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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file
number 811-07452
-------------------------------------------------------------------------
AIM Variable Insurance Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 100 Houston, Texas 77046
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 100 Houston, Texas 77046
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (713) 626-1919
--------------
Date of fiscal year end: 12/31
-----
Date of reporting period: 06/30/07
--------
Item 1. Schedule of Investments.
AIM V.I. Basic Balanced Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Value
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group
Inc.
THIS REPORT MUST BE ACCOMPANIED OR
PRECEDED BY A CURRENTLY EFFECTIVE FUND
PROSPECTUS AND VARIABLE PRODUCT
PROSPECTUS, WHICH CONTAIN MORE COMPLETE
INFORMATION, INCLUDING SALES CHARGES AND
EXPENSES. INVESTORS SHOULD READ EACH
CAREFULLY BEFORE INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Basic Balanced Fund
Fund performance The performance data quoted represent
======================================================================================= past performance and cannot guarantee
PERFORMANCE SUMMARY comparable future results; current
performance may be lower or higher. Please
FUND VS. INDEXES contact your variable product issuer or
financial advisor for the most recent
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. month-end variable product performance.
If variable product issuer charges were included, returns would be lower. Performance figures reflect Fund expenses,
reinvested distributions and changes in
Series I Shares 5.96% net asset value. Investment return and
Series II Shares 5.83 principal value will fluctuate so that you
S&P 500 Index(1) (Broad Market Index) 6.96 may have a gain or loss when you sell
Custom Basic Balanced Index(2) (Style-Specific Index) 4.15 shares.
Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index(1)
(Peer Group Index) 4.90 The net annual Fund operating expense
Lipper Balanced Funds Index(1) (Former Peer Group Index) 5.73 ratio set forth in the most recent Fund
prospectus as of the date of this report
Sources: (1) Lipper Inc.; (2) A I M Management Group Inc., Lipper Inc. for Series I and Series II shares was
0.91% and 1.16%, respectively.(1) The
The unmanaged S&P 500 --REGISTERED TRADEMARK-- Index is an index of common total annual Fund operating expense ratio
stocks frequently used as a general measure of U.S. stock market performance. set forth in the most recent Fund
prospectus as of the date of this report
The Custom Basic Balanced Index used in this report is an index created by A I M for Series I and Series II shares was
Advisors, Inc. to benchmark the Fund. The index consists of the following indexes: 60% 1.15% and 1.40%, respectively. The expense
Russell 1000 --REGISTERED TRADEMARK-- Value Index and 40% Lehman Brothers U.S. ratios presented above may vary from the
Aggregate Bond Index. The Russell 1000 Value Index measures the performance of those expense ratios presented in other sections
Russell 1000 companies with lower price-to-book ratios and lower forecasted growth of this report that are based on expenses
values. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell incurred during the period covered by this
Company. Russell --REGISTERED TRADEMARK-- is a trademark of the Frank Russell Company. report.
The Lehman Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate
bonds with components for government and corporate securities, mortgage pass-throughs AIM V.I. Basic Balanced Fund, a series
and asset-backed securities. portfolio of AIM Variable Insurance Funds,
is currently offered through insurance
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) companies issuing variable products. You
Mixed-Asset Target Allocation Moderate Funds Index as its peer group instead of cannot purchase shares of the Fund
the Lipper Balanced Funds Index. In 2006, Lipper began publishing VUF indexes, directly. Performance figures given
allowing the Fund to be compared with the Lipper VUF Mixed-Asset Target represent the Fund and are not intended to
Allocation Moderate Funds Index. The unmanaged Lipper VUF Mixed-Asset Target reflect actual variable product values.
Allocation Moderate Funds Index is an equally weighted representation of the They do not reflect sales charges,
largest variable insurance underlying moderate funds that by portfolio practice expenses and fees assessed in connection
maintain a mix of between 40%-60% equity securities, with the remainder invested with a variable product. Sales charges,
in bonds, cash and cash equivalents. Lipper Inc. is an independent mutual fund expenses and fees, which are determined by
performance monitor. the variable product issuers, will vary
and will lower the total return.
The unmanaged Lipper Balanced Funds Index represents an average of the largest
balanced funds tracked by Lipper Inc. It is calculated daily, with adjustments Per NASD requirements, the most recent
for distributions as of the ex-dividend dates. month-end performance data at the Fund
level, excluding variable product charges,
The Fund is not managed to track the performance of any particular index, is available on the AIM automated
including the indexes defined here, and consequently, the performance of the information line, 866-702-4402. As
Fund may deviate significantly from the performance of the indexes. mentioned above, for the most recent
month-end performance including variable
A direct investment cannot be made in an index. Unless otherwise indicated, product charges, please contact your
index results include reinvested dividends, and they do not reflect sales variable product issuer or financial
charges. Performance of an index of funds reflects fund expenses; performance of advisor.
a market index does not.
======================================================================================= (1) Total annual operating expenses less
contractual advisory fee waivers by
========================================== Series II shares' inception date is the advisor in effect through at
FUND PERFORMANCE January 24, 2002. Returns since that date least December 31, 2009. See current
As of 6/30/07 are historical. All other returns are the prospectus for more information.
SERIES I SHARES blended returns of the historical Total annual operating expenses less
Inception (5/1/98) 4.24% performance of Series II shares since any contractual fee waivers and/or
5 Years 7.56 their inception and the restated expense reimbursements by the advisor
1 Year 15.98 historical performance of Series I shares in effect through at least April 30,
(for periods prior to inception of Series 2009. See current prospectus for more
SERIES II SHARES II shares) adjusted to reflect the Rule information.
Inception 3.99% 12b-1 fees applicable to Series II shares.
5 Years 7.30 The inception date of Series I shares is
1 Year 15.63 May 1, 1998.
==========================================
The performance of the Fund's Series I
and Series II share classes will differ
primarily due to different class expenses.
AIM V.I. Basic Balanced Fund
PORTFOLIO COMPOSITION
By security type, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Common Stocks & Other Equity Interests 62.1%
- ----------------------------------------------------------
Bonds & Notes 27.0
- ----------------------------------------------------------
U.S. Mortgage-Backed Securities 13.5
- ----------------------------------------------------------
Asset-Backed Securities 1.6
- ----------------------------------------------------------
U.S. Government Agency Securities 1.0
- ----------------------------------------------------------
Commercial Paper 0.7
- ----------------------------------------------------------
Municipal Obligations 0.4
- ----------------------------------------------------------
Preferred Stocks 0.3
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities (6.6)
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-62.07%
ADVERTISING-3.51%
Interpublic Group of Cos., Inc. (The)(a) 131,432 $ 1,498,325
- ------------------------------------------------------------------------
Omnicom Group Inc. 28,788 1,523,461
========================================================================
3,021,786
========================================================================
AEROSPACE & DEFENSE-0.36%
Honeywell International Inc. 5,532 311,341
========================================================================
APPAREL RETAIL-1.34%
Gap, Inc., (The) 60,442 1,154,442
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.22%
Bank of New York Mellon Corp. 25,376 1,051,581
========================================================================
BREWERS-1.69%
Molson Coors Brewing Co.-Class B 15,741 1,455,413
========================================================================
BROADCASTING & CABLE TV-0.00%
Citadel Broadcasting Corp. 0.5 3
========================================================================
BUILDING PRODUCTS-0.75%
American Standard Cos., Inc. 11,006 649,134
========================================================================
COMPUTER HARDWARE-2.56%
Dell Inc.(a) 77,121 2,201,804
========================================================================
CONSTRUCTION MATERIALS-2.08%
Cemex S.A.B. de C.V.-ADR (Mexico)(a) 48,442 1,787,510
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-2.72%
First Data Corp. 30,273 $ 989,019
- ------------------------------------------------------------------------
Western Union Co. (The) 65,012 1,354,200
========================================================================
2,343,219
========================================================================
EDUCATION SERVICES-1.74%
Apollo Group, Inc.-Class A(a) 25,695 1,501,359
========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.75%
Tyco Electronics Ltd.(a) 16,611 648,826
========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.63%
Waste Management, Inc. 13,888 542,326
========================================================================
GENERAL MERCHANDISE STORES-1.85%
Target Corp. 25,045 1,592,862
========================================================================
HEALTH CARE DISTRIBUTORS-2.36%
Cardinal Health, Inc. 28,810 2,035,138
========================================================================
HEALTH CARE EQUIPMENT-1.33%
Baxter International Inc. 14,222 801,268
- ------------------------------------------------------------------------
Covidien Ltd.(a) 8,061 347,429
========================================================================
1,148,697
========================================================================
HOME IMPROVEMENT RETAIL-1.31%
Home Depot, Inc. (The) 28,678 1,128,479
========================================================================
INDUSTRIAL CONGLOMERATES-2.68%
General Electric Co. 37,033 1,417,623
- ------------------------------------------------------------------------
Tyco International Ltd. 16,611 891,679
========================================================================
2,309,302
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INDUSTRIAL MACHINERY-1.34%
Illinois Tool Works Inc. 21,359 $ 1,157,444
========================================================================
INSURANCE BROKERS-0.40%
Marsh & McLennan Cos., Inc. 11,250 347,400
========================================================================
INVESTMENT BANKING & BROKERAGE-2.15%
Merrill Lynch & Co., Inc. 8,997 751,969
- ------------------------------------------------------------------------
Morgan Stanley 13,072 1,096,480
========================================================================
1,848,449
========================================================================
MANAGED HEALTH CARE-2.55%
UnitedHealth Group Inc. 42,903 2,194,059
========================================================================
MOVIES & ENTERTAINMENT-1.44%
Walt Disney Co. (The) 36,233 1,236,995
========================================================================
MULTI-LINE INSURANCE-1.16%
American International Group, Inc. 8,429 590,283
- ------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 4,176 411,378
========================================================================
1,001,661
========================================================================
OIL & GAS DRILLING-1.99%
Transocean Inc.(a) 16,206 1,717,512
========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.45%
Halliburton Co. 45,331 1,563,919
- ------------------------------------------------------------------------
Schlumberger Ltd. 16,534 1,404,398
========================================================================
2,968,317
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.94%
Citigroup Inc. 40,806 2,092,940
- ------------------------------------------------------------------------
JPMorgan Chase & Co. 26,749 1,295,989
========================================================================
3,388,929
========================================================================
PACKAGED FOODS & MEATS-1.18%
Unilever N.V. (Netherlands)(b) 32,769 1,019,000
========================================================================
PHARMACEUTICALS-4.48%
Pfizer Inc. 44,758 1,144,462
- ------------------------------------------------------------------------
Sanofi-Aventis (France)(b) 14,711 1,187,894
- ------------------------------------------------------------------------
Wyeth 26,650 1,528,111
========================================================================
3,860,467
========================================================================
PROPERTY & CASUALTY INSURANCE-0.95%
ACE Ltd. 13,120 820,262
========================================================================
SEMICONDUCTOR EQUIPMENT-1.27%
KLA-Tencor Corp. 19,946 1,096,033
========================================================================
SYSTEMS SOFTWARE-3.49%
CA Inc. 67,026 1,731,282
- ------------------------------------------------------------------------
Microsoft Corp. 43,143 1,271,424
========================================================================
3,002,706
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-2.15%
Fannie Mae 28,280 $ 1,847,532
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.23%
Sprint Nextel Corp. 50,976 1,055,713
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $40,224,305) 53,445,701
========================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-27.05%
AEROSPACE & DEFENSE-0.56%
Goodrich Corp., Unsec. Unsub. Notes, 6.45%,
04/15/08(c) $ 90,000 90,591
- ------------------------------------------------------------------------
Precision Castparts Corp., Unsec. Notes,
6.75%, 12/15/07(c) 230,000 231,203
- ------------------------------------------------------------------------
Systems 2001 Asset Trust LLC (United
Kingdom)- Series 2001, Class G, Pass
Through Ctfs., (INS-MBIA Insurance Corp.)
6.66%, 09/15/13 (Acquired
02/09/05-10/27/05; Cost $172,344)(c)(d)(e) 156,375 162,198
========================================================================
483,992
========================================================================
AGRICULTURAL PRODUCTS-0.37%
Corn Products International Inc., Sr. Unsec.
Notes, 8.25%, 07/15/07(c) 320,000 320,211
========================================================================
APPAREL RETAIL-0.09%
Gap Inc. (The), Unsec. Notes, 6.90%,
09/15/07(c) 80,000 80,100
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.07%
Bank of New York Co. Inc. (The), Sr. Unsec.
Sub. Notes, 4.25%, 09/04/12(c)(f) 35,000 34,974
- ------------------------------------------------------------------------
Tokai Preferred Capital Co. LLC-Series A,
Bonds, 9.98% (Acquired 01/29/07; Cost
$26,389)(c)(d)(f)(g) 25,000 26,035
========================================================================
61,009
========================================================================
AUTOMOBILE MANUFACTURERS-0.43%
DaimlerChrysler N.A. Holding Corp.,
Unsec. Gtd. Unsub. Global Notes,
4.05%, 06/04/08(c) 100,000 98,533
- ------------------------------------------------------------------------
-Series E, Unsec. Gtd. Unsub. Floating Rate
Medium Term Notes,
5.89%, 10/31/08(c)(f) 270,000 271,336
========================================================================
369,869
========================================================================
BIOTECHNOLOGY-0.17%
Amgen Inc. Sr. Unsec. Notes,
5.85%, 06/01/17 (Acquired 05/24/07; Cost
$74,882)(c)(d) 75,000 74,122
- ------------------------------------------------------------------------
6.38%, 06/01/37 (Acquired 05/24/07; Cost
$74,920)(c)(d) 75,000 73,744
========================================================================
147,866
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
BROADCASTING & CABLE TV-1.87%
Clear Channel Communications Inc., Sr. Unsec.
Sub. Global Notes, 4.63%, 01/15/08(c) $ 240,000 $ 238,349
- ------------------------------------------------------------------------
Comcast Cable Communications Holdings Inc.,
Unsec. Gtd. Global Notes, 9.46%,
11/15/22(c) 167,000 213,353
- ------------------------------------------------------------------------
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12(c) 130,000 155,754
- ------------------------------------------------------------------------
Cox Communications Inc.,
Sr. Unsec. Notes,
6.40%, 08/01/08(c) 70,000 70,588
- ------------------------------------------------------------------------
Unsec. Notes,
3.88%, 10/01/08(c) 350,000 343,206
- ------------------------------------------------------------------------
Cox Enterprises, Inc., Notes, 4.38%, 05/01/08
(Acquired 04/25/07; Cost $128,567)(c)(d) 130,000 128,733
- ------------------------------------------------------------------------
Cox Enterprises, Inc., Notes, 7.88%, 09/15/10
(Acquired 05/02/07; Cost $37,559)(c)(d) 35,000 37,010
- ------------------------------------------------------------------------
Hearst-Argyle Television Inc., Sr. Unsec.
Unsub. Notes, 7.00%, 11/15/07(c) 90,000 90,411
- ------------------------------------------------------------------------
Time Warner Entertainment Co. L.P., Sr.
Unsec. Notes, 10.15%, 05/01/12(c) 280,000 329,549
========================================================================
1,606,953
========================================================================
BUILDING PRODUCTS-0.43%
American Standard Inc., Sr. Unsec. Gtd.
Notes, 7.38%, 02/01/08(c) 300,000 302,898
- ------------------------------------------------------------------------
Masco Corp., Unsec. Notes, 4.63%, 08/15/07(c) 70,000 69,926
========================================================================
372,824
========================================================================
CASINOS & GAMING-0.10%
Verizon New York Inc., Unsec. Deb., 7.00%,
12/01/33(c) 90,000 89,788
========================================================================
CONSUMER FINANCE-0.52%
Capital One Capital III, Jr. Gtd. Sub. Notes,
7.69%, 08/15/36(c) 50,000 51,812
- ------------------------------------------------------------------------
Ford Motor Credit Co. LLC, Sr. Unsec. Notes,
4.95%, 01/15/08(c) 310,000 307,942
- ------------------------------------------------------------------------
SLM Corp.-Series A, Medium Term Notes, 3.95%,
08/15/08(c) 90,000 88,007
========================================================================
447,761
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.49%
Computer Sciences Corp., Notes, 3.50%,
04/15/08(c) 370,000 364,446
- ------------------------------------------------------------------------
Fiserv Inc., Sr. Unsec. Global Notes, 3.00%,
06/27/08(c) 55,000 53,671
========================================================================
418,117
========================================================================
DEPARTMENT STORES-0.27%
May Department Stores Co. (The), Unsec.
Global Notes, 3.95%, 07/15/07(c) 230,000 229,880
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
DIVERSIFIED BANKS-1.90%
Bangkok Bank PCL (Hong Kong), Unsec. Sub.
Notes, 9.03%, 03/15/29 (Acquired 04/22/05;
Cost $75,121)(c)(d) $ 60,000 $ 72,005
- ------------------------------------------------------------------------
BankAmerica Institutional-Series A, Gtd.
Trust Pfd. Capital Securities, 8.07%,
12/31/26 (Acquired 09/26/06; Cost
$104,484)(c)(d) 100,000 104,439
- ------------------------------------------------------------------------
Barclays Bank PLC (United Kingdom), Floating
Rate Global Notes, 4.85%, 08/08/07
(Acquired 04/06/06; Cost $99,481)(c)(d)(f) 100,000 100,010
- ------------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Unsec. Gtd. Unsub. Notes, 5.92%
(Acquired 03/22/07; Cost
$40,000)(c)(d)(f)(g) 40,000 37,421
- ------------------------------------------------------------------------
Calyon (France), Gtd. Floating Rate Medium
Term Notes, 5.38%, 02/11/08 (Acquired
04/02/07; Cost $189,050)(c)(d) 190,000 189,291
- ------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.85%, 06/01/27
(Acquired 05/22/03; Cost $63,272)(c)(d) 50,000 52,094
- ------------------------------------------------------------------------
First Union Institutional Capital I, Jr.
Unsec. Gtd. Sub. Trust Pfd. Bonds, 8.04%,
12/01/26(c) 100,000 104,397
- ------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series
1, Unsec. Sub. Floating Rate Euro Notes,
5.63%(c)(f)(g) 130,000 114,411
- ------------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Gtd. Sub. Second Tier Euro Bonds,
8.38%(c)(g) 30,000 31,336
- ------------------------------------------------------------------------
National Bank of Canada (Canada), Floating
Rate Euro Deb., 5.56%, 08/29/87(c)(f) 60,000 49,099
- ------------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)- Series B, Unsec. Sub. Floating
Rate Euro Notes, 5.63%(c)(f)(g) 100,000 86,452
- ------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,
8.25%, 11/01/24(c) 50,000 59,956
- ------------------------------------------------------------------------
North Fork Bancorp., Inc., Unsec. Sub. Notes,
5.00%, 08/15/12(c)(f) 244,000 244,071
- ------------------------------------------------------------------------
RBD Capital S.A. (Luxembourg), Euro Notes,
6.50%, 08/11/08(c) 100,000 100,627
- ------------------------------------------------------------------------
RBS Capital Trust III, Jr. Gtd. Sub. Trust
Pfd. Global Notes, 5.51%(c)(f)(g) 60,000 57,715
- ------------------------------------------------------------------------
Sumitomo Mitsui Banking Corp. (Japan), Sub.
Second Tier Euro Notes, 8.15%(c)(g) 90,000 92,415
- ------------------------------------------------------------------------
VTB Capital S.A. (Russia), Sr. Floating Rate
Notes, 6.11%, 09/21/07 (Acquired 12/14/05;
Cost $140,000)(c)(d)(f) 140,000 140,094
========================================================================
1,635,833
========================================================================
DIVERSIFIED CHEMICALS-0.40%
Bayer Corp., Bonds, 6.20%, 02/15/08 (Acquired
08/01/06-05/24/07; Cost $190,964)(c)(d)(f) 190,000 190,559
- ------------------------------------------------------------------------
Dow Chemical Co. (The), Sr. Unsec. Global
Notes, 5.75%, 12/15/08(c) 100,000 100,464
- ------------------------------------------------------------------------
Hercules Inc., Unsec. Deb., 6.60%,
08/01/27(c) 50,000 50,022
========================================================================
341,045
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.06%
Erac USA Finance Co., Bond, 5.30%, 11/15/08
(Acquired 05/24/07; Cost $54,822)(c)(d) $ 55,000 $ 54,689
========================================================================
DIVERSIFIED METALS & MINING-0.07%
Reynolds Metals Co., Medium Term Notes,
7.00%, 05/15/09(c) 58,000 58,943
========================================================================
DRUG RETAIL-0.04%
CVS Caremark Corp., Sr. Unsec. Global Notes,
3.88%, 11/01/07(c) 30,000 29,840
========================================================================
ELECTRIC UTILITIES-0.58%
Duke Energy Indiana, Inc., Unsec. Deb.,
7.85%, 10/15/07(c) 40,000 40,249
- ------------------------------------------------------------------------
Entergy Gulf States, Inc., Sec. First
Mortgage Bonds, 3.60%, 06/01/08(c) 80,000 78,581
- ------------------------------------------------------------------------
Ohio Edison Co., Sr. Unsec. Global Notes,
4.00%, 05/01/08(c) 90,000 88,842
- ------------------------------------------------------------------------
PPL Electric Utilities Corp., Sr. Sec. Bonds,
5.88%, 08/15/07(c) 295,000 295,118
========================================================================
502,790
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.13%
Thomas & Betts Corp., Medium Term Notes,
6.63%, 05/07/08(c) 110,000 110,866
========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.08%
Waste Management Inc., Sr. Unsec. Unsub.
Notes, 6.50%, 11/15/08(c) 70,000 70,788
========================================================================
FOOD RETAIL-1.32%
Safeway Inc.,
Sr. Unsec. Notes,
4.80%, 07/16/07(c) 1,030,000 1,029,773
- ------------------------------------------------------------------------
7.00%, 09/15/07(c) 110,000 110,263
========================================================================
1,140,036
========================================================================
GAS UTILITIES-0.05%
CenterPoint Energy Resources Corp., Unsec.
Deb., 6.50%, 02/01/08(c) 40,000 40,212
========================================================================
GENERAL MERCHANDISE STORES-0.07%
Target Corp., Sr. Unsec. Notes, 5.38%,
05/01/17(c) 65,000 62,632
========================================================================
HOMEBUILDING-0.08%
DR Horton Inc., Sr. Unsec. Gtd. Notes, 5.00%,
01/15/09(c) 70,000 68,971
========================================================================
HOTELS, RESORTS & CRUISE LINES-0.02%
Carnival Corp., Sr. Unsec. Gtd. Global Notes,
3.75%, 11/15/07(c) 21,000 20,868
========================================================================
HOUSEWARES & SPECIALTIES-0.05%
Newell Rubbermaid Inc.-Series A, Unsec.
Unsub. Putable Medium Term Notes, 6.35%,
07/15/08(c)(f) 40,000 40,361
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.22%
TXU Energy Co. LLC, Sr. Unsec. Floating Rate
Notes, 5.86%, 09/16/08 (Acquired 03/13/07;
Cost $190,000)(c)(d)(f) $ 190,000 $ 190,089
========================================================================
INDUSTRIAL MACHINERY-0.08%
IDEX Corp., Sr. Unsec. Notes, 6.88%,
02/15/08(c) 70,000 70,543
========================================================================
INDUSTRIAL REIT'S-0.02%
ProLogis, Sr. Unsec. Notes, 7.10%,
04/15/08(c) 20,000 20,232
========================================================================
INSURANCE BROKERS-0.64%
Marsh & McLennan Cos., Inc., Global Notes,
5.50%, 07/13/07(c) 250,000 249,997
- ------------------------------------------------------------------------
Unsec. Global Bonds, 3.63%, 02/15/08(c) 305,000 301,453
========================================================================
551,450
========================================================================
INTEGRATED OIL & GAS-0.47%
ConocoPhillips, Unsec. Deb., 7.13%,
03/15/28(c) 65,000 66,809
- ------------------------------------------------------------------------
Husky Oil Ltd. (Canada), Unsec. Sub. Yankee
Bonds, 8.90%, 08/15/28(c)(f) 325,000 335,969
========================================================================
402,778
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.05%
Southwestern Bell Telephone L.P., Unsec.
Unsub. Deb., 7.20%, 10/15/26(c) 110,000 113,571
- ------------------------------------------------------------------------
Telecom Italia Capital S.A. (Italy), Unsec.
Gtd. Unsub. Global Notes, 4.00%,
11/15/08(c) 590,000 578,813
- ------------------------------------------------------------------------
Verizon Communications Inc., Sr. Unsec.
Notes, 6.25%, 04/01/37(c) 60,000 58,399
- ------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Unsec. Global
Deb., 4.63%, 03/15/13(c) 160,000 150,137
========================================================================
900,920
========================================================================
INTERNET RETAIL-0.07%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13(c) 60,000 60,038
========================================================================
INVESTMENT BANKING & BROKERAGE-0.61%
Jefferies Group, Inc.,
Sr. Unsec. Deb.,,
5.88%, 06/08/14(c) 230,000 228,392
- ------------------------------------------------------------------------
Sr. Unsec. Notes,
6.45%, 06/08/27(c) 50,000 49,473
- ------------------------------------------------------------------------
-Series B,
Sr. Unsec. Notes,
7.50%, 08/15/07(c) 30,000 30,059
- ------------------------------------------------------------------------
Lazard Group, Sr. Unsec. Notes, 6.85%,
06/15/17 (Acquired 06/18/07; Cost
$69,791)(c)(d) 70,000 70,115
- ------------------------------------------------------------------------
Merrill Lynch & Co. Inc.-Series C, Sr. Unsec.
Floating Rate Medium Term Notes, 5.69%,
07/21/09(c)(f) 40,000 40,001
- ------------------------------------------------------------------------
SB Treasury Co. LLC,, Bond, 9.40% (Acquired
06/29/07; Cost $103,570)(c)(d)(f)(g) 100,000 103,456
========================================================================
521,496
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
LEISURE FACILITIES-0.07%
International Speedway Corp., Unsec. Global
Notes, 4.20%, 04/15/09(c) $ 65,000 $ 63,535
========================================================================
LEISURE PRODUCTS-0.05%
Hasbro Inc., Sr. Unsec. Notes, 6.15%,
07/15/08(c) 40,000 40,070
========================================================================
LIFE & HEALTH INSURANCE-0.36%
Prudential Holdings, LLC-Series B, Bonds,
(INS-Financial Security Assurance Inc.)
7.25%, 12/18/23 (Acquired
01/22/04-02/17/06; Cost $329,829)(c)(d)(e) 280,000 313,440
========================================================================
MANAGED HEALTH CARE-0.05%
Whirlpool Corp., Unsec. Unsub. Notes, 3.50%,
09/01/07(c) 40,000 39,856
========================================================================
MORTGAGE REIT'S-0.14%
iStar Financial Inc.,
Sr. Notes,,
7.00%, 03/15/08(c) 40,000 40,617
- ------------------------------------------------------------------------
Sr. Unsec. Notes,,
8.75%, 08/15/08(c) 81,000 83,725
========================================================================
124,342
========================================================================
MOVIES & ENTERTAINMENT-0.14%
Historic TW Inc., Notes, 8.18%, 08/15/07(c) 120,000 120,346
========================================================================
MULTI-LINE INSURANCE-0.17%
Unitrin Inc., Sr. Unsec. Notes, 5.75%,
07/01/07(c) 150,000 150,000
========================================================================
MULTI-UTILITIES-1.24%
Consumers Energy Co.-Series A, Sr. Sec.
Global Notes, 6.38%, 02/01/08(c) 130,000 130,608
- ------------------------------------------------------------------------
Dominion Capital Trust I, Jr. Unsec. Gtd.
Trust Pfd. Capital Securities, 7.83%,
12/01/27(c) 140,000 145,984
- ------------------------------------------------------------------------
Dominion Resources, Inc.,
Notes,
4.13%, 02/15/08(c) 40,000 39,665
- ------------------------------------------------------------------------
-Series D,
Sr. Floating Rate Notes,
5.66%, 09/28/07(c)(f) 85,000 85,027
- ------------------------------------------------------------------------
Midamerican Energy Holdings Co., Sr. Unsec.
Notes, 7.52%, 09/15/08(c) 80,000 81,829
- ------------------------------------------------------------------------
New York State Electric & Gas Corp., Notes,
4.38%, 11/15/07(c) 150,000 149,394
- ------------------------------------------------------------------------
PSEG Funding Trust I, Notes, 5.38%,
11/16/07(c) 190,000 189,903
- ------------------------------------------------------------------------
Tampa Electric Co., Unsec. Unsub. Notes,
5.38%, 08/15/07(c) 215,000 214,978
- ------------------------------------------------------------------------
TE Products Pipeline Co., Sr. Unsec. Notes,
6.45%, 01/15/08(c) 30,000 30,125
========================================================================
1,067,513
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-0.67%
Anadarko Petroleum Corp., Sr. Unsec. Notes,
3.25%, 05/01/08(c) $ 500,000 $ 490,870
- ------------------------------------------------------------------------
Pemex Project Funding Master Trust (Mexico),
Unsec. Gtd. Unsub. Global Notes, 8.63%,
02/01/22(c) 70,000 85,571
========================================================================
576,441
========================================================================
OIL & GAS REFINING & MARKETING-0.11%
Premcor Refining Group Inc. (The), Sr. Unsec.
Global Notes, 9.50%, 02/01/13(c) 90,000 96,032
========================================================================
OIL & GAS STORAGE & TRANSPORTATION-0.32%
Enterprise Products Operating L.P.-Series B,
Sr. Unsec. Gtd. Unsub. Global Notes, 4.00%,
10/15/07(c) 280,000 278,849
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.09%
BankAmerica Capital II-Series 2, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
8.00%, 12/15/26(c) 80,000 83,493
- ------------------------------------------------------------------------
BankAmerica Capital III, Gtd. Floating Rate
Trust Pfd. Capital Securities, 5.93%,
01/15/27(c)(f) 137,000 133,496
- ------------------------------------------------------------------------
Capmark Financial Group Inc., Sr. Unsec. Gtd.
Floating Rate Notes, 6.01%, 05/10/10
(Acquired 05/03/07; Cost $210,000)(c)(d)(f) 210,000 210,124
- ------------------------------------------------------------------------
Countrywide Home Loans, Inc.-Series L, Medium
Term Global Notes, 3.25%, 05/21/08(c) 140,000 137,165
- ------------------------------------------------------------------------
General Electric Capital Corp., Unsec.
Floating Rate Putable Deb., 5.34%,
09/01/10(c)(f) 55,000 54,393
- ------------------------------------------------------------------------
Mantis Reef Ltd. (Cayman Islands), Notes,
4.69%, 11/14/08 (Acquired
08/11/06-06/21/07; Cost $348,704)(c)(d) 355,000 349,583
- ------------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Sub.
Bonds, 9.87% (Acquired 06/16/04-07/28/05;
Cost $356,092)(c)(d)(f)(g) 315,000 328,019
- ------------------------------------------------------------------------
NB Capital Trust IV, Gtd. Sub. Trust Pfd.
Capital Securities, 8.25%, 04/15/27(c) 460,000 479,596
- ------------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2,
Class A1, Global Bonds, (INS-MBIA Insurance
Corp.) 9.69%, 08/15/09(c) 252,000 262,511
- ------------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands), Sr. Notes, 9.25%, 03/15/30
(Acquired 09/22/04; Cost $169,578)(c)(d) 143,333 157,548
- ------------------------------------------------------------------------
Residential Capital LLC, Sr. Unsec. Gtd.
Floating Rate Notes, 5.86%, 06/09/08(c)(f) 135,000 133,697
- ------------------------------------------------------------------------
Textron Financial Corp.-Series E, Gtd.
Floating Rate Medium Term Notes, 6.82%,
12/01/07(c)(f) 100,000 100,476
- ------------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate
Pass Through Ctfs., 6.32% (Acquired
12/07/04; Cost $90,000)(c)(d)(f)(g) 90,000 90,289
- ------------------------------------------------------------------------
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Two-Rock Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 6.30%
(Acquired 11/10/06; Cost
$100,118)(c)(d)(f)(g) $ 100,000 $ 98,525
- ------------------------------------------------------------------------
UFJ Finance Aruba AEC (Japan), Gtd. Sub.
Second Tier Euro Bonds, 8.75%(c)(g) 40,000 41,608
========================================================================
2,660,523
========================================================================
PACKAGED FOODS & MEATS-0.61%
Heinz (H.J.) Co., Notes, 6.43%, 12/01/08
(Acquired 05/30/07; Cost $465,295)(c)(d) 460,000 465,570
- ------------------------------------------------------------------------
Sara Lee Corp.-Series C, Medium Term Notes,
6.00%, 01/15/08(c) 55,000 55,128
========================================================================
520,698
========================================================================
PAPER PACKAGING-0.19%
Sealed Air Corp., Sr. Unsec. Notes, 5.38%,
04/15/08 (Acquired 05/18/07-05/21/07; Cost
$159,675)(c)(d) 160,000 159,870
========================================================================
PAPER PRODUCTS-0.12%
Union Camp Corp., Notes, 6.50%, 11/15/07(c) 105,000 105,341
========================================================================
PROPERTY & CASUALTY INSURANCE-2.20%
Allstate Corp. (The),
Jr. Sub. Global Deb.,
6.13%, 05/15/37(c)(f) 30,000 28,973
- ------------------------------------------------------------------------
6.50%, 05/15/57(c)(f) 20,000 19,063
- ------------------------------------------------------------------------
Chubb Corp., Sr. Unsec. Notes, 5.47%,
08/16/08(c) 55,000 55,072
- ------------------------------------------------------------------------
CNA Financial Corp.,
Sr. Unsec. Notes,
6.45%, 01/15/08(c) 185,000 185,797
- ------------------------------------------------------------------------
6.60%, 12/15/08(c) 470,000 476,965
- ------------------------------------------------------------------------
First American Capital Trust I, Gtd. Trust
Pfd. Capital Securities, 8.50%, 04/15/12(c) 285,000 310,348
- ------------------------------------------------------------------------
North Front Pass-Through Trust, Pass Through
Ctfs. Bonds, 5.81%, 12/15/24 (Acquired
12/08/04; Cost $100,000)(c)(d) 100,000 98,972
- ------------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec.
Sub. Deb., 8.00%, 09/15/34 (Acquired
04/29/05-06/09/05; Cost $213,696)(c)(d) 200,000 192,558
- ------------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56% (Acquired
06/15/06; Cost $360,000)(c)(d)(f)(g) 360,000 371,509
- ------------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia), Gtd.
Sub. Bonds, 6.80% (Acquired 04/25/07; Cost
$20,000)(c)(d)(f) 20,000 19,461
- ------------------------------------------------------------------------
Safeco Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.07%, 07/15/37(c) 130,000 135,329
========================================================================
1,894,047
========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.03%
Realogy Corp., Sr. Floating Rate Notes,
7.06%, 10/20/09 (Acquired 10/13/06; Cost
$30,000)(c)(d)(f) 30,000 29,808
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
REGIONAL BANKS-1.30%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd.
Floating Rate Notes, 6.91%, 03/01/34(c)(f) $ 200,000 $ 204,398
- ------------------------------------------------------------------------
Greater Bay Bancorp-Series B, Sr. Notes,
5.25%, 03/31/08(c) 50,000 49,731
- ------------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate Trust
Pfd. Capital Securities, 5.93%,
06/01/28(c)(f) 100,000 96,657
- ------------------------------------------------------------------------
Popular North America Inc., Gtd. Notes,
4.25%, 04/01/08(c) 35,000 34,516
- ------------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes,
6.05%, 06/01/17(c) 110,000 107,533
- ------------------------------------------------------------------------
TCF National Bank, Sub. Notes, 5.00%,
06/15/14(c)(f) 60,000 59,102
- ------------------------------------------------------------------------
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12(c) 530,000 570,667
========================================================================
1,122,604
========================================================================
REINSURANCE-0.22%
Stingray Pass-Through Trust, Pass Through
Ctfs., 5.90%, 01/12/15 (Acquired
01/07/05-11/03/05; Cost $196,920)(c)(d) 200,000 188,396
========================================================================
RESIDENTIAL REIT'S-0.04%
AvalonBay Communities Inc., Sr. Medium Term
Notes, 8.25%, 07/15/08(c) 30,000 30,806
========================================================================
RESTAURANTS-0.12%
Yum! Brands Inc., Sr. Unsec. Notes, 7.65%,
05/15/08(c) 100,000 101,697
========================================================================
RETAIL REIT'S-0.22%
Developers Diversified Realty Corp., Sr.
Medium Term Notes, 6.63%, 01/15/08(c) 60,000 60,333
- ------------------------------------------------------------------------
National Retail Properties Inc., Sr. Unsec.
Notes, 7.13%, 03/15/08(c) 125,000 126,328
========================================================================
186,661
========================================================================
SPECIALIZED REIT'S-0.52%
Health Care Property Investors, Inc.,
Sr. Sec. Floating Rate Medium Term Notes,
5.81%, 09/15/08(c)(f) 140,000 140,064
- ------------------------------------------------------------------------
Sr. Sec. Medium Term Notes,
6.30%, 09/15/16(c) 110,000 110,019
- ------------------------------------------------------------------------
Health Care REIT, Inc.,
Sr. Notes,
5.88%, 05/15/15(c) 100,000 97,524
- ------------------------------------------------------------------------
Sr. Unsec. Notes,
7.50%, 08/15/07(c) 100,000 100,209
========================================================================
447,816
========================================================================
SPECIALTY CHEMICALS-0.24%
ICI Wilmington Inc., Gtd. Notes, 7.05%,
09/15/07(c) 150,000 150,231
- ------------------------------------------------------------------------
Valspar Corp. (The),
Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12(c) 25,000 24,727
- ------------------------------------------------------------------------
6.05%, 05/01/17(c) 30,000 29,502
========================================================================
204,460
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-0.23%
Countrywide Financial Corp., Gtd. Global
Medium Term Notes, 5.80%, 06/07/12(c) $ 100,000 $ 99,737
- ------------------------------------------------------------------------
Countrywide Home Loans, Inc.-Series E, Gtd.
Medium Term Notes, 6.94%, 07/16/07(c) 100,000 100,038
========================================================================
199,775
========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.06%
Western Power Distribution Holdings Ltd.
(United Kingdom), Unsec. Unsub. Notes,
7.38%, 12/15/28 (Acquired 01/25/05; Cost
$56,019)(c)(d) 50,000 53,246
========================================================================
TRUCKING-0.44%
Roadway Corp., Sr. Sec. Gtd. Global Notes,
8.25%, 12/01/08(c) 230,000 237,374
- ------------------------------------------------------------------------
Stagecoach Transport Holdings PLC (United
Kingdom), Unsec. Unsub. Yankee Notes,
8.63%, 11/15/09(c) 130,000 138,329
========================================================================
375,703
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.72%
Alamosa Delaware Inc., Sr. Gtd. Global Notes,
8.50%, 01/31/12(c) 210,000 221,600
- ------------------------------------------------------------------------
Nextel Communications, Inc.-Series D, Sr.
Gtd. Notes, 7.38%, 08/01/15(c) 30,000 30,145
- ------------------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec. Gtd. Global
Notes, 6.13%, 11/15/08(c) 140,000 140,921
- ------------------------------------------------------------------------
Sprint Nextel Corp., Deb., 9.25%, 04/15/22(c) 140,000 161,004
- ------------------------------------------------------------------------
Vodafone Group PLC (United Kingdom),
Unsec. Global Bonds,
6.15%, 02/27/37(c) 30,000 28,028
- ------------------------------------------------------------------------
Unsec. Global Notes,
5.63%, 02/27/17(c) 40,000 38,356
========================================================================
620,054
========================================================================
Total Bonds & Notes (Cost $23,481,411) 23,295,719
========================================================================
U.S. MORTGAGE-BACKED SECURITIES-13.49%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-3.52%
Federal Home Loan Mortgage Corp.,
Pass Through Ctfs.,
7.00%, 06/01/15 to 06/01/32(c) 117,425 121,579
- ------------------------------------------------------------------------
6.00%, 04/01/16 to 11/01/33(c) 498,085 497,042
- ------------------------------------------------------------------------
5.50%, 10/01/18 to 02/01/37(c) 224,596 221,957
- ------------------------------------------------------------------------
7.50%, 11/01/30 to 05/01/31(c) 22,043 23,015
- ------------------------------------------------------------------------
6.50%, 05/01/32 to 08/01/32(c) 29,960 30,518
- ------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 07/01/37(c)(h) 778,000 729,254
- ------------------------------------------------------------------------
5.50%, 07/01/37(c)(h) 372,000 358,806
- ------------------------------------------------------------------------
6.50%, 09/01/37(c)(h) 1,034,000 1,043,532
========================================================================
3,025,703
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-8.61%
Federal National Mortgage Association,
Pass Through Ctfs.,
6.50%, 04/01/14 to 10/01/2035 $ 483,663 $ 493,111
- ------------------------------------------------------------------------
7.50%, 11/01/15 to 03/01/2031 102,083 107,708
- ------------------------------------------------------------------------
7.00%, 02/01/16 to 09/01/32(c) 71,321 73,820
- ------------------------------------------------------------------------
6.00%, 01/01/17 to 03/01/37(c) 6,779 6,793
- ------------------------------------------------------------------------
6.00%, 05/01/17(c) 91,580(i) 92,134
- ------------------------------------------------------------------------
5.00%, 04/01/18(c) 227,301 220,542
- ------------------------------------------------------------------------
4.50%, 11/01/18(c) 97,066 92,518
- ------------------------------------------------------------------------
5.50%, 03/01/21(c) 1,762 1,736
- ------------------------------------------------------------------------
8.00%, 08/01/21 to 12/01/23(c) 23,287 24,502
- ------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 07/01/22 to 07/01/37(c)(h) 2,136,000 2,076,678
- ------------------------------------------------------------------------
6.00%, 07/01/22 to 07/01/37(c)(h) 2,672,000 2,665,901
- ------------------------------------------------------------------------
6.50%, 07/01/37(c)(h) 548,000 553,223
- ------------------------------------------------------------------------
7.00%, 07/01/37(c)(h) 976,000 1,002,230
========================================================================
7,410,896
========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-1.36%
Government National Mortgage Association,
Pass Through Ctfs.,
7.50%, 06/15/23 to 10/15/31(c) 35,227 36,889
- ------------------------------------------------------------------------
8.50%, 11/15/24(c) 73,407 79,261
- ------------------------------------------------------------------------
8.00%, 08/15/25(c) 11,637 12,336
- ------------------------------------------------------------------------
6.50%, 03/15/29 to 01/15/2037 411,278 418,392
- ------------------------------------------------------------------------
6.00%, 09/15/31 to 05/15/33(c) 289,316 288,806
- ------------------------------------------------------------------------
5.50%, 12/15/33 to 02/15/34(c) 202,247 196,694
- ------------------------------------------------------------------------
7.00%, 06/15/37(c) 137,455 141,959
========================================================================
1,174,337
========================================================================
Total U.S. Mortgage-Backed Securities
(Cost $11,720,074) 11,610,936
========================================================================
ASSET-BACKED SECURITIES-1.62%
COLLATERALIZED MORTGAGE OBLIGATIONS-0.65%
Federal Home Loan Bank (FHLB)-Series TQ-2015,
Class A, Pass Through Ctfs., 5.07%,
10/20/15(c) 112,807 110,315
- ------------------------------------------------------------------------
Option One Mortgage Securities Corp. NIM
Trust Series 2007-4A, Floating Rate Notes,
5.42%, 04/25/12 (Acquired 05/11/07; Cost
$110,574)(d)(f) 110,574 110,574
- ------------------------------------------------------------------------
Structured Asset Securities Corp.Series
2007-OSI, Floating Rate Pass Through Ctfs.,
5.41%, 06/25/37(c) 153,204 153,310
- ------------------------------------------------------------------------
US Bank N.A., Sr. Medium Term Notes, 5.92%,
05/25/12(c) 180,000 180,851
========================================================================
555,050
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-0.97%
Citicorp Lease Pass-Through Trust-Series
1999-1, Class A2, Pass Through Ctfs.,
8.04%, 12/15/19 (Acquired
06/01/00-01/26/06; Cost $364,942)(c)(d) $ 325,000 $ 371,442
- ------------------------------------------------------------------------
LILACS Repackaging 2005-I-Series A, Sr. Sec.
Notes, 5.14%, 01/15/64 (Acquired 07/14/05;
Cost $489,556)(d)(j) 489,556 465,930
========================================================================
837,372
========================================================================
Total Asset-Backed Securities (Cost
$1,406,575) 1,392,422
========================================================================
U.S. GOVERNMENT AGENCY SECURITIES-1.03%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-0.77%
Unsec. Floating Rate Global Notes, 3.92%,
02/17/09(c)(f) 200,000 195,244
- ------------------------------------------------------------------------
Unsec. Notes,
5.30%, 01/12/10(c) 100,000 100,067
- ------------------------------------------------------------------------
6.25%, 03/29/22(c) 370,000 364,317
========================================================================
659,628
========================================================================
STUDENT LOAN MARKETING ASSOCIATION-0.26%
Medium Term Notes, 5.05%,11/14/14(c) 70,000 58,326
- ------------------------------------------------------------------------
Unsec. Unsub. Floating Rate Medium Term
Notes, 5.42%, 12/15/08(c)(f) 90,000 88,442
- ------------------------------------------------------------------------
Series A, Medium Term Notes, 3.63%,
03/17/08(c) 80,000 78,763
========================================================================
225,531
========================================================================
Total U.S. Government Agency Securities
(Cost $899,105) 885,159
========================================================================
COMMERCIAL PAPER-0.67%
BROADCASTING & CABLE TV-0.32%
Cox Communications Inc., Floating Rate
Commercial Paper, 5.62%, 08/15/07 (Acquired
11/03/06; Cost $280,000)(c)(d)(f) 280,000 280,020
========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.35%
PHH Corp., Disc. Commercial Paper, 5.63%,
07/18/07(k) 300,000 299,156
========================================================================
Total Commercial Paper (Cost $579,202) 579,176
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS-0.38%
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO
(INS-Ambac Assurance Corp.),
4.96%, 04/01/20(c)(e) $ 65,000 $ 60,312
- ------------------------------------------------------------------------
Series 2005,
Taxable COP (INS-Financial Guaranty
Insurance Co.), 4.95%, 06/15/25(c)(e) 80,000 71,299
- ------------------------------------------------------------------------
Indianapolis (City of), Indiana Local Public
Improvement Bond Bank; Series 2005 A,
Taxable RB,
5.22%, 07/15/20(c) 50,000 47,504
- ------------------------------------------------------------------------
5.28%, 01/15/22(c) 25,000 23,664
- ------------------------------------------------------------------------
Industry (City of), California Urban
Development Agency (Project 3); Series
2003, Taxable Allocation RB, (INS-MBIA
Insurance Corp.) 6.10%, 05/01/24(c)(e) 125,000 127,609
========================================================================
Total Municipal Obligations (Cost
$347,890) 330,388
========================================================================
<Caption>
SHARES
PREFERRED STOCKS-0.26%
LIFE & HEALTH INSURANCE-0.12%
Aegon N.V., 6.38% Pfd. (Netherlands) 4,100 99,876
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.14%
Telephone & Data Systems, Inc.-
Series A, 7.60% Pfd.(a) 5,000 122,500
========================================================================
Total Preferred Stocks (Cost $230,625) 222,376
========================================================================
MONEY MARKET FUNDS-1.37%
Liquid Assets Portfolio-Institutional
Class(l) 589,940 589,940
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(l) 589,940 589,940
========================================================================
Total Money Market Funds (Cost
$1,179,880) 1,179,880
========================================================================
TOTAL INVESTMENTS-107.94% (Cost $80,069,067) 92,941,757
========================================================================
OTHER ASSETS LESS LIABILITIES-(7.94)% (6,833,908)
========================================================================
NET ASSETS-100.00% $ 86,107,849
________________________________________________________________________
========================================================================
</Table>
AIM V.I. Basic Balanced Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
COP - Certificates of Participation
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
LILACS - Life Insurance and Life Annuities Based Certificates
Pfd. - Preferred
RB - Revenue Bonds
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $2,206,894, which
represented 2.56% of the Fund's Net Assets. See Note 1A.
(c) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate value of these securities at June 30, 2007
was $37,218,140, which represented 43.22% of the Fund's Net Assets. See Note
1A.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $6,160,988,
which represented 7.15% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Principal and/or interest payments are secured by the bond insurance company
listed.
(f) Interest rate is redetermined periodically. Rate shown is the rate in effect
on June 30, 2007.
(g) Perpetual bond with no specified maturity date.
(h) Security purchased on forward commitment basis. This security is subject to
dollar roll transactions. See Note 1I.
(i) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 1L and Note 8.
(j) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The value of this
security considered illiquid at June 30, 2007 represented 0.54% of the
Fund's Net Assets.
(k) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at the time of purchase by the Fund.
(l) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Basic Balanced Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $78,889,187) $ 91,761,877
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $1,179,880) 1,179,880
=============================================================
Total investments (Cost $80,069,067) 92,941,757
=============================================================
Foreign currencies, at value (Cost $96,863) 97,666
- -------------------------------------------------------------
Cash 17,967
- -------------------------------------------------------------
Receivables for:
Investments sold 5,189,816
- -------------------------------------------------------------
Variation margin 45,192
- -------------------------------------------------------------
Fund shares sold 13,967
- -------------------------------------------------------------
Dividends and Interest 433,477
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 35,162
=============================================================
Total assets 98,775,004
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 12,410,787
- -------------------------------------------------------------
Fund shares reacquired 132,847
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 41,934
- -------------------------------------------------------------
Accrued administrative services fees 46,859
- -------------------------------------------------------------
Accrued distribution fees -- Series II 3,523
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,594
- -------------------------------------------------------------
Accrued transfer agent fees 781
- -------------------------------------------------------------
Accrued operating expenses 26,830
=============================================================
Total liabilities 12,667,155
=============================================================
Net assets applicable to shares outstanding $ 86,107,849
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 84,006,147
- -------------------------------------------------------------
Undistributed net investment income 2,959,273
- -------------------------------------------------------------
Undistributed net realized gain (loss) (13,710,861)
- -------------------------------------------------------------
Unrealized appreciation 12,853,290
=============================================================
$ 86,107,849
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $ 80,439,193
_____________________________________________________________
=============================================================
Series II $ 5,668,656
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,370,687
_____________________________________________________________
=============================================================
Series II 452,519
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 12.63
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 12.53
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 851,347
- ------------------------------------------------------------
Dividends (net of foreign withholding taxes of
$10,058) 463,562
- ------------------------------------------------------------
Dividends from affiliated money market funds 67,451
============================================================
Total investment income 1,382,360
============================================================
EXPENSES:
Advisory fees 327,825
- ------------------------------------------------------------
Administrative services fees 115,500
- ------------------------------------------------------------
Custodian fees 11,036
- ------------------------------------------------------------
Distribution fees -- Series II 7,106
- ------------------------------------------------------------
Transfer agent fees 4,367
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 9,721
- ------------------------------------------------------------
Other 36,156
============================================================
Total expenses 511,711
============================================================
Less: Fees waived and expense offset
arrangements (107,419)
============================================================
Net expenses 404,292
============================================================
Net investment income 978,068
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains from
securities sold to affiliates of $192,512) 3,875,564
- ------------------------------------------------------------
Foreign currencies 1,121
- ------------------------------------------------------------
Futures contracts (129,552)
- ------------------------------------------------------------
Swap Agreements (652)
============================================================
3,746,481
============================================================
Change in net unrealized appreciation of:
Investment securities 291,255
- ------------------------------------------------------------
Foreign currencies 1,339
- ------------------------------------------------------------
Futures contracts 54,894
- ------------------------------------------------------------
Swap agreements 1,151
============================================================
348,639
============================================================
Net realized and unrealized gain 4,095,120
============================================================
Net increase in net assets resulting from
operations $5,073,188
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Basic Balanced Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 978,068 $ 1,993,006
- -------------------------------------------------------------------------------
Net realized gain 3,746,481 3,777,882
- -------------------------------------------------------------------------------
Change in net unrealized appreciation 348,639 3,408,364
===============================================================================
Net increase in net assets resulting from
operations 5,073,188 9,179,252
===============================================================================
Distributions to shareholders from net
investment income:
Series I -- (1,595,527)
- -------------------------------------------------------------------------------
Series II -- (98,205)
===============================================================================
Decrease in net assets resulting from
distributions -- (1,693,732)
===============================================================================
Share transactions-net:
Series I (8,524,726) (13,432,639)
- -------------------------------------------------------------------------------
Series II (529,897) (466,801)
===============================================================================
Net increase (decrease) in net assets
resulting from share transactions (9,054,623) (13,899,440)
===============================================================================
Net increase (decrease) in net assets (3,981,435) (6,413,920)
_______________________________________________________________________________
===============================================================================
NET ASSETS:
Beginning of period 90,089,284 96,503,204
===============================================================================
End of period (including undistributed net
investment income of $2,959,273 and
$1,981,205, respectively) $86,107,849 $ 90,089,284
_______________________________________________________________________________
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Basic Balanced Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Basic Balanced Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital and current
income.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote provided by an
independent pricing service. Evaluated quotes provided by the pricing
service are valued based on a model which may include end of day net
present values, spreads, ratings, industry, and company performance.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
AIM V.I. Basic Balanced Fund
date. Paydown gains and losses on mortgage and asset-backed securities are
recorded as adjustments to interest income. Dividend income is recorded on
the ex-dividend date. Bond premiums and discounts are amortized and/or
accreted for financial reporting purposes.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. DOLLAR ROLL TRANSACTIONS -- 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 purchase a substantially
similar security (same type, coupon and maturity) from the institution at
an agreed upon price and future date. The mortgage-backed securities to be
purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories. Based on the typical structure of dollar roll
transactions by the Fund, the dollar roll transactions are accounted for as
financing transactions in which the Fund receives compensation as either a
"fee" or a "drop". "Fee" income which is agreed upon amongst the parties at
the commencement of the dollar roll and the "drop" which is the difference
between the selling price and the repurchase price of the mortgage-backed
securities are amortized to income. During the period between the sale and
purchase settlement dates, the Fund will not be entitled to receive
interest and principal payments on securities purchased and not yet
settled. Proceeds of the sale may 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 are considered
borrowings under the 1940 Act. At the time the Fund enters into the dollar
roll, it will segregate liquid assets having a dollar value equal to the
purchase price.
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 purchase under the
agreement. In the event that 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 purchase the securities. The return earned
by the Fund with the proceeds of the dollar roll transaction may not exceed
the return on the securities sold.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the portion
of the results of
AIM V.I. Basic Balanced Fund
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. The combined results of changes in foreign exchange rates and the
fluctuation of market prices on investments (net of estimated foreign tax
withholding) are included with the net realized and unrealized gain or loss
from investments in the Statement of Operations. Reported net realized
foreign currency gains or losses arise from (i) sales of foreign
currencies, (ii) currency gains or losses realized between the trade and
settlement dates on securities transactions, and (iii) the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign currency gains and losses
arise from changes in the fair values of assets and liabilities, other than
investments in securities at fiscal period end, resulting from changes in
exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
L. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
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 received or
made 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. If the Fund were unable
to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to
maintain the margin deposits on the futures contracts. Risks may exceed
amounts recognized in the Statement of Assets and Liabilities.
M. COVERED CALL OPTIONS WRITTEN -- The Fund may write call options, including
options on futures. 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.
Written call options are recorded as a liability in the Statement of Assets
and Liabilities. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. 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. Realized gains and losses on these contracts are included in the
Statement of Operations. A risk in writing a call option is that the Fund
gives up the opportunity for profit if the market price of the security
increases and the option is exercised.
An option on a futures contract gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying futures
contract on the exercise date. The value of a futures contract fluctuates
with changes in the market values of the securities underlying the futures
contract. In writing futures contract options, the principal risk is that
the Fund could bear a loss on the options that would be only partially
offset (or not offset at all) by the increased value or reduced cost of
underlying portfolio securities. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
N. PUT OPTIONS PURCHASED AND WRITTEN -- The Fund may purchase and write put
options including options on securities indexes and/or futures contracts.
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, securities index, 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 underlying portfolio securities. The Fund may
write put options to earn additional income in the form of option premiums
if it expects the price of the underlying instrument to remain stable or
rise during the option period so that the option will not be exercised. The
risk in this strategy is that the price of the underlying securities may
decline by an amount greater than the premium received. Put options written
are reported as a liability in the Statement of Assets and Liabilities.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. A risk in buying an option is that the Fund
pays a premium whether or not the option is exercised. In addition, there
can be no assurance that a liquid secondary market will exist for any
option purchased.
O. SWAP AGREEMENTS -- The Fund may enter into various swap transactions,
including interest rate, index, currency exchange rate and credit default
swap contracts ("CDS") for investment purposes or to manage interest rate,
currency or credit risk.
Interest rate, index, and currency exchange rate swap agreements are
two-party contracts entered into primarily to exchange the returns (or
differentials in rates of returns) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged
or
AIM V.I. Basic Balanced Fund
"swapped" between the parties are calculated with respect to a notional
amount, i.e., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index.
A CDS is an agreement between two parties ("Counterparties") to exchange
the credit risk of an issuer. A buyer of a CDS is said to buy protection by
paying a fixed payment over the life of the agreement to the seller of the
CDS. If a defined credit event occurs (such as payment default or
bankruptcy), the Fund as a protection buyer would cease paying its fixed
payment, the Fund would deliver the corresponding bonds, or other similar
bonds issued by the same reference entity to the seller, and the seller
would pay the full notional value, or the "par value", of the referenced
obligation to the Fund. A seller of a CDS is said to sell protection and
thus would receive the fixed payment stream. If a credit event occurs, the
Fund as a protection seller would cease to receive the fixed payment
stream, the Fund would pay the buyer the full notional value of the
referenced obligation, and the Fund would receive the corresponding bonds
or similar bonds issued by the same reference entity. If no credit event
occurs, the Fund receives the fixed payment over the life of the agreement.
As the seller, the Fund would effectively add leverage to its portfolio
because, in addition to its total net assets, the Fund would be subject to
investment exposure on the notional amount of the CDS. Because the CDS is a
bilateral agreement between Counterparties, the transaction can
alternatively be settled by a cash payment in the case of a credit event.
Changes in the value of swap agreements are recognized as unrealized
gains (losses) in the Statement of Operations by "marking to market" on a
daily basis to reflect the value of the swap agreement at the end of each
trading day. The Fund accrues for the fixed payments on swap agreements on
a daily basis with the net amount accrued, recorded as a component of
realized gain (loss) on the Statement of Operations. A liquidation payment
received or made at the termination of a swap agreement is recorded as
realized gain (loss) on the Statement of Operations. The Fund segregates
liquid securities having a value at least equal to the amount of the
potential obligation of a Fund under any swap transaction. Entering into
these agreements involves, to varying degrees, lack of liquidity and
elements of credit, market, and counterparty risk in excess of amounts
recognized on the Statement of Assets and Liabilities.
P. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $150 million 0.75%
- -------------------------------------------------------------------
Over $150 million 0.50%
__________________________________________________________________
===================================================================
</Table>
Through December 31, 2009, AIM has contractually agreed to waive advisory
fees to the extent necessary so that the advisory fees payable by the Fund
(based on the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $150 million 0.62%
- --------------------------------------------------------------------
Next $4.85 billion 0.50%
- --------------------------------------------------------------------
Next $5 billion 0.475%
- --------------------------------------------------------------------
Over $10 billion 0.45%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 0.91% and Series
II shares to 1.16% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year.
Further, Effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$107,088.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
AIM V.I. Basic Balanced Fund
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,794 for accounting and fund administrative services and reimbursed $90,706
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio -- Institutional Class $1,436,490 $11,176,889 $(12,023,439) $ 589,940 $33,811
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio -- Institutional Class 1,436,490 11,176,889 (12,023,439) 589,940 33,640
=================================================================================================================================
Total Investments in Affiliates $2,872,980 $22,353,778 $(24,046,878) $1,179,880 $67,451
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $728,488, which resulted in net realized gains of
$192,512, and securities purchases of $32,878.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $331.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,369 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
AIM V.I. Basic Balanced Fund
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--FUTURES CONTRACTS
On June 30, 2007, $91,580 principal amount of U.S. Mortgage-backed obligations
were pledged as collateral to cover margin requirements for open futures
contracts.
<Table>
<Caption>
OPEN FUTURES CONTRACTS AT PERIOD END
- --------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ VALUE APPRECIATION
CONTRACT CONTRACTS COMMITMENT 06/30/07 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 1 Sept-07/Long $ 203,781 $ 748
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 23 Sept-07/Long 2,393,797 1,872
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 53 Sept-07/Long 5,602,266 (30,932)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Long Bonds 14 Sept-07/Long 1,508,500 7,469
==========================================================================================================================
$9,708,344 $(20,843)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $ 1,166,135
- -----------------------------------------------------------------------------
December 31, 2010 16,216,953
=============================================================================
Total capital loss carryforward $17,383,088
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
AIM V.I. Basic Balanced Fund
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $23,975,832 and
$32,120,826, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $13,800,647
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,006,518)
===============================================================================
Net unrealized appreciation of investment securities $12,794,129
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $80,147,628.
</Table>
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Series I 152,787 $ 1,868,621 360,135 $ 4,088,599
- --------------------------------------------------------------------------------------------------------------------
Series II 14,317 174,957 47,372 532,918
====================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 134,985 1,595,527
- --------------------------------------------------------------------------------------------------------------------
Series II -- -- 8,358 98,205
====================================================================================================================
Reacquired:
Series I (847,509) (10,393,347) (1,679,810) (19,116,765)
- --------------------------------------------------------------------------------------------------------------------
Series II (58,234) (704,854) (97,098) (1,097,924)
====================================================================================================================
(738,639) $ (9,054,623) (1,226,058) $(13,899,440)
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 79% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 12--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Basic Balanced Fund
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.92 $ 10.99 $ 10.59 $ 9.99 $ 8.75 $ 10.84
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.14 0.25 0.18 0.13 0.14 0.18
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.57 0.91 0.38 0.62 1.29 (2.02)
=================================================================================================================================
Total from investment operations 0.71 1.16 0.56 0.75 1.43 (1.84)
=================================================================================================================================
Less dividends from net investment income -- (0.23) (0.16) (0.15) (0.19) (0.25)
=================================================================================================================================
Net asset value, end of period $ 12.63 $ 11.92 $ 10.99 $ 10.59 $ 9.99 $ 8.75
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.96% 10.55% 5.29% 7.52% 16.36% (17.02)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $80,439 $84,212 $90,633 $99,070 $97,665 $82,866
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.91%(c) 0.91% 0.95% 1.12% 1.11% 1.17%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.15%(c) 1.15% 1.15% 1.12% 1.11% 1.17%
=================================================================================================================================
Ratio of net investment income to average net assets 2.25%(c) 2.16% 1.68% 1.24% 1.47% 1.90%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 28% 44% 44% 51% 131% 90%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$82,412,554.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
-------------------------------------------------------------------------------
JANUARY 24, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------------------------ DECEMBER 31
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.84 $10.91 $10.53 $ 9.95 $ 8.73 $ 10.70
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.12 0.22 0.15 0.10 0.12 0.14
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.57 0.91 0.37 0.62 1.29 (1.86)
=================================================================================================================================
Total from investment operations 0.69 1.13 0.52 0.72 1.41 (1.72)
=================================================================================================================================
Less dividends from net investment income -- (0.20) (0.14) (0.14) (0.19) (0.25)
=================================================================================================================================
Net asset value, end of period $12.53 $11.84 $10.91 $10.53 $ 9.95 $ 8.73
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.83% 10.36% 4.91% 7.24% 16.15% (16.12)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,669 $5,878 $5,870 $5,642 $4,133 $ 733
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.16%(c) 1.16% 1.20% 1.37% 1.36% 1.42%(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.40%(c) 1.40% 1.40% 1.37% 1.36% 1.42%(d)
=================================================================================================================================
Ratio of net investment income to average net
assets 2.00%(c) 1.91% 1.43% 0.99% 1.22% 1.65%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 28% 44% 44% 51% 131% 90%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$5,731,864.
(d) Annualized
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Basic Balanced Fund
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Basic Balanced Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service fees (12b-1); You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,059.60 $4.65 $1,020.28 $4.56 0.91%
Series II 1,000.00 1,058.30 5.92 1,019.04 5.81 1.16
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Basic Balanced Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM Committee considers each Sub-Committee's sory fees, expense limitations and/or fee
Variable Insurance Funds is required under recommendations and makes its own waivers.
the Investment Company Act of 1940 to recommendations regarding the performance,
approve annually the renewal of the AIM fees and expenses of the AIM Funds to the A. NATURE, EXTENT AND QUALITY OF SERVICES
V.I. Basic Balanced Fund (the Fund) full Board. Moreover, the Investments PROVIDED BY AIM
investment advisory agreement with A I M Committee considers each Sub-Committee's
Advisors, Inc. (AIM). During contract recommendations in making its annual The Board reviewed the advisory services
renewal meetings held on June 25-27, 2007, recommendation to the Board whether to provided to the Fund by AIM under the
the Board as a whole and the disinterested approve the continuance of each AIM Fund's Fund's advisory agreement, the performance
or "independent" Trustees, voting investment advisory agreement and of AIM in providing these services, and
separately, approved the continuance of sub-advisory agreement, if applicable the credentials and experience of the
the Fund's investment advisory agreement (advisory agreements), for another year. officers and employees of AIM who provide
for another year, effective July 1, 2007. these services. The Board's review of the
In doing so, the Board determined that the The independent Trustees, as mentioned qualifications of AIM to provide these
Fund's advisory agreement is in the best above, are assisted in their annual services included the Board's
interests of the Fund and its shareholders evaluation of the advisory agreements by consideration of AIM's portfolio and
and that the compensation to AIM under the the independent Senior Officer. One product review process, various back
Fund's advisory agreement is fair and responsibility of the Senior Officer is to office support functions provided by AIM,
reasonable. manage the process by which the AIM Funds' and AIM's equity and fixed income trading
proposed management fees are negotiated operations. The Board concluded that the
The independent Trustees met separately during the annual contract renewal process nature, extent and quality of the advisory
during their evaluation of the Fund's to ensure that they are negotiated in a services provided to the Fund by AIM were
investment advisory agreement with manner which is at arms' length and appropriate and that AIM currently is
independent legal counsel from whom they reasonable. Accordingly, the Senior providing satisfactory advisory services
received independent legal advice, and the Officer must either supervise a in accordance with the terms of the Fund's
independent Trustees also received competitive bidding process or prepare an advisory agreement. In addition, based on
assistance during their deliberations from independent written evaluation. The Senior their ongoing meetings throughout the year
the independent Senior Officer, a Officer has recommended that an with the Fund's portfolio managers, the
full-time officer of the AIM Funds who independent written evaluation be provided Board concluded that these individuals are
reports directly to the independent and, upon the direction of the Board, has competent and able to continue to carry
Trustees. The following discussion more prepared an independent written out their responsibilities under the
fully describes the process employed by evaluation. Fund's advisory agreement.
the Board to evaluate the performance of
the AIM Funds (including the Fund) During the annual contract renewal In determining whether to continue the
throughout the year and, more process, the Board considered the factors Fund's advisory agreement, the Board
specifically, during the annual contract discussed below under the heading "Factors considered the prior relationship between
renewal meetings. and Conclusions and Summary of Independent AIM and the Fund, as well as the Board's
Written Fee Evaluation" in evaluating the knowledge of AIM's operations, and
THE BOARD'S FUND EVALUATION PROCESS fairness and reasonableness of the Fund's concluded that it was beneficial to
advisory agreement at the contract renewal maintain the current relationship, in
The Board's Investments Committee has meetings and at their meetings throughout part, because of such knowledge. The Board
established three Sub-Committees which are the year as part of their ongoing also considered the steps that AIM and its
responsible for overseeing the management oversight of the Fund. The Fund's advisory affiliates have taken over the last
of a number of the series portfolios of agreement was considered separately, several years to improve the quality and
the AIM Funds. This Sub-Committee although the Board also considered the efficiency of the services they provide to
structure permits the Trustees to focus on common interests of all of the AIM Funds the Funds in the areas of investment
the performance of the AIM Funds that have in their deliberations. The Board performance, product line diversification,
been assigned to them. The Sub-Committees comprehensively considered all of the distribution, fund operations, shareholder
meet throughout the year to review the information provided to them and did not services and compliance. The Board
performance of their assigned funds, and identify any particular factor that was concluded that the quality and efficiency
the Sub-Committees review monthly and controlling. Furthermore, each Trustee may of the services AIM and its affiliates
quarterly comparative performance have evaluated the information provided provide to the AIM Funds in each of these
information and periodic asset flow data differently from one another and areas have generally improved, and support
for their assigned funds. These materials attributed different weight to the various the Board's approval of the continuance of
are prepared under the direction and factors. The Trustees recognized that the the Fund's advisory agreement.
supervision of the independent Senior advisory arrangements and resulting
Officer. Over the course of each year, the advisory fees for the Fund and the other B. FUND PERFORMANCE
Sub-Committees meet with portfolio AIM Funds are the result of years of
managers for their assigned funds and review and negotiation between the The Board compared the Fund's performance
other members of management and review Trustees and AIM, that the Trustees may during the past one, three and five
with these individuals the performance, focus to a greater extent on certain calendar years to the performance of funds
investment objective(s), policies, aspects of these arrangements in some in the Fund's Lipper peer group that are
strategies and limitations of these funds. years than others, and that the Trustees' not managed by AIM, and against the
deliberations and conclusions in a performance of all funds in the Lipper
In addition to their meetings particular year may be based in part on Variable Annuity Underlying Funds -
throughout the year, the Sub-Committees their deliberations and conclusions of Mixed-Asset Target Allocation Moderate
meet at designated contract renewal these same arrangements throughout the Index. The Board also reviewed the
meetings each year to conduct an in-depth year and in prior years. methodology used by Lipper to identify the
review of the performance, fees and Fund's peers. The Board noted that the
expenses of their assigned funds. During FACTORS AND CONCLUSIONS AND SUMMARY OF Fund's performance was below the median
the contract renewal process, the Trustees INDEPENDENT WRITTEN FEE EVALUATION performance of its peers for the one and
receive comparative performance and fee five year periods, and comparable to such
data regarding all the AIM Funds prepared The discussion below serves as a summary performance for the three year period. The
by an independent company, Lipper, Inc., of the Senior Officer's independent Board noted that the Fund's performance
under the direction and supervision of the written evaluation, as well as a was comparable to the performance of the
independent Senior Officer who also discussion of the material factors and Index for the one and three year periods,
prepares a separate analysis of this related conclusions that formed the basis and below such Index for the five year
information for the Trustees. Each for the Board's approval of the Fund's period. The Board also considered the
Sub-Committee then makes recommendations advisory agreement. Unless otherwise steps AIM has taken over the last several
to the Investments Committee regarding the stated, information set forth below is as years to improve the quality and
performance, fees and expenses of their of June 27, 2007 and does not reflect any efficiency of the services that AIM
assigned funds. The Investments changes that may have occurred since that provides to the AIM Funds. The Board
date, including but not limited to changes concluded that AIM continues to be
to the Fund's performance, advi- responsive to the Board's focus on fund
performance. Although the independent
(continued)
AIM V.I. Basic Balanced Fund
written evaluation of the Fund's Senior D. ECONOMIES OF SCALE AND BREAKPOINTS G. COLLATERAL BENEFITS TO AIM AND ITS
Officer (discussed below) only considered AFFILIATES
Fund performance through the most recent The Board considered the extent to
calendar year, the Board also reviewed which there are economies of scale in The Board considered various other
more recent Fund performance and this AIM's provision of advisory services to benefits received by AIM and its
review did not change their conclusions. the Fund. The Board also considered affiliates resulting from AIM's
whether the Fund benefits from such relationship with the Fund, including the
C. ADVISORY FEES AND FEE WAIVERS economies of scale through contractual fees received by AIM and its affiliates
breakpoints in the Fund's advisory fee for their provision of administrative,
The Board compared the Fund's contractual schedule or through advisory fee waivers transfer agency and distribution services
advisory fee rate to the contractual or expense limitations. The Board noted to the Fund. The Board considered the
advisory fee rates of funds in the Fund's that the Fund's contractual advisory fee performance of AIM and its affiliates in
Lipper peer group that are not managed by schedule includes one breakpoint but that, providing these services and the
AIM, at a common asset level and as of the due to the Fund's asset level at the end organizational structure employed by AIM
end of the past calendar year. The Board of the past calendar year and the way in and its affiliates to provide these
noted that the Fund's advisory fee rate which the breakpoint has been structured, services. The Board also considered that
was comparable to the median advisory fee the Fund has yet to benefit from the these services are provided to the Fund
rate of its peers. The Board also reviewed breakpoint. The Board also noted that pursuant to written contracts which are
the methodology used by Lipper and noted AIM's contractual advisory fee waiver reviewed and approved on an annual basis
that the contractual fee rates shown by discussed above includes breakpoints based by the Board. The Board concluded that AIM
Lipper include any applicable long-term on net asset levels. Based on this and its affiliates were providing these
contractual fee waivers. The Board also information, the Board concluded that the services in a satisfactory manner and in
compared the Fund's contractual advisory Fund's advisory fees would reflect accordance with the terms of their
fee rate to the contractual advisory fee economies of scale at higher asset levels. contracts, and were qualified to continue
rates of other clients of AIM and its The Board also noted that the Fund shares to provide these services to the Fund.
affiliates with investment strategies directly in economies of scale through
comparable to those of the Fund, including lower fees charged by third party service The Board considered the benefits
one mutual fund advised by AIM, two providers based on the combined size of realized by AIM as a result of portfolio
Canadian funds advised by an AIM affiliate all of the AIM Funds and affiliates. brokerage transactions executed through
and sub-advised by AIM, and one offshore "soft dollar" arrangements. Under these
fund advised and sub-advised by AIM E. PROFITABILITY AND FINANCIAL RESOURCES arrangements, portfolio brokerage
affiliates. The Board noted that the OF AIM commissions paid by the Fund and/or other
Fund's rate was: (i) above the rate for funds advised by AIM are used to pay for
the mutual fund; (ii) above the The Board reviewed information from AIM research and execution services. The Board
sub-advisory fee rates for the two concerning the costs of the advisory and noted that soft dollar arrangements shift
Canadian funds, although the advisory fee other services that AIM and its affiliates the payment obligation for the research
rate for one such Canadian fund was the provide to the Fund and the profitability and executions services from AIM to the
same as the Fund's; and (iii) below the of AIM and its affiliates in providing funds and therefore may reduce AIM's
advisory fee rate for the offshore fund. these services. The Board also reviewed expenses. The Board also noted that
information concerning the financial research obtained through soft dollar
The Board noted that AIM has condition of AIM and its affiliates. The arrangements may be used by AIM in making
contractually agreed to waive advisory Board also reviewed with AIM the investment decisions for the Fund and may
fees of the Fund through December 31, 2009 methodology used to prepare the therefore benefit Fund shareholders. The
and that this fee waiver includes profitability information. The Board Board concluded that AIM's soft dollar
breakpoints based on net asset levels. The considered the overall profitability of arrangements were appropriate. The Board
Board considered the contractual nature of AIM, as well as the profitability of AIM also concluded that, based on their review
this fee waiver and noted that it remains in connection with managing the Fund. The and representations made by AIM, these
in effect until December 31, 2009. The Board noted that AIM continues to operate arrangements were consistent with
Board noted that, according to information at a net profit, although increased regulatory requirements.
provided by AIM, this fee waiver reduces expenses in recent years have reduced the
the Fund's effective advisory fees to a profitability of AIM and its affiliates. The Board considered the fact that the
level generally in line with the median The Board concluded that the Fund's Fund's uninvested cash and cash collateral
effective advisory fees for the Fund's advisory fees were fair and reasonable, from any securities lending arrangements
peers, as determined by AIM. The Board and that the level of profits realized by may be invested in money market funds
also noted that AIM has contractually AIM and its affiliates from providing advised by AIM pursuant to procedures
agreed to waive fees and/or limit expenses services to the Fund was not excessive in approved by the Board. The Board noted
of the Fund through at least April 30, light of the nature, quality and extent of that AIM will receive advisory fees from
2009 in an amount necessary to limit total the services provided. The Board these affiliated money market funds
annual operating expenses to a specified considered whether AIM is financially attributable to such investments, although
percentage of average daily net assets for sound and has the resources necessary to AIM has contractually agreed to waive the
each class of the Fund. The Board perform its obligations under the Fund's advisory fees payable by the Fund with
considered the contractual nature of this advisory agreement, and concluded that AIM respect to its investment of uninvested
fee waiver and noted that it remains in has the financial resources necessary to cash in these affiliated money market
effect until at least April 30, 2009. The fulfill these obligations. funds through at least April 30, 2009. The
Board reviewed the Fund's effective Board considered the contractual nature of
advisory fee rate, after taking account of F. INDEPENDENT WRITTEN EVALUATION OF THE this fee waiver and noted that it remains
these fee waivers/expense limitations, and FUND'S SENIOR OFFICER in effect until at least April 30, 2009.
considered the effect these fee The Board concluded that the Fund's
waivers/expense limitations would have on The Board noted that, upon their investment of uninvested cash and cash
the Fund's estimated total expenses. The direction, the Senior Officer of the Fund, collateral from any securities lending
Board concluded that the levels of fee who is independent of AIM and AIM's arrangements in the affiliated money
waivers/expense limitations for the Fund affiliates, had prepared an independent market funds is in the best interests of
were fair and reasonable. written evaluation to assist the Board in the Fund and its shareholders.
determining the reasonableness of the
After taking account of the Fund's proposed management fees of the AIM Funds,
contractual advisory fee rate, as well as including the Fund. The Board noted that
the comparative advisory fee information they had relied upon the Senior Officer's
and the fee waivers/expense limitations written evaluation instead of a
discussed above, the Board concluded that competitive bidding process. In
the Fund's advisory fees were fair and determining whether to continue the Fund's
reasonable. advisory agreement, the Board considered
the Senior Officer's written evaluation.
AIM V.I. Basic Value Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Value
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Basic Value Fund
Fund performance
=======================================================================================
PERFORMANCE SUMMARY connection with a variable product. Sales
charges, expenses and fees, which are
FUND VS. INDEXES determined by the variable product
issuers, will vary and will lower the
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. total return.
If variable product issuer charges were included, returns would be lower.
Per NASD requirements, the most recent
Series I Shares 7.71% month-end performance data at the Fund
Series II Shares 7.55 level, excluding variable product charges,
S&P 500 Index(1) (Broad Market Index) 6.96 is available on the AIM automated
Russell 1000 Value Index(1) (Style-Specific Index) 6.23 information line, 866-702-4402. As
Lipper VUF Large-Cap Value Funds Index(1) (Peer Group Index) 7.24 mentioned above, for the most recent
Lipper Large-Cap Value Funds Index(1) (Former Peer Group Index) 7.27 month-end performance including variable
product charges, please contact your
SOURCE: (1) LIPPER INC. variable product issuer or financial
advisor.
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance.
The unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Value Index is a subset of the
unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Index, which represents the performance
of the stocks of large-capitalization companies; the Value subset measures the
performance of Russell 1000 companies with lower price/book ratios and lower forecasted
growth values. The Russell 1000 Value Index and the Russell 1000 Index are
trademarks/service marks of the Frank Russell Company. Russell -- REGISTERED TRADEMARK --
is a trademark of the Frank Russell Company.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Large-Cap
Value Funds Index as its peer group instead of the Lipper Large-Cap Value Funds Index.
In 2006, Lipper began publishing VUF indexes, allowing the Fund to be compared with the
Lipper VUF Large-Cap Value Funds Index. The unmanaged Lipper VUF Large-Cap Value Funds
Index is an equally weighted representation of the largest variable insurance
underlying funds in the Lipper Large-Cap Value Funds category. Lipper Inc. is an
independent mutual fund performance monitor.
The unmanaged Lipper Large-Cap Value Funds Index represents an average of the
performance of the largest large-capitalization value funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== Fund expenses, reinvested distributions
FUND PERFORMANCE and changes in net asset value. Investment
As of 6/30/07 return and principal value will fluctuate
SERIES I SHARES so that you may have a gain or loss when
Inception (9/10/01) 7.59% you sell shares.
5 Years 10.50
1 Year 20.76 The total annual Fund operating expense
ratio set forth in the most recent Fund
SERIES II SHARES prospectus as of the date of this report
Inception (9/10/01) 7.33% for Series I and Series II shares was
5 Years 10.22 0.97% and 1.22%, respectively. The expense
1 Year 20.39 ratios presented above may vary from the
========================================== expense ratios presented in other sections
of this report that are based on expenses
The performance of the Fund's Series I and incurred during the period covered by this
Series II share classes will differ report.
primarily due to different class expenses.
AIM V.I. Basic Value Fund, a series
The performance data quoted represent portfolio of AIM Variable Insurance Funds,
past performance and cannot guarantee is currently offered through insurance
comparable future results; current companies issuing variable products. You
performance may be lower or higher. Please cannot purchase shares of the Fund
contact your variable product issuer or directly. Performance figures given
financial advisor for the most recent represent the Fund and are not intended to
month-end variable product performance. reflect actual variable product values.
Performance figures reflect They do not reflect sales charges,
expenses and fees assessed in
AIM V.I. Basic Value Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Consumer Discretionary 18.5%
- ----------------------------------------------------------
Financials 17.9
- ----------------------------------------------------------
Health Care 17.2
- ----------------------------------------------------------
Information Technology 16.7
- ----------------------------------------------------------
Industrials 9.3
- ----------------------------------------------------------
Energy 8.4
- ----------------------------------------------------------
Consumer Staples 4.3
- ----------------------------------------------------------
Materials 3.2
- ----------------------------------------------------------
Telecommunication Services 1.5
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 3.0
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.01%
ADVERTISING-5.75%
Interpublic Group of Cos., Inc. (The)(a) 2,140,652 $ 24,403,433
- ------------------------------------------------------------------------
Omnicom Group Inc. 445,832 23,593,429
========================================================================
47,996,862
========================================================================
APPAREL RETAIL-2.13%
Gap, Inc., (The) 931,898 17,799,252
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.98%
Bank of New York Mellon Corp.(a) 398,775 16,525,236
========================================================================
BREWERS-2.51%
Molson Coors Brewing Co.-Class B 226,656 20,956,614
========================================================================
BROADCASTING & CABLE TV-0.00%
Citadel Broadcasting Corp. 1 6
========================================================================
BUILDING PRODUCTS-2.17%
American Standard Cos., Inc. 306,293 18,065,161
========================================================================
COMPUTER HARDWARE-3.91%
Dell Inc.(a) 1,144,153 32,665,568
========================================================================
CONSTRUCTION MATERIALS-3.21%
Cemex S.A.B. de C.V.-ADR (Mexico)(a) 726,468 26,806,669
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.48%
First Data Corp. 520,338 16,999,443
- ------------------------------------------------------------------------
Western Union Co. (The) 978,088 20,373,573
========================================================================
37,373,016
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
EDUCATION SERVICES-2.69%
Apollo Group, Inc.-Class A(a) 383,655 $ 22,416,962
========================================================================
ELECTRONIC MANUFACTURING SERVICES-1.13%
Tyco Electronics Ltd.(a) 240,633 9,399,135
========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.02%
Waste Management, Inc. 217,973 8,511,846
========================================================================
GENERAL MERCHANDISE STORES-2.81%
Target Corp. 369,107 23,475,205
========================================================================
HEALTH CARE DISTRIBUTORS-3.53%
Cardinal Health, Inc. 416,419 29,415,838
========================================================================
HEALTH CARE EQUIPMENT-0.62%
Covidien Ltd.(a) 120,633 5,199,293
========================================================================
HOME IMPROVEMENT RETAIL-1.90%
Home Depot, Inc. (The) 402,744 15,847,977
========================================================================
INDUSTRIAL CONGLOMERATES-4.01%
General Electric Co. 537,147 20,561,987
- ------------------------------------------------------------------------
Tyco International Ltd. 240,633 12,917,193
========================================================================
33,479,180
========================================================================
INDUSTRIAL MACHINERY-2.11%
Illinois Tool Works Inc. 324,707 17,595,872
========================================================================
INSURANCE BROKERS-0.56%
Marsh & McLennan Cos., Inc. 152,100 4,696,848
========================================================================
</Table>
AIM V.I. Basic Value Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-3.35%
Merrill Lynch & Co., Inc. 137,964 $ 11,531,031
- ------------------------------------------------------------------------
Morgan Stanley 196,183 16,455,830
========================================================================
27,986,861
========================================================================
LIFE SCIENCES TOOLS & SERVICES-2.40%
Waters Corp.(a) 337,105 20,010,553
========================================================================
MANAGED HEALTH CARE-3.92%
UnitedHealth Group Inc. 640,194 32,739,521
========================================================================
MOVIES & ENTERTAINMENT-2.18%
Walt Disney Co. (The) 532,969 18,195,562
========================================================================
MULTI-LINE INSURANCE-0.96%
American International Group, Inc. 114,118 7,991,684
========================================================================
OIL & GAS DRILLING-3.25%
Transocean Inc.(a) 255,690 27,098,026
========================================================================
OIL & GAS EQUIPMENT & SERVICES-5.13%
Halliburton Co. 651,375 22,472,437
- ------------------------------------------------------------------------
Weatherford International Ltd.(a) 367,862 20,320,697
========================================================================
42,793,134
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-6.13%
Citigroup Inc. 607,997 31,184,166
- ------------------------------------------------------------------------
JPMorgan Chase & Co. 412,885 20,004,278
========================================================================
51,188,444
========================================================================
PACKAGED FOODS & MEATS-1.79%
Unilever N.V. (Netherlands)(b) 481,511 14,973,283
========================================================================
PHARMACEUTICALS-6.75%
Pfizer Inc. 673,437 17,219,784
- ------------------------------------------------------------------------
Sanofi-Aventis (France)(b) 212,227 17,137,056
- ------------------------------------------------------------------------
Wyeth 382,385 21,925,956
========================================================================
56,282,796
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
PROPERTY & CASUALTY INSURANCE-1.50%
ACE Ltd. 200,089 $ 12,509,564
========================================================================
SEMICONDUCTOR EQUIPMENT-1.96%
KLA-Tencor Corp. 297,805 16,364,385
========================================================================
SPECIALIZED CONSUMER SERVICES-1.03%
H&R Block, Inc. 369,280 8,630,074
========================================================================
SYSTEMS SOFTWARE-5.24%
CA Inc. 966,154 24,955,758
- ------------------------------------------------------------------------
Microsoft Corp. 637,613 18,790,455
========================================================================
43,746,213
========================================================================
THRIFTS & MORTGAGE FINANCE-3.40%
Fannie Mae 433,913 28,347,536
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.50%
Sprint Nextel Corp. 604,969 12,528,908
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $572,565,914) 809,613,084
========================================================================
MONEY MARKET FUNDS-2.62%
Liquid Assets Portfolio-Institutional
Class(c) 10,909,166 10,909,166
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 10,909,166 10,909,166
========================================================================
Total Money Market Funds (Cost
$21,818,332) 21,818,332
========================================================================
TOTAL INVESTMENTS-99.63% (Cost $594,384,246) 831,431,416
========================================================================
OTHER ASSETS LESS LIABILITIES-0.37% 3,106,506
========================================================================
NET ASSETS-100.00% $834,537,922
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(*) Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $32,110,339, which
represented 3.85% of the Fund's Net Assets. See Note 1A.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Basic Value Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $572,565,914) $809,613,084
- ------------------------------------------------------------
Investments in affiliated money market funds
(Cost $21,818,332) 21,818,332
- ------------------------------------------------------------
Total investments (Cost $594,384,246) 831,431,416
- ------------------------------------------------------------
Foreign currencies, at value (Cost $13,149) 13,289
- ------------------------------------------------------------
Receivables for:
Investments sold 10,312,696
- ------------------------------------------------------------
Fund shares sold 31,917
- ------------------------------------------------------------
Dividends 621,922
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 23,557
============================================================
Total assets 842,434,797
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 6,172,311
- ------------------------------------------------------------
Fund shares reacquired 810,285
- ------------------------------------------------------------
Trustee deferred compensation and retirement
plans 67,607
- ------------------------------------------------------------
Accrued administrative services fees 584,600
- ------------------------------------------------------------
Accrued distribution fees -- Series II 219,057
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 5,702
- ------------------------------------------------------------
Accrued transfer agent fees 1,491
- ------------------------------------------------------------
Accrued operating expenses 35,822
============================================================
Total liabilities 7,896,875
============================================================
Net assets applicable to shares outstanding $834,537,922
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $498,858,819
- ------------------------------------------------------------
Undistributed net investment income 5,753,496
- ------------------------------------------------------------
Undistributed net realized gain 92,878,298
- ------------------------------------------------------------
Unrealized appreciation 237,047,309
============================================================
$834,537,922
____________________________________________________________
============================================================
NET ASSETS:
Series I $485,889,744
____________________________________________________________
============================================================
Series II $348,648,178
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 33,771,306
____________________________________________________________
============================================================
Series II 24,476,084
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 14.39
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 14.24
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$133,353) $ 6,072,148
- ------------------------------------------------------------
Dividends from affiliated money market funds 544,948
============================================================
Total investment income 6,617,096
============================================================
EXPENSES:
Advisory fees 2,943,649
- ------------------------------------------------------------
Administrative services fees 1,114,329
- ------------------------------------------------------------
Custodian fees 13,726
- ------------------------------------------------------------
Distribution fees -- Series II 425,480
- ------------------------------------------------------------
Transfer agent fees 11,707
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 20,900
- ------------------------------------------------------------
Other 31,829
============================================================
Total expenses 4,561,620
============================================================
Less: Fees waived and expense offset
arrangement (206,251)
============================================================
Net expenses 4,355,369
============================================================
Net investment income 2,261,727
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$650,281) 54,756,437
- ------------------------------------------------------------
Foreign currencies (856)
============================================================
54,755,581
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 4,286,213
- ------------------------------------------------------------
Foreign currencies (1,212)
============================================================
4,285,001
============================================================
Net realized and unrealized gain 59,040,582
============================================================
Net increase in net assets resulting from
operations $ 61,302,309
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Basic Value Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,261,727 $ 3,567,406
- ----------------------------------------------------------------------------------------
Net realized gain 54,755,581 40,034,739
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation 4,285,001 57,602,074
========================================================================================
Net increase in net assets resulting from operations 61,302,309 101,204,219
========================================================================================
Distributions to shareholders from net investment income:
Series I -- (1,857,288)
- ----------------------------------------------------------------------------------------
Series II -- (415,065)
========================================================================================
Total distributions from net investment income -- (2,272,353)
========================================================================================
Distributions to shareholders from net realized gains:
Series I -- (20,535,697)
- ----------------------------------------------------------------------------------------
Series II -- (14,423,526)
========================================================================================
Total distributions from net realized gains -- (34,959,223)
========================================================================================
Decrease in net assets resulting from distributions -- (37,231,576)
========================================================================================
Share transactions-net:
Series I (39,649,955) (34,896,912)
- ----------------------------------------------------------------------------------------
Series II (15,923,814) (50,991,677)
========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (55,573,769) (85,888,589)
========================================================================================
Net increase (decrease) in net assets 5,728,540 (21,915,946)
========================================================================================
NET ASSETS:
Beginning of period 828,809,382 850,725,328
========================================================================================
End of period (including undistributed net investment
income of $5,753,496 and $3,491,769, respectively) $834,537,922 $828,809,382
________________________________________________________________________________________
========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Basic Value Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Basic Value Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Basic Value Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. Basic Value Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $500 million 0.725%
- --------------------------------------------------------------------
Next $500 million 0.70%
- --------------------------------------------------------------------
Next $500 million 0.675%
====================================================================
Over $1.5 billion 0.65%
___________________________________________________________________
====================================================================
</Table>
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.695%
- --------------------------------------------------------------------
Next $250 million 0.67%
- --------------------------------------------------------------------
Next $500 million 0.645%
- --------------------------------------------------------------------
Next $1.5 billion 0.62%
- --------------------------------------------------------------------
Next $2.5 billion 0.595%
- --------------------------------------------------------------------
Next $2.5 billion 0.57%
- --------------------------------------------------------------------
Next $2.5 billion 0.545%
====================================================================
Over $10 billion 0.52%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. In addition, the Fund may also
benefit from a one time credit to be used to offset custodian expenses. These
credits are used to pay certain expenses incurred by the Fund. To the extent
that the annualized expense ratio does not exceed the expense limitation, AIM
will retain its ability to be reimbursed for such fee waivers or reimbursements
prior to the end of each fiscal year.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$198,456.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$99,642 for accounting and fund administrative services and reimbursed
$1,014,687 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average
AIM V.I. Basic Value Fund
daily net assets of the Series II shares may be paid to insurance companies who
furnish continuing personal shareholder services to customers who purchase and
own Series II shares of the Fund. For the six months ended June 30, 2007,
expenses incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $ 6,586,888 $ 57,776,941 $ (53,454,663) $10,909,166 $273,160
- ----------------------------------------------------------------------------------------------------------------------
Premier Portfolio-
Institutional Class 6,586,888 57,776,941 (53,454,663) 10,909,166 271,788
======================================================================================================================
Total Investments in Affiliates $13,173,776 $115,553,882 $(106,909,326) $21,818,332 $544,948
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $1,425,179, which resulted in net realized gains
of $650,281, and securities purchases of $448,548.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of (i) custodian credits which
result from periodic overnight cash balances at the custodian and (ii) a one
time custodian fee credit used to offset custodian fees. For the six months
ended June 30, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $7,795.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$3,806 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
AIM V.I. Basic Value Fund
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $109,804,070 and
$179,381,220, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 240,885,361
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,155,552)
===========================================================================================================
Net unrealized appreciation of investment securities $ 234,729,809
___________________________________________________________________________________________________________
===========================================================================================================
Cost of investments for tax purposes is $596,701,607.
</Table>
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Sold:
Series I 588,696 $ 8,105,258 1,696,765 $ 21,715,334
- -----------------------------------------------------------------------------------------------------------
Series II 2,355,524 32,687,721 7,249,058 88,895,732
===========================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 1,691,639 22,363,469
- -----------------------------------------------------------------------------------------------------------
Series II -- -- 1,131,836 14,838,368
===========================================================================================================
Reacquired:
Series I (3,460,155) (47,755,213) (6,148,598) (78,975,715)
- -----------------------------------------------------------------------------------------------------------
Series II (3,521,980) (48,611,535) (12,371,865) (154,725,777)
===========================================================================================================
(4,037,915) $(55,573,769) (6,751,165) $ (85,888,589)
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) There are five entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 62% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Basic Value Fund
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.35 $ 12.37 $ 11.84 $ 10.66 $ 7.98 $ 10.25
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05 0.07(a) 0.05 0.02 0.00 0.02(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.99 1.54 0.63 1.16 2.68 (2.29)
=================================================================================================================================
Total from investment operations 1.04 1.61 0.68 1.18 2.68 (2.27)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.05) (0.01) -- (0.00) (0.00)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.58) (0.14) -- -- --
=================================================================================================================================
Total distributions -- (0.63) (0.15) -- (0.00) (0.00)
=================================================================================================================================
Net asset value, end of period $ 14.39 $ 13.35 $ 12.37 $ 11.84 $ 10.66 $ 7.98
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.79% 13.12% 5.74% 11.07% 33.63% (22.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $485,890 $489,352 $487,332 $496,837 $309,384 $97,916
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.95%(c) 0.97% 0.97% 1.02% 1.04% 1.16%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.00%(c) 1.02% 1.02% 1.02% 1.04% 1.16%
=================================================================================================================================
Ratio of net investment income to average net assets 0.65%(c) 0.54% 0.38% 0.17% 0.01% 0.18%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 14% 15% 16% 14% 18% 22%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(c) Ratios are annualized and based on average daily net assets of
$486,950,890.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Basic Value Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES II
--------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.24 $ 12.26 $ 11.76 $ 10.61 $ 7.96 $ 10.25
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 0.04(a) 0.02 (0.01) (0.02) (0.01)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.97 1.54 0.62 1.16 2.67 (2.28)
=================================================================================================================================
Total from investment operations 1.00 1.58 0.64 1.15 2.65 (2.29)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.02) -- -- (0.00) (0.00)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.58) (0.14) -- -- --
=================================================================================================================================
Total distributions -- (0.60) (0.14) -- (0.00) (0.00)
=================================================================================================================================
Net asset value, end of period $ 14.24 $ 13.24 $ 12.26 $ 11.76 $ 10.61 $ 7.96
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.55% 12.94% 5.43% 10.84% 33.29% (22.34)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $348,648 $339,457 $363,393 $353,605 $253,877 $104,597
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.20%(c) 1.22% 1.22% 1.27% 1.29% 1.41%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.25%(c) 1.27% 1.27% 1.27% 1.29% 1.41%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.40%(c) 0.29% 0.13% (0.08)% (0.24)% (0.07)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 14% 15% 16% 14% 18% 22%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(c) Ratios are annualized and based on average daily net assets of
$343,204,562.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
AIM V.I. Basic Value Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Basic Value Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service fees (12b-1); You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period.. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,077.10 $4.89 $1,020.08 $4.76 0.95%
Series II 1,000.00 1,075.50 6.18 1,018.84 6.01 1.20
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Basic Value Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM regarding the performance, fees and ment, the performance of AIM in providing
Variable Insurance Funds is required under expenses of the AIM Funds to the full these services, and the credentials and
the Investment Company Act of 1940 to Board. Moreover, the Investments Committee experience of the officers and employees
approve annually the renewal of the AIM considers each Sub-Committee's of AIM who provide these services. The
V.I. Basic Value Fund (the Fund) recommendations in making its annual Board's review of the qualifications of
investment advisory agreement with A I M recommendation to the Board whether to AIM to provide these services included the
Advisors, Inc. (AIM). During contract approve the continuance of each AIM Fund's Board's consideration of AIM's portfolio
renewal meetings held on June 25-27, 2007, investment advisory agreement and and product review process, various back
the Board as a whole and the disinterested sub-advisory agreement, if applicable office support functions provided by AIM,
or "independent" Trustees, voting (advisory agreements), for another year. and AIM's equity and fixed income trading
separately, approved the continuance of operations. The Board concluded that the
the Fund's investment advisory agreement The independent Trustees, as mentioned nature, extent and quality of the advisory
for another year, effective July 1, 2007. above, are assisted in their annual services provided to the Fund by AIM were
In doing so, the Board determined that the evaluation of the advisory agreements by appropriate and that AIM currently is
Fund's advisory agreement is in the best the independent Senior Officer. One providing satisfactory advisory services
interests of the Fund and its shareholders responsibility of the Senior Officer is to in accordance with the terms of the Fund's
and that the compensation to AIM under the manage the process by which the AIM Funds' advisory agreement. In addition, based on
Fund's advisory agreement is fair and proposed management fees are negotiated their ongoing meetings throughout the year
reasonable. during the annual contract renewal process with the Fund's portfolio managers, the
to ensure that they are negotiated in a Board concluded that these individuals are
The independent Trustees met separately manner which is at arms' length and competent and able to continue to carry
during their evaluation of the Fund's reasonable. Accordingly, the Senior out their responsibilities under the
investment advisory agreement with Officer must either supervise a Fund's advisory agreement.
independent legal counsel from whom they competitive bidding process or prepare an
received independent legal advice, and the independent written evaluation. The Senior In determining whether to continue the
independent Trustees also received Officer has recommended that an Fund's advisory agreement, the Board
assistance during their deliberations from independent written evaluation be provided considered the prior relationship between
the independent Senior Officer, a and, upon the direction of the Board, has AIM and the Fund, as well as the Board's
full-time officer of the AIM Funds who prepared an independent written knowledge of AIM's operations, and
reports directly to the independent evaluation. concluded that it was beneficial to
Trustees. The following discussion more maintain the current relationship, in
fully describes the process employed by During the annual contract renewal part, because of such knowledge. The Board
the Board to evaluate the performance of process, the Board considered the factors also considered the steps that AIM and its
the AIM Funds (including the Fund) discussed below under the heading "Factors affiliates have taken over the last
throughout the year and, more and Conclusions and Summary of Independent several years to improve the quality and
specifically, during the annual contract Written Fee Evaluation" in evaluating the efficiency of the services they provide to
renewal meetings. fairness and reasonableness of the Fund's the Funds in the areas of investment
advisory agreement at the contract renewal performance, product line diversification,
THE BOARD'S FUND EVALUATION PROCESS meetings and at their meetings throughout distribution, fund operations, shareholder
the year as part of their ongoing services and compliance. The Board
The Board's Investments Committee has oversight of the Fund. The Fund's advisory concluded that the quality and efficiency
established three Sub-Committees which are agreement was considered separately, of the services AIM and its affiliates
responsible for overseeing the management although the Board also considered the provide to the AIM Funds in each of these
of a number of the series portfolios of common interests of all of the AIM Funds areas have generally improved, and support
the AIM Funds. This Sub-Committee structure in their deliberations. The Board the Board's approval of the continuance of
permits the Trustees to focus on the comprehensively considered all of the the Fund's advisory agreement.
performance of the AIM Funds that have information provided to them and did not
been assigned to them. The Sub-Committees identify any particular factor that was B. FUND PERFORMANCE
meet throughout the year to review the controlling. Furthermore, each Trustee may
performance of their assigned funds, and have evaluated the information provided The Board compared the Fund's performance
the Sub-Committees review monthly and differently from one another and during the past one, three and five
quarterly comparative performance attributed different weight to the various calendar years to the performance of funds
information and periodic asset flow data factors. The Trustees recognized that the in the Fund's Lipper peer group that are
for their assigned funds. These materials advisory arrangements and resulting not managed by AIM, and against the
are prepared under the direction and advisory fees for the Fund and the other performance of all funds in the Lipper
supervision of the independent Senior AIM Funds are the result of years of Variable Annuity Underlying Funds - Large
Officer. Over the course of each year, the review and negotiation between the Cap Growth Index. The Board also reviewed
Sub-Committees meet with portfolio managers Trustees and AIM, that the Trustees may the methodology used by Lipper to identify
for their assigned funds and other members focus to a greater extent on certain the Fund's peers. The Board noted that the
of management and review with these aspects of these arrangements in some Fund's performance was below the median
individuals the performance, investment years than others, and that the Trustees' performance of its peers for the one and
objective(s), policies, strategies and deliberations and conclusions in a three year periods, and comparable to such
limitations of these funds. particular year may be based in part on performance for the five year period. The
their deliberations and conclusions of Board noted that the Fund's performance
In addition to their meetings these same arrangements throughout the was below the performance of the Index for
throughout the year, the Sub-Committees year and in prior years. the one, three and five year periods. The
meet at designated contract renewal Board also considered the steps AIM has
meetings each year to conduct an in-depth FACTORS AND CONCLUSIONS AND SUMMARY OF taken over the last several years to
review of the performance, fees and INDEPENDENT WRITTEN FEE EVALUATION improve the quality and efficiency of the
expenses of their assigned funds. During services that AIM provides to the AIM
the contract renewal process, the Trustees The discussion below serves as a summary Funds. The Board concluded that AIM
receive comparative performance and fee of the Senior Officer's independent continues to be responsive to the Board's
data regarding all the AIM Funds prepared written evaluation, as well as a focus on fund performance. However, due to
by an independent company, Lipper, Inc., discussion of the material factors and the Fund's underperformance, the Board
under the direction and supervision of the related conclusions that formed the basis also concluded that it would be
independent Senior Officer who also for the Board's approval of the Fund's appropriate for the Board to continue to
prepares a separate analysis of this advisory agreement. Unless otherwise closely monitor and review the performance
information for the Trustees. Each stated, information set forth below is as of the Fund. Although the independent
Sub-Committee then makes recommendations of June 27, 2007 and does not reflect any written evaluation of the Fund's Senior
to the Investments Committee regarding the changes that may have occurred since that Officer (discussed below) only considered
performance, fees and expenses of their date, including but not limited to changes Fund performance through the most recent
assigned funds. The Investments Committee to the Fund's performance, advisory fees, calendar year, the Board also reviewed
considers each Sub-Committee's expense limitations and/or fee waivers. more recent Fund performance and this
recommendations and makes its own review did not change their conclusions.
recommendations A. NATURE, EXTENT AND QUALITY OF
SERVICES PROVIDED BY AIM
The Board reviewed the advisory services
provided to the Fund by AIM under the
Fund's advisory agree-
(continued)
AIM V.I. Basic Value Fund
C. ADVISORY FEES AND FEE WAIVERS independent Senior Officer that AIM AIM and AIM's affiliates, had prepared an
consider whether the advisory fee waivers independent written evaluation to assist
The Board compared the Fund's contractual for certain equity AIM Funds, including the Board in determining the
advisory fee rate to the contractual the Fund, should be simplified. The Board reasonableness of the proposed management
advisory fee rates of funds in the Fund's concluded that it would be appropriate to fees of the AIM Funds, including the Fund.
Lipper peer group that are not managed by approve the proposed amendment to the The Board noted that they had relied upon
AIM, at a common asset level and as of the Fund's contractual advisory fee schedule the Senior Officer's written evaluation
end of the past calendar year. The Board and that it was not necessary at this time instead of a competitive bidding process.
noted that the Fund's advisory fee rate to discuss with AIM whether to implement In determining whether to continue the
was above the median advisory fee rate of any fee waivers for the Fund. Fund's advisory agreement, the Board
its peers. The Board also reviewed the considered the Senior Officer's written
methodology used by Lipper and noted that After taking account of the Fund's evaluation.
the contractual fee rates shown by Lipper contractual advisory fee rate, as well as
include any applicable long-term the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
contractual fee waivers. The Board also and the expense limitation discussed AFFILIATES
compared the Fund's contractual advisory above, the Board concluded that the Fund's
fee rate to the contractual advisory fee advisory fees were fair and reasonable. The Board considered various other
rates of other clients of AIM and its benefits received by AIM and its
affiliates with investment strategies D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
comparable to those of the Fund, including relationship with the Fund, including the
three mutual funds advised by AIM, one The Board considered the extent to which fees received by AIM and its affiliates
mutual fund sub-advised by an AIM there are economies of scale in AIM's for their provision of administrative,
affiliate, and one offshore fund advised provision of advisory services to the transfer agency and distribution services
and sub-advised by AIM affiliates. The Fund. The Board also considered whether to the Fund. The Board considered the
Board noted that the Fund's rate was: (i) the Fund benefits from such economies of performance of AIM and its affiliates in
above the rates for the three mutual scale through contractual breakpoints in providing these services and the
funds; (ii) above the sub-advisory fee the Fund's advisory fee schedule or organizational structure employed by AIM
rate for the sub-advised mutual fund, through advisory fee waivers or expense and its affiliates to provide these
although the advisory fee rate for such limitations. The Board noted that the services. The Board also considered that
sub-advised fund was comparable to the Fund's contractual advisory fee schedule these services are provided to the Fund
Fund's; and (iii) below the advisory fee includes three breakpoints and that the pursuant to written contracts which are
rate for the offshore fund. level of the Fund's advisory fees, as a reviewed and approved on an annual basis
percentage of the Fund's net assets, has by the Board. The Board concluded that AIM
Additionally, the Board compared the decreased as net assets increased because and its affiliates were providing these
Fund's contractual advisory fee rate to of the breakpoints. The Board noted that services in a satisfactory manner and in
the advisory fees (before waivers) paid by the amendment to the Fund's contractual accordance with the terms of their
numerous separately managed accounts/wrap advisory fee schedule discussed above contracts, and were qualified to continue
accounts advised by an AIM affiliate. The provides for seven breakpoints. Based on to provide these services to the Fund.
Board noted that the Fund's rate was this information, the Board concluded that
generally above the rates for the the Fund's advisory fees appropriately The Board considered the benefits
separately managed accounts/wrap accounts. reflect economies of scale at current realized by AIM as a result of portfolio
The Board considered that management of asset levels. The Board also noted that brokerage transactions executed through
the separately managed accounts/wrap the Fund shares directly in economies of "soft dollar" arrangements. Under these
accounts by the AIM affiliate involves scale through lower fees charged by third arrangements, portfolio brokerage
different levels of services and different party service providers based on the commissions paid by the Fund and/or other
operational and regulatory requirements combined size of all of the AIM Funds and funds advised by AIM are used to pay for
than AIM's management of the Fund. The affiliates. research and execution services. The Board
Board concluded that these differences are noted that soft dollar arrangements shift
appropriately reflected in the fee E. PROFITABILITY AND FINANCIAL RESOURCES the payment obligation for the research
structure for the Fund and the separately OF AIM and executions services from AIM to the
managed accounts/wrap accounts. funds and therefore may reduce AIM's
The Board reviewed information from AIM expenses. The Board also noted that
The Board noted that AIM has concerning the costs of the advisory and research obtained through soft dollar
contractually agreed to waive fees and/or other services that AIM and its affiliates arrangements may be used by AIM in making
limit expenses of the Fund through at provide to the Fund and the profitability investment decisions for the Fund and may
least April 30, 2009 in an amount of AIM and its affiliates in providing therefore benefit Fund shareholders. The
necessary to limit total annual operating these services. The Board also reviewed Board concluded that AIM's soft dollar
expenses to a specified percentage of information concerning the financial arrangements were appropriate. The Board
average daily net assets for each class of condition of AIM and its affiliates. The also concluded that, based on their review
the Fund. The Board considered the Board also reviewed with AIM the and representations made by AIM, these
contractual nature of this fee waiver and methodology used to prepare the arrangements were consistent with
noted that it remains in effect until at profitability information. The Board regulatory requirements.
least April 30, 2009. The Board reviewed considered the overall profitability of
the Fund's effective advisory fee rate, AIM, as well as the profitability of AIM The Board considered the fact that the
after taking account of this expense in connection with managing the Fund. The Fund's uninvested cash and cash collateral
limitation, and considered the effect this Board noted that AIM continues to operate from any securities lending arrangements
expense limitation would have on the at a net profit, although increased may be invested in money market funds
Fund's estimated total expenses. The Board expenses in recent years have reduced the advised by AIM pursuant to procedures
concluded that the levels of fee profitability of AIM and its affiliates. approved by the Board. The Board noted
waivers/expense limitations for the Fund The Board concluded that the Fund's that AIM will receive advisory fees from
were fair and reasonable. advisory fees were fair and reasonable, these affiliated money market funds
and that the level of profits realized by attributable to such investments, although
The Board noted that AIM has not AIM and its affiliates from providing AIM has contractually agreed to waive the
proposed any advisory fee waivers for the services to the Fund was not excessive in advisory fees payable by the Fund with
Fund. However, the Board also noted that light of the nature, quality and extent of respect to its investment of uninvested
AIM has recommended that the Board approve the services provided. The Board cash in these affiliated money market
an amendment to the Fund's contractual considered whether AIM is financially funds through at least April 30, 2009. The
advisory fee schedule that would implement sound and has the resources necessary to Board considered the contractual nature of
the contractual advisory fee waiver that perform its obligations under the Fund's this fee waiver and noted that it remains
had been formerly committed to by AIM, advisory agreement, and concluded that AIM in effect until at least April 30, 2009.
which waiver provided for lower effective has the financial resources necessary to The Board concluded that the Fund's
fee rates at all asset levels than the fulfill these obligations. investment of uninvested cash and cash
Fund's current contractual advisory fee collateral from any securities lending
schedule. The Board noted that AIM's F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
recommendation was made in response to the FUND'S SENIOR OFFICER market funds is in the best interests of
recommendation of the the Fund and its shareholders.
The Board noted that, upon their
direction, the Senior Officer of the Fund,
who is independent of
AIM V.I. Capital Appreciation Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Growth
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Capital Appreciation Fund
Fund performance
=======================================================================================
PERFORMANCE SUMMARY AIM V.I. Capital Appreciation Fund, a
series portfolio of AIM Variable Insurance
FUND VS. INDEXES Funds, is currently offered through
insurance companies issuing variable
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. products. You cannot purchase shares of
If variable product issuer charges were included, returns would be lower. the Fund directly. Performance figures
given represent the Fund and are not
Series I Shares 9.65% intended to reflect actual variable
Series II Shares 9.53 product values. They do not reflect sales
S&P 500 Index(1) (Broad Market Index) 6.96 charges, expenses and fees assessed in
Russell 1000 Growth Index(1) (Style-Specific Index) 8.13 connection with a variable product. Sales
Lipper VUF Multi-Cap Growth Funds Category Average(1) (Peer Group Index) 9.15 charges, expenses and fees, which are
Lipper Multi-Cap Growth Funds Index(1) (Former Peer Group Index) 9.32 determined by the variable product
issuers, will vary and will lower the
Source: (1) Lipper Inc. total return.
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks Per NASD requirements, the most recent
frequently used as a general measure of U.S. stock market performance. month-end performance data at the Fund
level, excluding variable product charges,
The unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Growth Index is a subset of is available on this AIM automated
the unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Index, which represents the information line, 866-702-4402. As
performance of the stocks of large-capitalization companies; the Growth subset measures mentioned above, for the most recent
the performance of Russell 1000 companies with higher price/book ratios and higher month-end performance including variable
forecasted growth values. The Russell 1000 Growth Index and the Russell 1000 Index are product charges, please contact your
trademarks/service marks of the Frank Russell Company. Russell -- REGISTERED variable product issuer or financial
TRADEMARK -- is a trademark of the Frank Russell Company. advisor.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Multi-Cap
Growth Funds Category Average as its peer group instead of the Lipper Multi-Cap Growth
Funds Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund to be
compared with the Lipper VUF Multi-Cap Growth Funds Category Average. The unmanaged
Lipper VUF Multi-Cap Growth Funds Category Average represents the average of all the
variable insurance underlying multi-cap growth funds tracked by Lipper Inc.
The unmanaged Lipper Multi-Cap Growth Funds Index represents an average of the
performance of the largest multi-capitalization growth funds tracked by Lipper Inc., an
independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index, including the
indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== The performance of the Fund's Series I
FUND PERFORMANCE and Series II share classes will differ
As of 6/30/07 primarily due to different class expenses.
SERIES I SHARES
Inception (5/5/93) 9.18% The performance data quoted represent
10 Years 5.05 past performance and cannot guarantee
5 Years 9.08 comparable future results; current
1 Year 16.98 performance may be lower or higher. Please
contact your variable product issuer or
SERIES II SHARES financial advisor for the most recent
10 Years 4.80% month-end variable product performance.
5 Years 8.82 Performance figures reflect Fund expenses,
1 Year 16.74 reinvested distributions and changes in
========================================== net asset value. Investment return and
principal value will fluctuate so that you
Series II shares' inception date is August may have a gain or loss when you sell
21, 2001. Returns since that date are shares.
historical. All other returns are the
blended returns of the historical The total annual Fund operating expense
performance of Series II shares since ratio set forth in the most recent Fund
their inception and the restated prospectus as of the date of this report
historical performance of Series I shares for Series I and Series II shares was
(for periods prior to inception of Series 0.91% and 1.16%, respectively. The expense
II shares) adjusted to reflect the Rule ratios presented above may vary from the
12b-1 fees applicable to Series II shares. expense ratios presented in other sections
The inception date of Series I shares is of this report that are based on expenses
May 5, 1993. incurred during the period covered by this
report.
AIM V.I. Capital Appreciation Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 23.8%
- ----------------------------------------------------------
Industrials 17.4
- ----------------------------------------------------------
Consumer Discretionary 16.4
- ----------------------------------------------------------
Health Care 15.9
- ----------------------------------------------------------
Financials 10.6
- ----------------------------------------------------------
Energy 5.3
- ----------------------------------------------------------
Consumer Staples 4.7
- ----------------------------------------------------------
Telecommunication Services 2.9
- ----------------------------------------------------------
Materials 1.2
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 1.8
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-86.92%
AEROSPACE & DEFENSE-8.44%
Boeing Co. (The) 169,606 $ 16,309,313
- --------------------------------------------------------------------------
General Dynamics Corp. 282,292 22,080,880
- --------------------------------------------------------------------------
Precision Castparts Corp. 275,250 33,404,340
- --------------------------------------------------------------------------
Spirit Aerosystems Holdings, Inc.-Class A(a) 744,470 26,838,144
- --------------------------------------------------------------------------
United Technologies Corp. 417,613 29,621,290
==========================================================================
128,253,967
==========================================================================
APPAREL RETAIL-1.32%
Aeropostale, Inc.(a) 305,559 12,735,699
- --------------------------------------------------------------------------
DSW Inc.-Class A(a)(b) 211,490 7,364,082
==========================================================================
20,099,781
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.62%
Carter's, Inc.(a) 506,982 13,151,113
- --------------------------------------------------------------------------
Phillips-Van Heusen 188,372 11,409,692
==========================================================================
24,560,805
==========================================================================
APPLICATION SOFTWARE-3.56%
Adobe Systems Inc.(a) 377,853 15,170,798
- --------------------------------------------------------------------------
Amdocs Ltd.(a) 979,948 39,021,529
==========================================================================
54,192,327
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.13%
Ameriprise Financial, Inc. 226,973 14,428,674
- --------------------------------------------------------------------------
Blackstone Group L.P. (The)(a)(b) 611,389 17,895,356
==========================================================================
32,324,030
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
BIOTECHNOLOGY-1.17%
Gilead Sciences, Inc.(a) 460,824 $ 17,866,146
==========================================================================
COMMUNICATIONS EQUIPMENT-2.36%
Cisco Systems, Inc.(a) 1,287,151 35,847,155
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.85%
Best Buy Co., Inc. 276,100 12,885,587
==========================================================================
COMPUTER HARDWARE-6.40%
Apple, Inc.(a) 364,352 44,465,518
- --------------------------------------------------------------------------
Dell Inc.(a) 912,189 26,042,996
- --------------------------------------------------------------------------
Hewlett-Packard Co. 598,739 26,715,734
==========================================================================
97,224,248
==========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.68%
Terex Corp.(a) 127,665 10,379,165
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.81%
Fiserv, Inc.(a) 214,591 12,188,769
- --------------------------------------------------------------------------
VeriFone Holdings, Inc.(a)(b) 432,753 15,254,543
==========================================================================
27,443,312
==========================================================================
DEPARTMENT STORES-2.30%
JCPenney Co., Inc. 260,638 18,864,978
- --------------------------------------------------------------------------
Nordstrom, Inc. 314,782 16,091,656
==========================================================================
34,956,634
==========================================================================
DRUG RETAIL-0.69%
Longs Drug Stores Corp. 198,497 10,425,062
==========================================================================
</Table>
AIM V.I. Capital Appreciation Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
EDUCATION SERVICES-1.35%
Apollo Group, Inc.-Class A(a) 352,560 $ 20,600,081
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-3.37%
Acuity Brands, Inc. 186,574 11,246,681
- --------------------------------------------------------------------------
Cooper Industries, Ltd.-Class A 325,857 18,603,176
- --------------------------------------------------------------------------
Emerson Electric Co. 455,905 21,336,354
==========================================================================
51,186,211
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.98%
Amphenol Corp.-Class A 419,710 14,962,662
==========================================================================
FOOD RETAIL-0.73%
Safeway Inc. 324,530 11,043,756
==========================================================================
GENERAL MERCHANDISE STORES-2.36%
Family Dollar Stores, Inc.(b) 1,043,445 35,811,032
==========================================================================
HEALTH CARE DISTRIBUTORS-1.02%
McKesson Corp. 258,892 15,440,319
==========================================================================
HEALTH CARE EQUIPMENT-0.95%
Zimmer Holdings, Inc.(a) 169,404 14,380,706
==========================================================================
HEALTH CARE FACILITIES-1.89%
Manor Care, Inc. 203,901 13,312,696
- --------------------------------------------------------------------------
VCA Antech, Inc.(a) 410,741 15,480,829
==========================================================================
28,793,525
==========================================================================
HOME ENTERTAINMENT SOFTWARE-0.60%
Electronic Arts Inc.(a) 192,110 9,090,645
==========================================================================
HOUSEHOLD PRODUCTS-2.55%
Clorox Co. (The) 447,750 27,805,275
- --------------------------------------------------------------------------
Colgate-Palmolive Co. 168,307 10,914,709
==========================================================================
38,719,984
==========================================================================
INDUSTRIAL CONGLOMERATES-1.75%
McDermott International, Inc.(a) 319,928 26,592,415
==========================================================================
INTEGRATED OIL & GAS-1.17%
Occidental Petroleum Corp. 307,097 17,774,774
==========================================================================
INTERNET RETAIL-0.70%
Amazon.com, Inc.(a) 154,551 10,572,834
==========================================================================
INTERNET SOFTWARE & SERVICES-2.65%
eBay Inc.(a) 750,320 24,145,298
- --------------------------------------------------------------------------
Google Inc.-Class A(a) 30,863 16,153,077
==========================================================================
40,298,375
==========================================================================
INVESTMENT BANKING & BROKERAGE-3.59%
Goldman Sachs Group, Inc. (The) 150,467 32,613,722
- --------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 263,469 22,020,739
==========================================================================
54,634,461
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
IT CONSULTING & OTHER SERVICES-1.73%
Accenture Ltd.-Class A 614,431 $ 26,352,946
==========================================================================
MANAGED HEALTH CARE-3.55%
Health Net Inc.(a) 540,680 28,547,904
- --------------------------------------------------------------------------
UnitedHealth Group Inc. 497,166 25,425,069
==========================================================================
53,972,973
==========================================================================
MULTI-LINE INSURANCE-2.20%
American International Group, Inc. 212,013 14,847,270
- --------------------------------------------------------------------------
Assurant, Inc. 314,491 18,529,810
==========================================================================
33,377,080
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.74%
Cameron International Corp.(a) 299,748 21,422,990
- --------------------------------------------------------------------------
National-Oilwell Varco Inc.(a) 194,206 20,244,033
==========================================================================
41,667,023
==========================================================================
OIL & GAS REFINING & MARKETING-1.41%
Valero Energy Corp. 291,259 21,512,390
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.97%
JPMorgan Chase & Co. 618,937 29,987,498
==========================================================================
PHARMACEUTICALS-4.65%
Abbott Laboratories 310,039 16,602,589
- --------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 291,633 13,313,046
- --------------------------------------------------------------------------
Merck & Co. Inc. 820,029 40,837,444
==========================================================================
70,753,079
==========================================================================
PUBLISHING-1.04%
McGraw-Hill Cos., Inc. (The) 231,330 15,748,946
==========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.73%
CB Richard Ellis Group, Inc.-Class A(a) 305,103 11,136,260
==========================================================================
RESTAURANTS-1.37%
Darden Restaurants, Inc. 474,549 20,875,411
==========================================================================
SEMICONDUCTORS-3.03%
Microchip Technology Inc. 423,950 15,703,108
- --------------------------------------------------------------------------
Texas Instruments Inc. 805,667 30,317,249
==========================================================================
46,020,357
==========================================================================
SOFT DRINKS-0.73%
PepsiCo, Inc. 172,218 11,168,337
==========================================================================
SPECIALTY STORES-2.05%
OfficeMax Inc. 381,440 14,990,592
- --------------------------------------------------------------------------
PetSmart, Inc. 500,246 16,232,983
==========================================================================
31,223,575
==========================================================================
SYSTEMS SOFTWARE-0.73%
Micors Systems, Inc.(a) 177,552 9,658,829
- --------------------------------------------------------------------------
</Table>
AIM V.I. Capital Appreciation Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Microsoft Corp. 50,329 $ 1,483,195
==========================================================================
11,142,024
==========================================================================
Total Domestic Common Stocks (Cost
$1,027,156,031) 1,321,297,898
==========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-11.30%
CANADA-1.19%
Research In Motion Ltd. (Communications
Equipment)(a) 90,000 17,999,100
==========================================================================
HONG KONG-0.94%
China Mobile Ltd. (Wireless Telecommunication
Services)(c) 1,330,961 14,340,174
==========================================================================
JAPAN-1.81%
KDDI Corp. (Wireless Telecommunication
Services) 1,836 13,611,596
- --------------------------------------------------------------------------
Komatsu Ltd. (Construction & Farm Machinery &
Heavy Trucks)(c) 479,488 13,885,041
==========================================================================
27,496,637
==========================================================================
MEXICO-2.48%
America Movil S.A de C.V.-Series L-ADR
(Wireless Telecommunication Services) 252,275 15,623,391
- --------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 797,672 22,023,724
==========================================================================
37,647,115
==========================================================================
SWITZERLAND-3.79%
ABB Ltd. (Heavy Electrical Equipment)(c) 716,014 16,110,093
- --------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(c) 131,979 23,409,139
- --------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(c) 92,890 18,109,322
==========================================================================
57,628,554
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
UNITED KINGDOM-1.09%
Shire PLC (Pharmaceuticals) (Acquired
2/20/07; Cost $845,486)(c)(d) 38,893 $ 964,107
- --------------------------------------------------------------------------
Shire PLC (Pharmaceuticals)(c) 631,282 15,648,638
==========================================================================
16,612,745
==========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $126,489,522) 171,724,325
==========================================================================
MONEY MARKET FUNDS-0.56%
Liquid Assets Portfolio-Institutional
Class(e) 4,251,719 4,251,719
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 4,251,719 4,251,719
==========================================================================
Total Money Market Funds (Cost
$8,503,438) 8,503,438
==========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-98.78% (Cost
$1,162,148,991) 1,501,525,661
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN-2.02%
MONEY MARKET FUNDS-2.02%
Liquid Assets Portfolio-Institutional
Class(e)(f) 30,683,150 30,683,150
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities on
loan) (Cost $30,683,150) 30,683,150
==========================================================================
TOTAL INVESTMENTS-100.80% (Cost
$1,192,832,141) 1,532,208,811
==========================================================================
OTHER ASSETS LESS LIABILITIES-(0.80)% (12,112,261)
==========================================================================
NET ASSETS-100.00% $1,520,096,550
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) All or a portion of this security was out on loan at June 30, 2007.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $102,466,514, which
represented 6.74% of the Fund's Net Assets. See Note 1A.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at June 30, 2007 represented 0.06% of the Fund's
Net Assets. Unless otherwise indicated, this security is not considered to
be illiquid.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(f) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Capital Appreciation Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS
Investments, at value (Cost $1,153,645,553)* $1,493,022,223
- -----------------------------------------------------------------------------
Investments in affiliated money market funds (Cost
$39,186,588) 39,186,588
=============================================================================
Total investments (Cost $1,192,832,141) 1,532,208,811
=============================================================================
Foreign currencies, at value (Cost $160,236) 161,111
- -----------------------------------------------------------------------------
Receivables for:
Investments sold 39,161,883
- -----------------------------------------------------------------------------
Fund shares sold 1,261,713
- -----------------------------------------------------------------------------
Dividends 881,062
- -----------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement
plans 178,572
- -----------------------------------------------------------------------------
Other assets 387
=============================================================================
Total assets 1,573,853,539
_____________________________________________________________________________
=============================================================================
LIABILITIES:
Payables for:
Investments purchased 18,514,846
- -----------------------------------------------------------------------------
Fund shares reacquired 2,916,808
- -----------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 307,685
- -----------------------------------------------------------------------------
Collateral upon return of securities loaned 30,683,150
- -----------------------------------------------------------------------------
Accrued administrative services fees 973,346
- -----------------------------------------------------------------------------
Accrued distribution fees -- Series II 234,543
- -----------------------------------------------------------------------------
Accrued trustees' and officer's fees and benefits 7,661
- -----------------------------------------------------------------------------
Accrued transfer agent fees 5,301
- -----------------------------------------------------------------------------
Accrued operating expenses 113,649
=============================================================================
Total liabilities 53,756,989
=============================================================================
Net assets applicable to shares outstanding $1,520,096,550
_____________________________________________________________________________
=============================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,442,056,384
- -----------------------------------------------------------------------------
Undistributed net investment income 463,207
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) (261,830,339)
- -----------------------------------------------------------------------------
Unrealized appreciation 339,407,298
=============================================================================
$1,520,096,550
_____________________________________________________________________________
=============================================================================
NET ASSETS:
Series I $1,149,281,661
_____________________________________________________________________________
=============================================================================
Series II $ 370,814,889
_____________________________________________________________________________
=============================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED
NUMBER OF SHARES AUTHORIZED:
Series I 39,969,053
_____________________________________________________________________________
=============================================================================
Series II 13,067,334
_____________________________________________________________________________
=============================================================================
Series I:
Net asset value per share $ 28.75
_____________________________________________________________________________
=============================================================================
Series II:
Net asset value per share $ 28.38
_____________________________________________________________________________
=============================================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $29,507,634 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $189,588) $ 7,411,002
- -----------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $25,612) 612,193
=============================================================================
Total investment income 8,023,195
=============================================================================
EXPENSES:
Advisory fees 4,683,425
- -----------------------------------------------------------------------------
Administrative services fees 1,968,911
- -----------------------------------------------------------------------------
Custodian fees 19,120
- -----------------------------------------------------------------------------
Distribution fees -- Series II 464,994
- -----------------------------------------------------------------------------
Transfer agent fees 24,000
- -----------------------------------------------------------------------------
Trustees' and officer's fees and benefits 31,526
- -----------------------------------------------------------------------------
Other 51,084
=============================================================================
Total expenses 7,243,060
=============================================================================
Less: Fees waived and expense offset arrangement (4,828)
=============================================================================
Net expenses 7,238,232
=============================================================================
Net investment income 784,963
=============================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains (losses) from
securities sold to affiliates of $(936,772)) 54,389,352
- -----------------------------------------------------------------------------
Foreign currencies (238,084)
=============================================================================
54,151,268
=============================================================================
Change in net unrealized appreciation of:
Investment securities 88,188,788
- -----------------------------------------------------------------------------
Foreign currencies 29,225
=============================================================================
88,218,013
=============================================================================
Net realized and unrealized gain 142,369,281
=============================================================================
Net increase in net assets resulting from operations $ 143,154,244
_____________________________________________________________________________
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Capital Appreciation Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 784,963 $ (49,797)
- -------------------------------------------------------------------------------
Net realized gain 54,151,268 155,963,183
- -------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) 88,218,013 (94,510,673)
===============================================================================
Net increase in net assets resulting from
operations 143,154,244 61,402,713
===============================================================================
Distributions to shareholders from net
investment income-Series I -- (692,340)
===============================================================================
Share transactions-net:
Series I (164,019,280) 337,314,470
- -------------------------------------------------------------------------------
Series II (34,913,845) 15,761,962
===============================================================================
Net increase (decrease) in net assets
resulting from share transactions (198,933,125) 353,076,432
===============================================================================
Net increase (decrease) in net assets (55,778,881) 413,786,805
===============================================================================
NET ASSETS:
Beginning of period 1,575,875,431 1,162,088,626
===============================================================================
End of period (including undistributed net
investment income (loss) of $463,207 and
$(321,756), respectively) $1,520,096,550 $1,575,875,431
_______________________________________________________________________________
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Capital Appreciation Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Capital Appreciation Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Capital Appreciation Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. Capital Appreciation Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.65%
- -------------------------------------------------------------------
Over $250 million 0.60%
__________________________________________________________________
===================================================================
</Table>
Through December 31, 2009, AIM has contractually agreed to waive advisory
fees to the extent necessary so that the advisory fees payable by the Fund
(based on the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.695%
- --------------------------------------------------------------------
Next $750 million 0.625%
- --------------------------------------------------------------------
Next $1.5 billion 0.62%
- --------------------------------------------------------------------
Next $2.5 billion 0.595%
- --------------------------------------------------------------------
Next $2.5 billion 0.57%
- --------------------------------------------------------------------
Next $2.5 billion 0.545%
- --------------------------------------------------------------------
Over $10 billion 0.52%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. AIM did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $3,833.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$179,474 for accounting and fund administrative services and reimbursed
$1,789,437 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
AIM V.I. Capital Appreciation Fund
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- -----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $10,033,388 $117,686,948 $(123,468,617) $4,251,719 $294,020
- -----------------------------------------------------------------------------------------------------------------------
Premier Portfolio-
Institutional Class 10,033,388 117,686,948 (123,468,617) 4,251,719 292,561
=======================================================================================================================
Subtotal $20,066,776 $235,373,896 $(246,937,234) $8,503,438 $586,581
=======================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- -----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $24,258,490 $210,405,350 $(203,980,690) $30,683,150 $ 25,612
=======================================================================================================================
Total Investments in Affiliates $44,325,266 $445,779,246 $(450,917,924) $39,186,588 $612,193
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $6,297,886, which resulted in net realized gains
(losses) of $(936,772), and securities purchases of $2,309,113.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $995.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$5,278 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
AIM V.I. Capital Appreciation Fund
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, securities with an aggregate value of $29,507,634 were on
loan to brokers. The loans were secured by cash collateral of $30,683,150
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2007, the Fund received dividends on cash
collateral investments of $25,612 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of December
31, 2006 to utilizing $214,210,240 of capital loss carryforward in the fiscal
year ended December 31, 2007.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- ---------------------------------------------------------------------------
December 31, 2009 $ 69,344,321
- ---------------------------------------------------------------------------
December 31, 2010 182,587,156
- ---------------------------------------------------------------------------
December 31, 2011 56,312,952
- ---------------------------------------------------------------------------
Total capital loss carryforward $308,244,429
___________________________________________________________________________
===========================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of the dates May 1, 2006, the date of the
reorganization of AIM V.I. Aggressive Growth Fund and AIM V.I. Growth Fund
into the Fund and November 6, 2006, the date of the reorganization of AIM V.I.
Demographic Trends Fund into the Fund are realized on securities held in each
fund at such dates of reorganizations, the capital loss carryforward may be
further limited for up to five years from the dates of the reorganizations.
On April 27, 2007, 1,144,589 Series I and II shares of the Fund valued at
$56,570,503 were redeemed by a significant shareholder and settled through a
redemption-in-kind transaction, which resulted in a realized gain of
$11,904,147 to the Fund for book purposes. From a federal income tax
perspective, the realized gains are not recognized.
AIM V.I. Capital Appreciation Fund
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $490,236,987 and
$680,271,957, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 345,820,650
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (13,088,379)
===========================================================================================================
Net unrealized appreciation of investment securities $ 332,732,271
___________________________________________________________________________________________________________
===========================================================================================================
Cost of investments for tax purposes is $1,199,476,540.
</Table>
NOTE 11 -- SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Sold:
Series I 970,263 $ 26,389,174 5,977,566 $149,575,490
- -----------------------------------------------------------------------------------------------------------
Series II 766,109 20,511,999 2,823,485 70,459,146
===========================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 24,351 639,944
===========================================================================================================
Issued in connection with
acquisitions:(b)
Series I -- -- 18,028,541 472,256,763
- -----------------------------------------------------------------------------------------------------------
Series II -- -- 1,104,876 28,680,379
===========================================================================================================
Reacquired:
Series I (6,943,365) (190,408,454) (11,438,432) (285,157,727)
- -----------------------------------------------------------------------------------------------------------
Series II (2,031,403) (55,425,845) (3,482,328) (83,377,563)
===========================================================================================================
(7,238,396) $(198,933,126) 13,038,059 $353,076,432
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) There are six entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 47% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially
(b) As of the opening of business on May 1, 2006, the Fund acquired all the
net asset of AIM V.I. Aggressive Growth Fund and AIM V.I. Growth Fund
pursuant to the plans of reorganization approved by the Trustees of the
Fund on November 14, 2005 and by the shareholders of AIM V.I. Aggressive
Growth Fund and AIM V.I. Growth Fund, respectively on April 4, 2006. The
acquisition was accomplished by a tax-free exchange of 16,894,072 shares
of the Fund for 11,361,885 shares outstanding of AIM V.I. Aggressive
Growth Fund and 15,600,092 shares outstanding of AIM V.I. Growth Fund as
of the close of business on April 28, 2006. Each class of shares of AIM
V.I. Aggressive Growth Fund and AIM V.I. Growth Fund was exchanged for
the like class of shares of the Fund based on the relative net asset
value of AIM V.I. Aggressive Growth Fund and AIM V.I. Growth Fund to the
net asset value of the Fund as of the close of business, April 28, 2006.
AIM V.I. Aggressive Growth Fund's net assets as of the close of business
on April 28, 2006 of $155,800,373 including $27,776,076 of unrealized
appreciation and AIM V.I. Growth Fund's net assets as of the close of
business on April 28, 2006 of $288,359,981 including $64,941,780 of
unrealized appreciation, were combined with those of the Fund. The net
assets of the Fund immediately before the acquisition were
$1,269,556,120. The combined aggregate net assets of the Fund
immediately following the reorganizations were $1,713,716,474.
In addition, as of the opening of business on November 6, 2006, the Fund
acquired all of the net assets of AIM V.I. Dent Demographic Trends Fund
pursuant to a plan of reorganization approved by the Trustees of the Fund
on August 1, 2006 and by the shareholders of AIM V.I. Demographic Trends
Fund on October 31, 2006. The acquisition was accomplished by a tax-free
exchange of 2,239,345 shares of the Fund for 10,236,579 shares of AIM V.I.
Demographic Trends Fund shares outstanding as of the close of business on
November 3, 2006. Each class of shares of AIM V.I. Demographic Trends Fund
was exchanged for the like class of shares of the Fund based on the
relative net asset value of AIM V.I. Demographic Trends Fund to the net
asset value of the Fund as of the close of business, November 3, 2006. AIM
V.I. Demographic Trends Fund's net assets as of the close of business on
November 3, 2006 of $56,776,788, including $4,497,179 of unrealized
appreciation, were combined with those of the Fund immediately before the
acquisition of $1,506,731,773. The combined aggregate net assets of the
Fund immediately following the reorganization were $1,563,508,561.
NOTE 12--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Capital Appreciation Fund
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.22 $ 24.67 $ 22.69 $ 21.28 $ 16.43 $ 21.72
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02 0.01 0.03 0.02(a) (0.04)(b) (0.05)(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.51 1.55 1.97 1.39 4.89 (5.24)
=================================================================================================================================
Total from investment operations 2.53 1.56 2.00 1.41 4.85 (5.29)
=================================================================================================================================
Less dividends from net investment income -- (0.01) (0.02) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 28.75 $ 26.22 $ 24.67 $ 22.69 $ 21.28 $ 16.43
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.65% 6.34% 8.79% 6.62% 29.52% (24.35)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,149,282 $1,204,559 $822,899 $886,990 $938,820 $763,038
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.88%(d) 0.91% 0.89% 0.91% 0.85% 0.85%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.16%(d) 0.06% 0.11% 0.09%(a) (0.23)% (0.27)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 32% 120% 97% 74% 61% 67%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Net investment income per share and the ratio of net investment income
to average net assets include a special cash dividend received of $3.00
per share owned of Microsoft Corp. on December 2, 2004. Net investment
income (loss) per share and the ratio of net investment income (loss) to
average net assets excluding the special dividend are $(0.04) and
(0.17)%, respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$1,178,167,890.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.91 $ 24.43 $ 22.50 $ 21.16 $ 16.38 $ 21.70
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.05) (0.03) (0.02)(a) (0.09)(b) (0.09)(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 2.49 1.53 1.96 1.36 4.87 (5.23)
=================================================================================================================================
Total from investment operations 2.47 1.48 1.93 1.34 4.78 (5.32)
=================================================================================================================================
Net asset value, end of period $ 28.38 $ 25.91 $ 24.43 $ 22.50 $ 21.16 $ 16.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.53% 6.06% 8.58% 6.33% 29.18% (24.52)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $370,815 $371,316 $339,190 $136,982 $70,466 $23,893
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.13%(d) 1.16% 1.14% 1.16% 1.10% 1.10%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.09)%(d) (0.19)% (0.14)% (0.16)%(a) (0.48)% (0.52)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 32% 120% 97% 74% 61% 67%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (0.42)%, respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$375,078,085.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Capital Appreciation Fund
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Capital Appreciation Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,096.50 $4.57 $1,020.43 $4.41 0.88%
Series II 1,000.00 1,095.30 5.87 1,019.19 5.66 1.13
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Capital Appreciation Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF
Variable Insurance Funds is required under recommendations regarding the performance, SERVICES PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Capital Appreciation Fund (the Fund) Committee considers each Sub-Committee's provided to the Fund by AIM under the
investment advisory agreement with A I M recommendations in making its annual Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendation to the Board whether to of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, approve the continuance of each AIM Fund's the credentials and experience of the
the Board as a whole and the disinterested investment advisory agreement and officers and employees of AIM who provide
or "independent" Trustees, voting sub-advisory agreement, if applicable these services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another year. qualifications of AIM to provide these
the Fund's investment advisory agreement services included the Board's
for another year, effective July 1, 2007. The independent Trustees, as mentioned consideration of AIM's portfolio and
In doing so, the Board determined that the above, are assisted in their annual product review process, various back
Fund's advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee structure common interests of all of the AIM Funds distribution, fund operations, shareholder
permits the Trustees to focus on the in their deliberations. The Board services and compliance. The Board
performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio managers review and negotiation between the calendar years to the performance of funds
for their assigned funds and other members Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
of management and review with these focus to a greater extent on certain not managed by AIM, and against the
individuals the performance, investment aspects of these arrangements in some performance of all funds in the Lipper
objective(s), policies, strategies and years than others, and that the Trustees' Variable Annuity Underlying Funds -
limitations of these funds. deliberations and conclusions in a Multi-Cap Growth Index and the Lipper
particular year may be based in part on Variable Annuity Underlying Funds -
In addition to their meetings throughout their deliberations and conclusions of Large-Cap Growth Index. The Board also
the year, the Sub-Committees meet at these same arrangements throughout the reviewed the methodology used by Lipper to
designated contract renewal meetings each year and in prior years. identify the Fund's peers. The Board noted
year to conduct an in-depth review of the that the Fund's performance was below the
performance, fees and expenses of their FACTORS AND CONCLUSIONS AND SUMMARY OF median performance of its peers for the
assigned funds. During the contract INDEPENDENT WRITTEN FEE EVALUATION one and three year periods, and above such
renewal process, the Trustees receive performance for the five year period. The
comparative performance and fee data The discussion below serves as a summary Board noted that the Fund's performance
regarding all the AIM Funds prepared by an of the Senior Officer's independent was below the performance of the Lipper
independent company, Lipper, Inc., under written evaluation, as well as a Variable Annuity Underlying Funds
the direction and supervision of the discussion of the material factors and - Multi-Cap Growth Index for the one,
independent Senior Officer who also related conclusions that formed the basis three and five year periods. The Board
prepares a separate analysis of this for the Board's approval of the Fund's also noted that the Fund's performance was
information for the Trustees. Each advisory agreement. Unless otherwise comparable to the Lipper Variable Annuity
Sub-Committee then makes recommendations stated, information set forth below is as Underlying Funds - Large-Cap Growth Index
to the Investments Committee regarding the of June 27, 2007 and does not reflect any for the one and three year periods, and
performance, fees and expenses of their changes that may have occurred since that above such Index for the five year period.
assigned funds. The Investments Committee date, including but not limited to changes The Board noted that AIM made changes to
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, the Fund's portfolio manage-
expense limitations and/or fee waivers.
(continued)
AIM V.I. Capital Appreciation Fund
ment team in 2005, which need more time to Board concluded that the levels of fee Board noted that they had relied upon the
be evaluated before a conclusion can be waivers/expense limitations for the Fund Senior Officer's written evaluation
reached that the changes have adequately were fair and reasonable. instead of a competitive bidding process.
addressed the Fund's under-performance. In determining whether to continue the
The Board also considered the steps AIM After taking account of the Fund's Fund's advisory agreement, the Board
has taken over the last several years to contractual advisory fee rate, as well as considered the Senior Officer's written
improve the quality and efficiency of the the comparative advisory fee information evaluation.
services that AIM provides to the AIM and the fee waivers/expense limitations
Funds. The Board concluded that AIM discussed above, the Board concluded that G. COLLATERAL BENEFITS TO AIM AND ITS
continues to be responsive to the Board's the Fund's advisory fees were fair and AFFILIATES
focus on fund performance. Although the reasonable.
independent written evaluation of the The Board considered various other
Fund's Senior Officer (discussed below) D. ECONOMIES OF SCALE AND BREAKPOINTS benefits received by AIM and its
only considered Fund performance through affiliates resulting from AIM's
the most recent calendar year, the Board The Board considered the extent to which relationship with the Fund, including the
also reviewed more recent Fund performance there are economies of scale in AIM's fees received by AIM and its affiliates
and this review did not change their provision of advisory services to the for their provision of administrative,
conclusions. Fund. The Board also considered whether transfer agency and distribution services
the Fund benefits from such economies of to the Fund. The Board considered the
C. ADVISORY FEES AND FEE WAIVERS scale through contractual breakpoints in performance of AIM and its affiliates in
the Fund's advisory fee schedule or providing these services and the
The Board compared the Fund's through advisory fee waivers or expense organizational structure employed by AIM
contractual advisory fee rate to the limitations. The Board noted that the and its affiliates to provide these
contractual advisory fee rates of funds in Fund's contractual advisory fee schedule services. The Board also considered that
the Fund's Lipper peer group that are not includes one breakpoint and that the level these services are provided to the Fund
managed by AIM, at a common asset level of the Fund's advisory fees, as a pursuant to written contracts which are
and as of the end of the past calendar percentage of the Fund's net assets, has reviewed and approved on an annual basis
year. The Board noted that the Fund's decreased as net assets increased because by the Board. The Board concluded that AIM
advisory fee rate was below the median of the breakpoint. The Board also noted and its affiliates were providing these
advisory fee rate of its peers. The Board that AIM's contractual advisory fee waiver services in a satisfactory manner and in
also reviewed the methodology used by discussed above includes breakpoints based accordance with the terms of their
Lipper and noted that the contractual fee on net asset levels. Based on this contracts, and were qualified to continue
rates shown by Lipper include any information, the Board concluded that the to provide these services to the Fund.
applicable long-term contractual fee Fund's advisory fees appropriately reflect
waivers. The Board also compared the economies of scale at current asset The Board considered the benefits
Fund's contractual advisory fee rate to levels. The Board also noted that the Fund realized by AIM as a result of portfolio
the contractual advisory fee rates of shares directly in economies of scale brokerage transactions executed through
other clients of AIM and its affiliates through lower fees charged by third party "soft dollar" arrangements. Under these
with investment strategies comparable to service providers based on the combined arrangements, portfolio brokerage
those of the Fund, including two mutual size of all of the AIM Funds and commissions paid by the Fund and/or other
funds advised by AIM, four mutual funds affiliates. funds advised by AIM are used to pay for
sub-advised by an AIM affiliate, and one research and execution services. The Board
offshore fund advised and sub-advised by E. PROFITABILITY AND FINANCIAL RESOURCES noted that soft dollar arrangements shift
AIM affiliates. The Board noted that the OF AIM the payment obligation for the research
Fund's rate was: (i) comparable to the and executions services from AIM to the
rates for the two mutual funds; (ii) above The Board reviewed information from AIM funds and therefore may reduce AIM's
the sub-advisory fee rates for the four concerning the costs of the advisory and expenses. The Board also noted that
sub-advised mutual funds, although the other services that AIM and its affiliates research obtained through soft dollar
advisory fee rates for such sub-advised provide to the Fund and the profitability arrangements may be used by AIM in making
mutual funds were above the Fund's; and of AIM and its affiliates in providing investment decisions for the Fund and may
(iii) below the advisory fee rate for the these services. The Board also reviewed therefore benefit Fund shareholders. The
offshore fund. information concerning the financial Board concluded that AIM's soft dollar
condition of AIM and its affiliates. The arrangements were appropriate. The Board
The Board noted that AIM has Board also reviewed with AIM the also concluded that, based on their review
contractually agreed to waive advisory methodology used to prepare the and representations made by AIM, these
fees of the Fund through December 31, 2009 profitability information. The Board arrangements were consistent with
and that this fee waiver includes considered the overall profitability of regulatory requirements.
breakpoints based on net asset levels. The AIM, as well as the profitability of AIM
Board considered the contractual nature of in connection with managing the Fund. The The Board considered the fact that the
this fee waiver and noted that it remains Board noted that AIM continues to operate Fund's uninvested cash and cash collateral
in effect until December 31, 2009. The at a net profit, although increased from any securities lending arrangements
Board noted that, according to information expenses in recent years have reduced the may be invested in money market funds
provided by AIM, this fee waiver reduces profitability of AIM and its affiliates, advised by AIM pursuant to procedures
the Fund's effective advisory fees to a in light of AIM's profitability. The Board approved by the Board. The Board noted
level generally in line with the median concluded that the Fund's advisory fees that AIM will receive advisory fees from
effective advisory fees for the Fund's were fair and reasonable, and that the these affiliated money market funds
peers, as determined by AIM. The Board level of profits realized by AIM and its attributable to such investments, although
also noted that AIM has contractually affiliates from providing services to the AIM has contractually agreed to waive the
agreed to waive fees and/or limit expenses Fund was not excessive in light of the advisory fees payable by the Fund with
of the Fund through at least April 30, nature, quality and extent of the services respect to its investment of uninvested
2009 in an amount necessary to limit total provided. The Board considered whether AIM cash in these affiliated money market
annual operating expenses to a specified is financially sound and has the resources funds through at least April 30, 2009. The
percentage of average daily net assets for necessary to perform its obligations under Board considered the contractual nature of
each class of the Fund. The Board the Fund's advisory agreement, and this fee waiver and noted that it remains
considered the contractual nature of this concluded that AIM has the financial in effect until at least April 30, 2009.
fee waiver and noted that it remains in resources necessary to fulfill these The Board concluded that the Fund's
effect until at least April 30, 2009. The obligations. investment of uninvested cash and cash
Board reviewed the Fund's effective collateral from any securities lending
advisory fee rate, after taking account of F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
these fee waivers/expense limitations, and FUND'S SENIOR OFFICER market funds is in the best interests of
considered the effect these fee the Fund and its shareholders.
waivers/expense limitations would have on The Board noted that, upon their
the Fund's estimated total expenses. The direction, the Senior Officer of the Fund,
who is independent of AIM and AIM's
affiliates, had prepared an independent
written evaluation to assist the Board in
determining the reasonableness of the
proposed management fees of the AIM Funds,
including the Fund. The
AIM V.I. Capital Development Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Mid-Cap Growth
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Capital Development Fund
Fund performance during the period covered by this report.
=======================================================================================
PERFORMANCE SUMMARY AIM V.I. Capital Development Fund, a
series portfolio of AIM Variable Insurance
FUND VS. INDEXES Funds, is currently offered through
insurance companies issuing variable
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. products. You cannot purchase shares of
If variable product issuer charges were included, returns would be lower. the Fund directly. Performance figures
given represent the Fund and are not
Series I Shares 14.97% intended to reflect actual variable
Series II Shares 14.84 product values. They do not reflect sales
S&P 500 Index(1) (Broad Market Index) 6.96 charges, expenses and fees assessed in
Russell Midcap Growth Index(1) (Style-Specific Index) 10.97 connection with a variable product. Sales
Lipper VUF Mid-Cap Growth Funds Index(1) (Peer Group Index) 13.13 charges, expenses and fees, which are
Lipper Mid-Cap Growth Funds Index(1) (Former Peer Group Index) 14.70 determined by the variable product
issuers, will vary and will lower the
Source: (1) Lipper Inc. total return.
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks Per NASD requirements, the most recent
frequently used as a general measure of U.S. stock market performance. month-end performance data at the Fund
level, excluding variable product charges,
The unmanaged Russell Midcap -- REGISTERED TRADEMARK -- Growth Index is a subset of is available on the AIM automated
the Russell Midcap -- REGISTERED TRADEMARK -- Index, which represents the performance information line, 866-702-4402. As
of the stocks of domestic mid-capitalization companies; the Growth subset measures the mentioned above, for the most recent
performance of Russell Midcap companies with higher price/book ratios and higher month-end performance including variable
forecasted growth values. The Russell Midcap Growth Index and the Russell Midcap Index product charges, please contact your
are trademarks/service marks of the Frank Russell Company. Russell -- REGISTERED variable product issuer or financial
TRADEMARK -- is a trademark of the Frank Russell Company. advisor.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Mid-Cap (1) Total annual operating expenses less
Growth Funds Index as its peer group instead of the Lipper Mid-Cap Growth Funds Index. contractual advisory fee waivers by
In 2006, Lipper began publishing VUF indexes, allowing the Fund to be compared with the the advisor in effect through at
Lipper VUF Mid-Cap Growth Index. The unmanaged Lipper VUF Mid-Cap Growth Funds Index is least April 30, 2009. See current
an equally weighted representation of the largest variable insurance underlying funds prospectus for more information.
in the Lipper Mid-Cap Growth Funds category. Lipper Inc. is an independent mutual fund
performance monitor.
The unmanaged Lipper MID-CAP GROWTH FUNDS INDEX represents an average of the
performance of the largest mid-capitalization growth funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses; performance of
a market index does not.
=======================================================================================
========================================== and Series II share classes will differ
FUND PERFORMANCE primarily due to different class expenses.
As of 6/30/07
SERIES I SHARES The performance data quoted represent
Inception (5/1/98) 8.79% past performance and cannot guarantee
5 Years 13.67 comparable future results; current
1 Year 23.39 performance may be lower or higher. Please
contact your variable product issuer or
SERIES II SHARES financial advisor for the most recent
Inception 8.53% month-end variable product performance.
5 Years 13.39 Performance figures reflect Fund expenses,
1 Year 23.08 reinvested distributions and changes in
========================================== net asset value. Investment return and
principal value will fluctuate so that
Series II shares' inception dates is you may have a gain or loss when you
August 21, 2001. Returns since that date sell shares.
are historical. All other returns are the
blended returns of the historical The net annual Fund operating expense
performance of Series II shares since ratio set forth in the most recent Fund
their inception and the restated prospectus as of the date of this report
historical performance of Series I shares for Series I and Series II shares was
(for periods prior to inception of Series 1.09% and 1.34%, respectively.(1) The total
II shares) adjusted to reflect the Rule annual Fund operating expense ratio set
12b-1 fees applicable to Series II shares. forth in the most recent Fund prospectus
The inception date of Series I shares is as of the date of this report for Series I
May 1, 1998. and Series II shares was 1.10% and 1.35%,
respectively. The expense ratios presented
The performance of the Fund's Series I above may vary from the expense ratios
presented in other sections of this report
that are based on expenses incurred
AIM V.I. Capital Development Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 20.1%
- ----------------------------------------------------------
Consumer Discretionary 17.5
- ----------------------------------------------------------
Industrials 15.5
- ----------------------------------------------------------
Health Care 14.1
- ----------------------------------------------------------
Financials 10.7
- ----------------------------------------------------------
Energy 7.8
- ----------------------------------------------------------
Telecommunication Services 5.5
- ----------------------------------------------------------
Materials 4.4
- ----------------------------------------------------------
Consumer Staples 1.0
- ----------------------------------------------------------
Utilities 1.0
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 2.4
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.65%
ADVERTISING-2.70%
Clear Channel Outdoor Holdings, Inc.-Class
A(a) 86,112 $ 2,440,414
- -----------------------------------------------------------------------
Focus Media Holding Ltd.-ADR (China)(a) 83,633 4,223,466
- -----------------------------------------------------------------------
Lamar Advertising Co.-Class A 41,880 2,628,389
=======================================================================
9,292,269
=======================================================================
AEROSPACE & DEFENSE-4.39%
AerCap Holdings N.V. (Netherlands)(a) 93,331 2,986,592
- -----------------------------------------------------------------------
L-3 Communications Holdings, Inc. 31,714 3,088,626
- -----------------------------------------------------------------------
Precision Castparts Corp. 43,880 5,325,277
- -----------------------------------------------------------------------
Spirit Aerosystems Holdings, Inc.-Class A(a) 102,495 3,694,945
=======================================================================
15,095,440
=======================================================================
AIR FREIGHT & LOGISTICS-0.62%
Robinson (C.H.) Worldwide, Inc. 40,557 2,130,054
=======================================================================
ALTERNATIVE CARRIERS-1.06%
Level 3 Communications, Inc.(a) 623,916 3,649,909
=======================================================================
APPAREL RETAIL-2.33%
Abercrombie & Fitch Co.-Class A 35,125 2,563,423
- -----------------------------------------------------------------------
Aeropostale, Inc.(a) 39,770 1,657,614
- -----------------------------------------------------------------------
DSW Inc.-Class A(a) 49,755 1,732,469
- -----------------------------------------------------------------------
Ross Stores, Inc. 66,858 2,059,226
=======================================================================
8,012,732
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
APPAREL, ACCESSORIES & LUXURY GOODS-1.88%
Coach, Inc.(a) 49,830 $ 2,361,444
- -----------------------------------------------------------------------
Polo Ralph Lauren Corp. 41,848 4,105,707
=======================================================================
6,467,151
=======================================================================
APPLICATION SOFTWARE-4.18%
Amdocs Ltd.(a) 76,003 3,026,439
- -----------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 140,510 3,085,600
- -----------------------------------------------------------------------
Citrix Systems, Inc.(a) 84,384 2,841,209
- -----------------------------------------------------------------------
Solera Holdings Inc.(a) 159,857 3,098,029
- -----------------------------------------------------------------------
TIBCO Software Inc.(a) 257,707 2,332,248
=======================================================================
14,383,525
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.97%
American Capital Strategies, Ltd. 37,389 1,589,780
- -----------------------------------------------------------------------
FBR Capital Markets Corp.(a) 37,535 634,342
- -----------------------------------------------------------------------
FBR Capital Markets Corp. (Acquired 07/14/06;
Cost $1,110,000)(a)(b)(c) 74,000 1,125,540
=======================================================================
3,349,662
=======================================================================
BIOTECHNOLOGY-1.44%
Cephalon, Inc.(a) 21,590 1,735,620
- -----------------------------------------------------------------------
Genzyme Corp.(a) 50,000 3,220,000
=======================================================================
4,955,620
=======================================================================
</Table>
AIM V.I. Capital Development Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
CASINOS & GAMING-2.05%
International Game Technology 84,529 $ 3,355,801
- -----------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 105,727 3,695,159
=======================================================================
7,050,960
=======================================================================
COMMUNICATIONS EQUIPMENT-0.68%
Comverse Technology, Inc.(a) 111,612 2,327,110
=======================================================================
COMPUTER HARDWARE-0.45%
NCR Corp.(a) 29,700 1,560,438
=======================================================================
COMPUTER STORAGE & PERIPHERALS-1.60%
Intermec Inc.(a) 92,404 2,338,745
- -----------------------------------------------------------------------
Logitech International S.A. (Switzerland)(a) 59,583 1,572,395
- -----------------------------------------------------------------------
Network Appliance, Inc.(a) 54,474 1,590,641
=======================================================================
5,501,781
=======================================================================
CONSTRUCTION & ENGINEERING-2.76%
Aecom Technology Corp.(a) 152,538 3,784,468
- -----------------------------------------------------------------------
Foster Wheeler Ltd.(a) 53,359 5,708,879
=======================================================================
9,493,347
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.09%
Joy Global Inc. 64,119 3,740,061
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.50%
CheckFree Corp.(a) 47,351 1,903,510
- -----------------------------------------------------------------------
Euronet Worldwide, Inc.(a) 113,000 3,295,080
- -----------------------------------------------------------------------
Fidelity National Information Services, Inc. 62,300 3,381,644
- -----------------------------------------------------------------------
VeriFone Holdings, Inc.(a) 98,008 3,454,782
=======================================================================
12,035,016
=======================================================================
DISTRIBUTORS-0.48%
LKQ Corp.(a) 67,186 1,656,807
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.62%
Corrections Corp. of America(a) 86,239 5,442,543
- -----------------------------------------------------------------------
IHS Inc.-Class A(a) 77,493 3,564,678
=======================================================================
9,007,221
=======================================================================
DIVERSIFIED METALS & MINING-0.42%
Titanium Metals Corp.(a) 45,550 1,453,045
=======================================================================
DRUG RETAIL-1.01%
Shoppers Drug Mart Corp. (Canada) 74,600 3,456,116
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.97%
Cooper Industries, Ltd.-Class A 58,289 3,327,719
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS-2.09%
Agilent Technologies, Inc.(a) 95,556 $ 3,673,173
- -----------------------------------------------------------------------
Amphenol Corp.-Class A 98,337 3,505,714
=======================================================================
7,178,887
=======================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.72%
Potash Corp. of Saskatchewan Inc. (Canada) 31,902 2,487,399
=======================================================================
GENERAL MERCHANDISE STORES-1.07%
Dollar Tree Stores, Inc.(a) 84,488 3,679,452
=======================================================================
HEALTH CARE DISTRIBUTORS-0.82%
Schein (Henry), Inc.(a) 52,740 2,817,898
=======================================================================
HEALTH CARE EQUIPMENT-1.54%
Hologic, Inc.(a) 37,800 2,090,718
- -----------------------------------------------------------------------
ResMed Inc.(a) 77,434 3,194,927
=======================================================================
5,285,645
=======================================================================
HEALTH CARE FACILITIES-0.52%
Psychiatric Solutions, Inc.(a) 49,000 1,776,740
=======================================================================
HEALTH CARE SERVICES-1.93%
DaVita, Inc.(a) 50,944 2,744,863
- -----------------------------------------------------------------------
Express Scripts, Inc.(a) 17,200 860,172
- -----------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 55,000 3,033,250
=======================================================================
6,638,285
=======================================================================
HEALTH CARE SUPPLIES-1.15%
Inverness Medical Innovations, Inc.(a) 77,500 3,954,050
=======================================================================
HEALTH CARE TECHNOLOGY-0.24%
Cerner Corp.(a) 15,000 832,050
=======================================================================
HOTELS, RESORTS & CRUISE LINES-2.16%
Choice Hotels International, Inc. 43,781 1,730,225
- -----------------------------------------------------------------------
Hilton Hotels Corp. 79,735 2,668,731
- -----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 44,985 3,017,144
=======================================================================
7,416,100
=======================================================================
HOUSEWARES & SPECIALTIES-0.92%
Jarden Corp.(a) 73,839 3,175,815
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.32%
Monster Worldwide Inc.(a) 26,686 1,096,795
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.97%
KGEN Power Corp. (Acquired 01/12/07; Cost
$2,219,196)(a)(b) 158,514 3,328,794
=======================================================================
INDUSTRIAL CONGLOMERATES-0.75%
McDermott International, Inc.(a) 31,161 2,590,102
=======================================================================
</Table>
AIM V.I. Capital Development Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
INSURANCE BROKERS-0.93%
National Financial Partners Corp. 68,697 $ 3,181,358
=======================================================================
INTERNET SOFTWARE & SERVICES-0.89%
Digital River, Inc.(a) 67,243 3,042,746
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.00%
Lazard Ltd.-Class A (Bermuda) 38,300 1,724,649
- -----------------------------------------------------------------------
Schwab (Charles) Corp. (The) 83,000 1,703,160
=======================================================================
3,427,809
=======================================================================
IT CONSULTING & OTHER SERVICES-0.95%
Cognizant Technology Solutions Corp.-Class
A(a) 43,524 3,268,217
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-2.34%
Applera Corp.-Applied Biosystems Group 95,000 2,901,300
- -----------------------------------------------------------------------
Covance Inc.(a) 26,400 1,809,984
- -----------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 86,958 3,327,883
=======================================================================
8,039,167
=======================================================================
MANAGED HEALTH CARE-2.21%
Aveta, Inc. (Acquired 12/21/05-02/21/06; Cost
$2,162,718)(a)(b) 157,251 1,258,008
- -----------------------------------------------------------------------
Coventry Health Care, Inc.(a) 55,160 3,179,974
- -----------------------------------------------------------------------
Humana Inc.(a) 52,000 3,167,320
=======================================================================
7,605,302
=======================================================================
MARINE-0.78%
American Commercial Lines Inc.(a) 102,210 2,662,570
=======================================================================
METAL & GLASS CONTAINERS-1.82%
Crown Holdings, Inc.(a) 104,973 2,621,176
- -----------------------------------------------------------------------
Owens-Illinois, Inc.(a) 103,481 3,621,835
=======================================================================
6,243,011
=======================================================================
MORTGAGE REIT'S-1.85%
KKR Financial Holdings LLC 129,932 3,236,606
- -----------------------------------------------------------------------
RAIT Financial Trust 120,148 3,126,251
=======================================================================
6,362,857
=======================================================================
OFFICE SERVICES & SUPPLIES-1.24%
American Reprographics Co.(a) 87,504 2,694,248
- -----------------------------------------------------------------------
Knoll, Inc. 70,242 1,573,421
=======================================================================
4,267,669
=======================================================================
OIL & GAS DRILLING-2.16%
ENSCO International Inc. 57,900 3,532,479
- -----------------------------------------------------------------------
Noble Corp. 39,832 3,884,417
=======================================================================
7,416,896
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.64%
Complete Production Services, Inc.(a) 123,031 3,180,351
- -----------------------------------------------------------------------
FMC Technologies, Inc.(a) 44,640 3,536,381
- -----------------------------------------------------------------------
Grant Prideco, Inc.(a) 44,000 2,368,520
=======================================================================
9,085,252
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-2.01%
Pioneer Natural Resources Co. 51,437 $ 2,505,496
- -----------------------------------------------------------------------
Rosetta Resources, Inc.(a)(c) 35,550 765,747
- -----------------------------------------------------------------------
Southwestern Energy Co.(a) 82,024 3,650,068
=======================================================================
6,921,311
=======================================================================
OIL & GAS STORAGE & TRANSPORTATION-0.95%
Williams Cos., Inc. (The) 103,400 3,269,508
=======================================================================
PHARMACEUTICALS-1.87%
Adams Respiratory Therapeutics, Inc.(a) 80,369 3,165,735
- -----------------------------------------------------------------------
Shire PLC-ADR (United Kingdom) 44,059 3,266,094
=======================================================================
6,431,829
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.01%
LandAmerica Financial Group, Inc. 36,974 3,567,621
- -----------------------------------------------------------------------
Security Capital Assurance Ltd. 107,962 3,332,787
=======================================================================
6,900,408
=======================================================================
PUBLISHING-0.94%
R.H. Donnelley Corp.(a) 42,654 3,232,320
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.92%
CB Richard Ellis Group, Inc.-Class A(a) 109,658 4,002,517
- -----------------------------------------------------------------------
Meruelo Maddux Properties, Inc.(a) 316,638 2,583,766
=======================================================================
6,586,283
=======================================================================
REGIONAL BANKS-0.67%
Signature Bank(a) 67,877 2,314,606
=======================================================================
RESTAURANTS-1.01%
Burger King Holdings Inc. 132,262 3,483,781
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.48%
KLA-Tencor Corp. 29,085 1,598,221
- -----------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 56,908 3,478,217
=======================================================================
5,076,438
=======================================================================
SEMICONDUCTORS-3.76%
Maxim Integrated Products, Inc. 83,309 2,783,354
- -----------------------------------------------------------------------
Microsemi Corp.(a) 153,988 3,688,012
- -----------------------------------------------------------------------
NVIDIA Corp.(a) 73,660 3,042,895
- -----------------------------------------------------------------------
ON Semiconductor Corp.(a) 318,970 3,419,358
=======================================================================
12,933,619
=======================================================================
SPECIALIZED FINANCE-1.40%
Chicago Mercantile Exchange Holdings
Inc.-Class A 4,835 2,583,631
- -----------------------------------------------------------------------
IntercontinentalExchange Inc.(a) 15,000 2,217,750
=======================================================================
4,801,381
=======================================================================
SPECIALTY CHEMICALS-0.56%
Wacker Chemie A.G. (Germany)(d) 8,175 1,930,527
=======================================================================
</Table>
AIM V.I. Capital Development Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
SPECIALTY STORES-0.89%
PetSmart, Inc. 94,035 $ 3,051,436
=======================================================================
STEEL-0.91%
Allegheny Technologies, Inc. 29,945 3,140,632
=======================================================================
SYSTEMS SOFTWARE-0.55%
Quality Systems, Inc. 50,000 1,898,500
=======================================================================
TIRES & RUBBER-1.03%
Goodyear Tire & Rubber Co. (The)(a) 102,100 3,548,996
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-4.48%
American Tower Corp.-Class A(a) 71,482 3,002,244
- -----------------------------------------------------------------------
Crown Castle International Corp.(a) 84,847 3,077,401
- -----------------------------------------------------------------------
Leap Wireless International, Inc.(a) 22,655 1,914,347
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-(CONTINUED)
NII Holdings Inc.(a) 53,080 $ 4,285,679
- -----------------------------------------------------------------------
SBA Communications Corp.-Class A(a) 92,795 3,116,984
=======================================================================
15,396,655
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $267,713,222) 335,725,079
=======================================================================
MONEY MARKET FUNDS-1.83%
Liquid Assets Portfolio-Institutional
Class(e) 3,138,173 3,138,173
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 3,138,173 3,138,173
=======================================================================
Total Money Market Funds (Cost
$6,276,346) 6,276,346
=======================================================================
TOTAL INVESTMENTS-99.48% (Cost $273,989,568) 342,001,425
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.52% 1,804,304
=======================================================================
NET ASSETS-100.00% $343,805,729
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(*) Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $5,712,342,
which represented 1.66% of the Fund's Net Assets. These securities are
considered to be illiquid. The Fund is limited to investing 15% of net
assets in illiquid securities at the time of purchase.
(c) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at June 30, 2007 was $1,891,287, which represented 0.55% of the
Fund's Net Assets. See Note 1A.
(d) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
value of this security at June 30, 2007 represented 0.56% of the Fund's Net
Assets. See Note 1A.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Capital Development Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $267,713,222) $335,725,079
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $6,276,346) 6,276,346
=============================================================
Total investments (Cost $273,989,568) 342,001,425
=============================================================
Foreign currencies, at value (Cost $14,167) 14,402
- -------------------------------------------------------------
Receivables for:
Investments sold 2,474,700
- -------------------------------------------------------------
Investments sold to affiliates 880,968
- -------------------------------------------------------------
Fund shares sold 112,837
- -------------------------------------------------------------
Dividends 192,166
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 35,829
- -------------------------------------------------------------
Other assets 1,642
=============================================================
Total assets 345,713,969
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 879,904
- -------------------------------------------------------------
Fund shares reacquired 633,090
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 47,628
- -------------------------------------------------------------
Accrued administrative services fees 203,826
- -------------------------------------------------------------
Accrued distribution fees -- Series II 108,399
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,996
- -------------------------------------------------------------
Accrued transfer agent fees 1,643
- -------------------------------------------------------------
Accrued operating expenses 29,754
=============================================================
Total liabilities 1,908,240
=============================================================
Net assets applicable to shares outstanding $343,805,729
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $227,421,658
- -------------------------------------------------------------
Undistributed net investment income (loss) (891,687)
- -------------------------------------------------------------
Undistributed net realized gain 49,263,626
- -------------------------------------------------------------
Unrealized appreciation 68,012,132
=============================================================
$343,805,729
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $163,094,159
_____________________________________________________________
=============================================================
Series II $180,711,570
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 7,696,160
_____________________________________________________________
=============================================================
Series II 8,651,951
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 21.19
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 20.89
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$3,430) $ 735,852
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$45,000) 243,614
============================================================
Total investment income 979,466
============================================================
EXPENSES:
Advisory fees 1,165,665
- ------------------------------------------------------------
Administrative services fees 419,970
- ------------------------------------------------------------
Custodian fees 13,211
- ------------------------------------------------------------
Distribution fees -- Series II 193,778
- ------------------------------------------------------------
Transfer agent fees 10,756
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 12,546
- ------------------------------------------------------------
Other 29,586
============================================================
Total expenses 1,845,512
============================================================
Less: Fees waived and expense offset
arrangement (16,486)
============================================================
Net expenses 1,829,026
============================================================
Net investment income (loss) (849,560)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$437,584) 22,158,711
- ------------------------------------------------------------
Foreign currencies (7,167)
- ------------------------------------------------------------
Option contracts written 55,437
============================================================
22,206,981
============================================================
Change in net unrealized appreciation of:
Investment securities 21,936,234
- ------------------------------------------------------------
Foreign currencies 177
- ------------------------------------------------------------
Option contracts written 3,364
============================================================
21,939,775
============================================================
Net realized and unrealized gain 44,146,756
============================================================
Net increase in net assets resulting from
operations $43,297,196
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Capital Development Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (849,560) $ (1,348,237)
- ------------------------------------------------------------------------------
Net realized gain 22,206,981 28,747,177
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 21,939,775 6,372,091
==============================================================================
Net increase in net assets resulting from
operations 43,297,196 33,771,031
==============================================================================
Distributions to shareholders from net
realized gains:
Series I -- (2,202,279)
- ------------------------------------------------------------------------------
Series II -- (2,172,661)
==============================================================================
Decrease in net assets resulting from
distributions -- (4,374,940)
==============================================================================
Share transactions-net:
Series I (7,439,891) 14,360,380
- ------------------------------------------------------------------------------
Series II 30,290,510 32,838,781
==============================================================================
Net increase in net assets resulting from
share transactions 22,850,619 47,199,161
==============================================================================
Net increase in net assets 66,147,815 76,595,252
==============================================================================
NET ASSETS:
Beginning of period 277,657,914 201,062,662
==============================================================================
End of period (including undistributed net
investment income (loss) of $(891,687) and
$(42,127), respectively) $343,805,729 $277,657,914
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Capital Development Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Capital Development Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Capital Development Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
K. CALL OPTIONS WRITTEN AND PURCHASED -- The Fund may write and buy call
options. A call option gives the purchaser of such option the right to buy,
and the writer the obligation to sell, the underlying security at the
stated exercise price during the option period. 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
AIM V.I. Capital Development Fund
above the current market value of the underlying security at the time the
option is written. When the Fund writes a call option, an amount equal to
the premium received by the Fund is recorded as an asset and an equivalent
liability in the Statement of Assets and Liabilities. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. 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. Realized and unrealized gains and losses on
these contracts are included in the Statement of Operation. A risk in
writing a call option is that the Fund gives up the opportunity for profit
if the market price of the security increases and the option is exercised.
L. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. 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, securities index, 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. Realized and unrealized gains and losses on these contracts are
included in the Statement of Operations. A risk in buying an option is that
the Fund pays a premium whether or not the option is exercised. In
addition, there can be no assurance that a liquid secondary market will
exist for any option purchased.
M. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $350 million 0.75%
- --------------------------------------------------------------------
Over $350 million 0.625%
___________________________________________________________________
====================================================================
</Table>
Through at least April 30, 2009, AIM has contractually agreed to waive
advisory fees to the extent necessary so that the advisory fees payable by the
Fund (based on the Fund's average daily net assets) do not exceed the annual
rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.745%
- --------------------------------------------------------------------
Next $250 million 0.73%
- --------------------------------------------------------------------
Next $500 million 0.715%
- --------------------------------------------------------------------
Next $1.5 billion 0.70%
- --------------------------------------------------------------------
Next $2.5 billion 0.685%
- --------------------------------------------------------------------
Next $2.5 billion 0.67%
- --------------------------------------------------------------------
Next $2.5 billion 0.655%
- --------------------------------------------------------------------
Over $10 billion 0.64%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
total annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. AIM did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $13,842.
AIM V.I. Capital Development Fund
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$40,706 for accounting and fund administrative services and reimbursed $379,264
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $17,152,937 $43,579,050 $ (57,593,814) $3,138,173 $ 99,551
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 17,152,937 43,579,050 (57,593,814) 3,138,173 99,063
=================================================================================================================================
Subtotal $34,305,874 $87,158,100 $(115,187,628) $6,276,346 $198,614
=================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $ 2,108,462 $ 18,862,068 $ (20,970,530) $ -- $ 22,495
- ---------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class 2,108,462 18,828,613 (20,937,075) -- 22,505
=================================================================================================================================
Subtotal $ 4,216,924 $ 37,690,681 $ (41,907,605) $ -- $ 45,000
=================================================================================================================================
Total Investments in Affiliates $38,522,798 $124,848,781 $(157,095,233) $6,276,346 $243,614
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $3,442,564, which resulted in net realized gains
of $437,584, and securities purchases of $113,986.
AIM V.I. Capital Development Fund
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $2,644.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,745 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, there were no securities out on loan. For the six months
ended June 30, 2007, the Fund received dividends on cash collateral investments
of $45,000 for securities lending transactions during the period, which are net
of compensation to counterparties.
AIM V.I. Capital Development Fund
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- ------------------------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ------------------------------------------------------------------------------
Beginning of period 350 $ 60,617
- ------------------------------------------------------------------------------
Closed (140) (20,281)
- ------------------------------------------------------------------------------
Expired (210) (40,336)
==============================================================================
End of period -- $ --
______________________________________________________________________________
==============================================================================
</Table>
NOTE 10--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $174,526,050 and
$148,544,609, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 74,015,401
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (6,260,505)
===============================================================================
Net unrealized appreciation of investment securities $ 67,754,896
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $274,246,529.
</Table>
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
Sold:
Series I 383,519 $ 7,569,385 2,145,804 $38,715,460
- ----------------------------------------------------------------------------------------------------
Series II 2,999,552 59,409,797 2,681,069 46,879,330
====================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 117,706 2,202,279
- ----------------------------------------------------------------------------------------------------
Series II -- -- 117,632 2,172,661
====================================================================================================
Reacquired:
Series I (754,753) (15,009,276) (1,511,376) (26,557,359)
- ----------------------------------------------------------------------------------------------------
Series II (1,440,608) (29,119,287) (944,292) (16,213,210)
====================================================================================================
1,187,710 $ 22,850,619 2,606,543 $47,199,161
____________________________________________________________________________________________________
====================================================================================================
</Table>
(a) There are five entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 70% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 13--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Capital Development Fund
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 18.43 $ 16.09 $ 14.68 $ 12.71 $ 9.39 $ 11.94
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.04) (0.07) (0.04) (0.03)(a) (0.01) (0.01)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 2.80 2.73 1.45 2.00 3.33 (2.54)
=================================================================================================================================
Total from investment
operations 2.76 2.66 1.41 1.97 3.32 (2.55)
=================================================================================================================================
Less distributions from net
realized gains -- (0.32) -- -- -- --
=================================================================================================================================
Net asset value, end of period $ 21.19 $ 18.43 $ 16.09 $ 14.68 $ 12.71 $ 9.39
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 14.97% 16.52% 9.61% 15.50% 35.36% (21.36)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $163,094 $148,668 $117,674 $112,028 $93,813 $70,018
=================================================================================================================================
Ratio of expenses to average net
assets 1.05%(c)(d) 1.08%(c) 1.09% 1.10% 1.13% 1.14%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.42)%(d) (0.48)% (0.22)% (0.21)% (0.13)% (0.08)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 119% 125% 93% 95% 121%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.06%(annualized) and 1.09% for the six months ended June 30, 2007
and the year ended December 31, 2006, respectively.
(d) Ratios are annualized and based on average daily net assets of
$157,113,422.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 18.19 $ 15.92 $ 14.57 $ 12.64 $ 9.36 $ 11.94
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.06) (0.10) (0.07) (0.06)(a) (0.03) (0.03)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 2.76 2.69 1.42 1.99 3.31 (2.55)
=================================================================================================================================
Total from investment
operations 2.70 2.59 1.35 1.93 3.28 (2.58)
=================================================================================================================================
Less distributions from net
realized gains -- (0.32) -- -- -- --
=================================================================================================================================
Net asset value, end of period $ 20.89 $ 18.19 $ 15.92 $ 14.57 $ 12.64 $ 9.36
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 14.84% 16.26% 9.27% 15.27% 35.04% (21.61)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $180,712 $128,990 $83,388 $71,339 $33,550 $14,969
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.30%(c)(d) 1.33%(c) 1.34% 1.35% 1.38% 1.39%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.67)%(d) (0.73)% (0.47)% (0.46)% (0.38)% (0.33)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 48% 119% 125% 93% 95% 121%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.31%(annualized) and 1.34% for the six months ended June 30, 2007
and the year ended December 31, 2006, respectively.
(d) Ratios are annualized and based on average daily net assets of
$156,306,690.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Capital Development Fund
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM
Distributors, Inc. ("ADI") (Order No. 05-1318). The WVASC makes findings of fact
that AIM and ADI entered into certain arrangements permitting market timing of
the AIM Funds and failed to disclose these arrangements in the prospectuses for
such Funds, and conclusions of law to the effect that AIM and ADI violated the
West Virginia securities laws. The WVASC orders AIM and ADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, AIM's time to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Capital Development Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES expense ratio and an assumed rate of
return of 5% per year before expenses,
As a shareholder of the Fund, you incur The table below provides information about which is not the Fund's actual return.
ongoing costs, including management fees; actual account values and actual expenses.
distribution and/or service (12b-1) fees; You may use the information in this table, The hypothetical account values and
and other Fund expenses. This example is together with the amount you invested, to expenses may not be used to estimate the
intended to help you understand your estimate the expenses that you paid over actual ending account balance or expenses
ongoing costs (in dollars) of investing in the period. Simply divide your account you paid for the period. You may use this
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 information to compare the ongoing costs
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), of investing in the Fund and other funds.
funds. The example is based on an then multiply the result by the number in To do so, compare this 5% hypothetical
investment of $1,000 invested at the the table under the heading entitled example with the 5% hypothetical examples
beginning of the period and held for the "Actual Expenses Paid During Period" to that appear in the shareholder reports of
entire period January 1, 2007, through estimate the expenses you paid on your the other funds.
June 30, 2007. account during this period.
Please note that the expenses shown in
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON the table are meant to highlight your
the examples below do not represent the PURPOSES ongoing costs. Therefore, the hypothetical
effect of any fees or other expenses information is useful in comparing ongoing
assessed in connection with a variable The table below also provides information costs, and will not help you determine the
product; if they did, the expenses shown about hypothetical account values and relative total costs of owning different
would be higher while the ending account hypothetical expenses based on the Fund's funds.
values shown would be lower. actual
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,149.70 $5.60 $1,019.59 $5.26 1.05%
Series II 1,000.00 1,148.40 6.92 1,018.35 6.51 1.30
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Capital Development Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM expenses of their assigned funds. The may have occurred since that date,
Variable Insurance Funds is required under Investments Committee considers each including but not limited to changes to
the Investment Company Act of 1940 to Sub-Committee's recommendations and makes the Fund's performance, advisory fees,
approve annually the renewal of the AIM its own recommendations regarding the expense limitations and/or fee waivers.
V.I. Capital Development Fund (the Fund) performance, fees and expenses of the AIM
investment advisory agreement with A I M Funds to the full Board. Moreover, the A. NATURE, EXTENT AND QUALITY OF SERVICES
Advisors, Inc. (AIM). During contract Investments Committee considers each PROVIDED BY AIM
renewal meetings held on June 25-27, 2007, Sub-Committee's recommendations in making
the Board as a whole and the disinterested its annual recommendation to the Board The Board reviewed the advisory services
or "independent" Trustees, voting whether to approve the continuance of each provided to the Fund by AIM under the
separately, approved the continuance of AIM Fund's investment advisory agreement Fund's advisory agreement, the performance
the Fund's investment advisory agreement and sub-advisory agreement, if applicable of AIM in providing these services, and
for another year, effective July 1, 2007. (advisory agreements), for another year. the credentials and experience of the
In doing so, the Board determined that the officers and employees of AIM who provide
Fund's advisory agreement is in the best The independent Trustees, as mentioned these services. The Board's review of the
interests of the Fund and its shareholders above, are assisted in their annual qualifications of AIM to provide these
and that the compensation to AIM under the evaluation of the advisory agreements by services included the Board's
Fund's advisory agreement is fair and the independent Senior Officer. One consideration of AIM's portfolio and
reasonable. responsibility of the Senior Officer is to product review process, various back
manage the process by which the AIM Funds' office support functions provided by AIM,
The independent Trustees met separately proposed management fees are negotiated and AIM's equity and fixed income trading
during their evaluation of the Fund's during the annual contract renewal process operations. The Board concluded that the
investment advisory agreement with to ensure that they are negotiated in a nature, extent and quality of the advisory
independent legal counsel from whom they manner which is at arms' length and services provided to the Fund by AIM were
received independent legal advice, and the reasonable. Accordingly, the Senior appropriate and that AIM currently is
independent Trustees also received Officer must either supervise a providing satisfactory advisory services
assistance during their deliberations from competitive bidding process or prepare an in accordance with the terms of the Fund's
the independent Senior Officer, a independent written evaluation. The Senior advisory agreement. In addition, based on
full-time officer of the AIM Funds who Officer has recommended that an their ongoing meetings throughout the year
reports directly to the independent independent written evaluation be provided with the Fund's portfolio managers, the
Trustees. The following discussion more and, upon the direction of the Board, has Board concluded that these individuals are
fully describes the process employed by prepared an independent written competent and able to continue to carry
the Board to evaluate the performance of evaluation. out their responsibilities under the
the AIM Funds (including the Fund) Fund's advisory agreement.
throughout the year and, more During the annual contract renewal
specifically, during the annual contract process, the Board considered the factors In determining whether to continue the
renewal meetings. discussed below under the heading "Factors Fund's advisory agreement, the Board
and Conclusions and Summary of Independent considered the prior relationship between
THE BOARD'S FUND EVALUATION PROCESS Written Fee Evaluation" in evaluating the AIM and the Fund, as well as the Board's
fairness and reasonableness of the Fund's knowledge of AIM's operations, and
The Board's Investments Committee has advisory agreement at the contract renewal concluded that it was beneficial to
established three Sub-Committees which are meetings and at their meetings throughout maintain the current relationship, in
responsible for overseeing the management the year as part of their ongoing part, because of such knowledge. The Board
of a number of the series portfolios of oversight of the Fund. The Fund's advisory also considered the steps that AIM and its
the AIM Funds. This Sub-Committee structure agreement was considered separately, affiliates have taken over the last
permits the Trustees to focus on the although the Board also considered the several years to improve the quality and
performance of the AIM Funds that have common interests of all of the AIM Funds efficiency of the services they provide to
been assigned to them. The Sub-Committees in their deliberations. The Board the Funds in the areas of investment
meet throughout the year to review the comprehensively considered all of the performance, product line diversification,
performance of their assigned funds, and information provided to them and did not distribution, fund operations, shareholder
the Sub-Committees review monthly and identify any particular factor that was services and compliance. The Board
quarterly comparative performance controlling. Furthermore, each Trustee may concluded that the quality and efficiency
information and periodic asset flow data have evaluated the information provided of the services AIM and its affiliates
for their assigned funds. These materials differently from one another and provide to the AIM Funds in each of these
are prepared under the direction and attributed different weight to the various areas have generally improved, and support
supervision of the independent Senior factors. The Trustees recognized that the the Board's approval of the continuance of
Officer. Over the course of each year, the advisory arrangements and resulting the Fund's advisory agreement.
Sub-Committees meet with portfolio managers advisory fees for the Fund and the other
for their assigned funds and other members AIM Funds are the result of years of B. FUND PERFORMANCE
of management and review with these review and negotiation between the
individuals the performance, investment Trustees and AIM, that the Trustees may The Board compared the Fund's performance
objective(s), policies, strategies and focus to a greater extent on certain during the past one, three and five
limitations of these funds. aspects of these arrangements in some calendar years to the performance of funds
years than others, and that the Trustees' in the Fund's Lipper peer group that are
In addition to their meetings deliberations and conclusions in a not managed by AIM, and against the
throughout the year, the Sub-Committees particular year may be based in part on performance of all funds in the Lipper
meet at designated contract renewal their deliberations and conclusions of Variable Annuity Underlying Funds -
meetings each year to conduct an in-depth these same arrangements throughout the Mid-Cap Growth Index. The Board also
review of the performance, fees and year and in prior years. reviewed the methodology used by Lipper to
expenses of their assigned funds. During identify the Fund's peers. The Board noted
the contract renewal process, the Trustees FACTORS AND CONCLUSIONS AND SUMMARY OF that the Fund's performance was above the
receive comparative performance and fee INDEPENDENT WRITTEN FEE EVALUATION median performance of its peers for the
data regarding all the AIM Funds prepared one, three and five year periods. The
by an independent company, Lipper, Inc., The discussion below serves as a summary Board noted that the Fund's performance
under the direction and supervision of the of the Senior Officer's independent was above the performance of the Index for
independent Senior Officer who also written evaluation, as well as a the one, three and five year periods. The
prepares a separate analysis of this discussion of the material factors and Board also considered the steps AIM has
information for the Trustees. Each related conclusions that formed the basis taken over the last several years to
Sub-Committee then makes recommendations for the Board's approval of the Fund's improve the quality and efficiency of the
to the Investments Committee regarding the advisory agreement. Unless otherwise services that AIM provides to the AIM
performance, fees and stated, information set forth below is as Funds. The Board concluded that AIM
of June 27, 2007 and does not reflect any continues to be responsive to the Board's
changes that focus on fund performance. Although the
independ-
(continued)
AIM V.I. Capital Development Fund
ent written evaluation of the Fund's After taking account of the Fund's Board noted that they had relied upon the
Senior Officer (discussed below) only contractual advisory fee rate, as well as Senior Officer's written evaluation
considered Fund performance through the the comparative advisory fee information instead of a competitive bidding process.
most recent calendar year, the Board also and the fee waivers/expense limitations In determining whether to continue the
reviewed more recent Fund performance and discussed above, the Board concluded that Fund's advisory agreement, the Board
this review did not change their the Fund's advisory fees were fair and considered the Senior Officer's written
conclusions. reasonable. evaluation.
C. ADVISORY FEES AND FEE WAIVERS D. ECONOMIES OF SCALE AND BREAKPOINTS G. COLLATERAL BENEFITS TO AIM AND ITS
AFFILIATES
The Board compared the Fund's contractual The Board considered the extent to which
advisory fee rate to the contractual there are economies of scale in AIM's The Board considered various other
advisory fee rates of funds in the Fund's provision of advisory services to the benefits received by AIM and its
Lipper peer group that are not managed by Fund. The Board also considered whether affiliates resulting from AIM's
AIM, at a common asset level and as of the the Fund benefits from such economies of relationship with the Fund, including the
end of the past calendar year. The Board scale through contractual breakpoints in fees received by AIM and its affiliates
noted that the Fund's advisory fee rate the Fund's advisory fee schedule or for their provision of administrative,
was below the median advisory fee rate of through advisory fee waivers or expense transfer agency and distribution services
its peers. The Board also reviewed the limitations. The Board noted that the to the Fund. The Board considered the
methodology used by Lipper and noted that Fund's contractual advisory fee schedule performance of AIM and its affiliates in
the contractual fee rates shown by Lipper includes one breakpoint but that, due to providing these services and the
include any applicable long-term the Fund's asset level at the end of the organizational structure employed by AIM
contractual fee waivers. The Board also past calendar year and the way in which and its affiliates to provide these
compared the Fund's contractual advisory the breakpoint has been structured, the services. The Board also considered that
fee rate to the contractual advisory fee Fund has yet to benefit from the these services are provided to the Fund
rates of other clients of AIM and its breakpoint. The Board also noted that pursuant to written contracts which are
affiliates with investment strategies AIM's contractual advisory fee waiver reviewed and approved on an annual basis
comparable to those of the Fund, including discussed above includes breakpoints based by the Board. The Board concluded that AIM
three mutual funds advised by AIM, one on net asset levels. Based on this and its affiliates were providing these
mutual fund sub-advised by an AIM information, the Board concluded that the services in a satisfactory manner and in
affiliate, and one offshore fund advised Fund's advisory fees appropriately reflect accordance with the terms of their
and sub-advised by AIM affiliates. The economies of scale at current asset contracts, and were qualified to continue
Board noted that the Fund's rate was: (i) levels. The Board also noted that the Fund to provide these services to the Fund.
above the rates for two of the mutual shares directly in economies of scale
funds and the same as the rate for the through lower fees charged by third party The Board considered the benefits
third mutual fund; (ii) above the service providers based on the combined realized by AIM as a result of portfolio
sub-advisory fee rate for the sub-advised size of all of the AIM Funds and brokerage transactions executed through
mutual fund, although the advisory fee affiliates. "soft dollar" arrangements. Under these
rate for such sub-advised mutual fund was arrangements, portfolio brokerage
comparable to the Fund's; and (iii) below E. PROFITABILITY AND FINANCIAL RESOURCES commissions paid by the Fund and/or other
the advisory fee rate for the offshore OF AIM funds advised by AIM are used to pay for
fund. research and execution services. The Board
The Board reviewed information from AIM noted that soft dollar arrangements shift
The Board noted that AIM has concerning the costs of the advisory and the payment obligation for the research
contractually agreed to waive advisory other services that AIM and its affiliates and executions services from AIM to the
fees of the Fund through at least April provide to the Fund and the profitability funds and therefore may reduce AIM's
30, 2009 and that this fee waiver includes of AIM and its affiliates in providing expenses. The Board also noted that
breakpoints based on net asset levels. The these services. The Board also reviewed research obtained through soft dollar
Board considered the contractual nature of information concerning the financial arrangements may be used by AIM in making
this fee waiver and noted that it remains condition of AIM and its affiliates. The investment decisions for the Fund and may
in effect until at least April 30, 2009. Board also reviewed with AIM the therefore benefit Fund shareholders. The
The Board noted that, according to methodology used to prepare the Board concluded that AIM's soft dollar
information provided by AIM, this fee profitability information. The Board arrangements were appropriate. The Board
waiver reduces the Fund's effective considered the overall profitability of also concluded that, based on their review
advisory fees to a level generally in line AIM, as well as the profitability of AIM and representations made by AIM, these
with the median effective advisory fees in connection with managing the Fund. The arrangements were consistent with
for the Fund's peers, as determined by Board noted that AIM continues to operate regulatory requirements.
AIM. The Board noted that this fee waiver at a net profit, although increased
was proposed by AIM in response to the expenses in recent years have reduced the The Board considered the fact that the
recommendation of the independent Senior profitability of AIM and its affiliates. Fund's uninvested cash and cash collateral
Officer that AIM consider whether the The Board concluded that the Fund's from any securities lending arrangements
advisory fee waivers for certain equity advisory fees were fair and reasonable, may be invested in money market funds
AIM Funds, including the Fund, should be and that the level of profits realized by advised by AIM pursuant to procedures
simplified. The Board also noted that AIM AIM and its affiliates from providing approved by the Board. The Board noted
has contractually agreed to waive fees services to the Fund was not excessive in that AIM will receive advisory fees from
and/or limit expenses of the Fund through light of the nature, quality and extent of these affiliated money market funds
at least April 30, 2009 in an amount the services provided. The Board attributable to such investments, although
necessary to limit total annual operating considered whether AIM is financially AIM has contractually agreed to waive the
expenses to a specified percentage of sound and has the resources necessary to advisory fees payable by the Fund with
average daily net assets for each class of perform its obligations under the Fund's respect to its investment of uninvested
the Fund. The Board considered the advisory agreement, and concluded that AIM cash in these affiliated money market
contractual nature of this fee waiver and has the financial resources necessary to funds through at least April 30, 2009. The
noted that it remains in effect until at fulfill these obligations. Board considered the contractual nature of
least April 30, 2009. The Board reviewed this fee waiver and noted that it remains
the Fund's effective advisory fee rate, F. INDEPENDENT WRITTEN EVALUATION OF THE in effect until at least April 30, 2009.
after taking account of these fee FUND'S SENIOR OFFICER The Board concluded that the Fund's
waivers/expense limitations, and investment of uninvested cash and cash
considered the effect these fee The Board noted that, upon their collateral from any securities lending
waivers/expense limitations would have on direction, the Senior Officer of the Fund, arrangements in the affiliated money
the Fund's estimated total expenses. The who is independent of AIM and AIM's market funds is in the best interests of
Board concluded that the levels of fee affiliates, had prepared an independent the Fund and its shareholders.
waivers/expense limitations for the Fund written evaluation to assist the Board in
were fair and reasonable. determining the reasonableness of the
proposed management fees of the AIM Funds,
including the Fund. The
AIM V.I. Core Equity Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Blend
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Core Equity Fund
Fund performance Funds, is currently offered through
======================================================================================= insurance companies issuing variable
PERFORMANCE SUMMARY products. You cannot purchase shares of
the Fund directly. Performance figures
FUND VS. INDEXES given represent the Fund and are not
intended to reflect actual variable
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. product values. They do not reflect sales
If variable product issuer charges were included, returns would be lower. charges, expenses and fees assessed in
connection with a variable product. Sales
Series I Shares 9.08% charges, expenses and fees, which are
Series II Shares 8.96 determined by the variable product
S&P 500 Index(1) (Broad Market Index) 6.96 issuers, will vary and will lower the
Russell 1000 Index(1) (Style-Specific Index) 7.18 total return.
Lipper VUF Large-Cap Core Funds Index(1) (Peer Group Index) 7.41
Lipper Large-Cap Core Funds Index(1) (Former Peer Group Index) 7.33 Per NASD requirements, the most recent
month-end performance data at the Fund
Source: (1) Lipper Inc. level, excluding variable product charges,
is available on the AIM automated
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks information line, 866-702-4402. As
frequently used as a general measure of U.S. stock market performance. mentioned above, for the most recent
month-end performance including variable
The unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Index represents the product charges, please contact your
performance of the stocks of large-capitalization companies. The Russell 1000 Index is variable product issuer or financial
a trademark/service mark of the Frank Russell Company. Russell advisor.
- -- REGISTERED TRADEMARK -- is a trademark of the Frank Russell Company.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Large-Cap
Core Funds Index as its peer group instead of the Lipper Large-Cap Core Funds Index. In
2006, Lipper began publishing VUF indexes, allowing the Fund to be compared with the
Lipper VUF Large-Cap Core Funds Index. The unmanaged Lipper VUF Large-Cap Core Funds
Index is an equally weighted representation of the largest variable insurance
underlying funds in the Lipper Large-Cap Core Funds category. Lipper Inc. is an
independent mutual fund performance monitor.
The unmanaged Lipper Large-Cap Core Funds Index represents an average of the
performance of the largest large-capitalization core equity funds tracked by Lipper
Inc.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== The performance of the Fund's Series I
FUND PERFORMANCE and Series II share classes will differ
As of 6/30/07 primarily due to different class expenses.
SERIES I SHARES
Inception (5/2/94) 9.99% The performance data quoted represent
10 Years 6.45 past performance and cannot guarantee
5 Years 10.62 comparable future results; current
1 Year 22.34 performance may be lower or higher. Please
contact your variable product issuer or
SERIES II SHARES financial advisor for the most recent
10 Years 6.19% month-end variable product performance.
5 Years 10.35 Performance figures reflect Fund expenses,
1 Year 22.03 reinvested distributions and changes in
========================================== net asset value. Investment return and
principal value will fluctuate so that you
Series II shares' inception date is may have a gain or loss when you sell
October 24, 2001. Returns since that date shares.
are historical. All other returns are the
blended returns of the historical The total annual Fund operating expense
performance of the fund's Series II shares ratio set forth in the most recent Fund
since their inception and the restated prospectus as of the date of this report
historical performance of Series I shares for Series I and Series II shares was
(for periods prior to inception of the 0.91% and 1.16%, respectively. The expense
Series II shares) adjusted to reflect the ratios presented above may vary from the
Rule 12b-1 fees applicable to the Series expense ratios presented in other sections
II shares. The inception date of Series I of this report that are based on expenses
shares is May 2, 1994. incurred during the period covered by this
report.
AIM V.I. Core Equity Fund, a series
portfolio of AIM Variable Insurance
AIM V.I. Core Equity Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 21.4%
- ----------------------------------------------------------
Industrials 16.1
- ----------------------------------------------------------
Energy 13.0
- ----------------------------------------------------------
Financials 12.3
- ----------------------------------------------------------
Health Care 10.3
- ----------------------------------------------------------
Consumer Staples 9.6
- ----------------------------------------------------------
Consumer Discretionary 6.5
- ----------------------------------------------------------
Telecommunication Services 2.2
- ----------------------------------------------------------
Utilities 0.5
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 8.1
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-72.16%
AEROSPACE & DEFENSE-2.02%
Northrop Grumman Corp. 273,326 $ 21,283,896
- --------------------------------------------------------------------------
United Technologies Corp. 450,000 31,918,500
==========================================================================
53,202,396
==========================================================================
AIR FREIGHT & LOGISTICS-1.47%
United Parcel Service, Inc.-Class B 529,928 38,684,744
==========================================================================
APPAREL RETAIL-1.04%
Gap, Inc., (The) 1,439,177 27,488,281
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.32%
Blackstone Group L.P. (The)(a) 286,279 8,379,386
==========================================================================
BIOTECHNOLOGY-2.95%
Amgen Inc.(a) 1,401,906 77,511,383
==========================================================================
COMMUNICATIONS EQUIPMENT-3.97%
Cisco Systems, Inc.(a) 1,430,166 39,830,123
- --------------------------------------------------------------------------
Corning Inc.(a) 1,164,363 29,749,475
- --------------------------------------------------------------------------
Motorola, Inc. 1,967,156 34,818,661
==========================================================================
104,398,259
==========================================================================
COMPUTER HARDWARE-0.79%
International Business Machines Corp. 196,925 20,726,356
==========================================================================
COMPUTER STORAGE & PERIPHERALS-2.01%
EMC Corp.(a) 1,325,936 23,999,441
- --------------------------------------------------------------------------
Seagate Technology 1,321,557 28,770,296
==========================================================================
52,769,737
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.91%
Caterpillar Inc. 642,747 $ 50,327,090
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.69%
Automatic Data Processing, Inc. 920,191 44,601,658
==========================================================================
ELECTRIC UTILITIES-0.56%
FPL Group, Inc. 257,458 14,608,167
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.32%
Agilent Technologies, Inc.(a) 1,586,946 61,002,204
==========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.56%
Waste Management, Inc. 1,048,373 40,938,966
==========================================================================
HYPERMARKETS & SUPER CENTERS-2.12%
Wal-Mart Stores, Inc. 1,160,898 55,850,803
==========================================================================
INDUSTRIAL CONGLOMERATES-8.15%
3M Co. 871,096 75,602,422
- --------------------------------------------------------------------------
General Electric Co. 1,299,094 49,729,318
- --------------------------------------------------------------------------
Tyco International Ltd.(a) 2,641,762 89,265,138
==========================================================================
214,596,878
==========================================================================
INSURANCE BROKERS-0.98%
Marsh & McLennan Cos., Inc. 838,646 25,897,388
==========================================================================
INTEGRATED OIL & GAS-1.21%
Exxon Mobil Corp. 380,342 31,903,087
==========================================================================
</Table>
AIM V.I. Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-0.82%
AT&T Inc. 519,827 $ 21,572,821
==========================================================================
MOVIES & ENTERTAINMENT-0.92%
News Corp.-Class A 1,145,752 24,301,400
==========================================================================
MULTI-LINE INSURANCE-0.97%
Genworth Financial Inc.-Class A 743,939 25,591,502
==========================================================================
OFFICE ELECTRONICS-1.44%
Xerox Corp.(a) 2,053,790 37,954,039
==========================================================================
OIL & GAS DRILLING-0.94%
Transocean Inc.(a) 233,500 24,746,330
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-4.82%
BJ Services Co. 1,466,591 41,709,848
- --------------------------------------------------------------------------
Schlumberger Ltd. 408,933 34,734,769
- --------------------------------------------------------------------------
Smith International, Inc. 287,868 16,880,580
- --------------------------------------------------------------------------
Weatherford International Ltd.(a) 608,138 33,593,543
==========================================================================
126,918,740
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.52%
Apache Corp. 347,029 28,314,096
- --------------------------------------------------------------------------
Chesapeake Energy Corp. 894,565 30,951,949
- --------------------------------------------------------------------------
XTO Energy, Inc. 556,321 33,434,892
==========================================================================
92,700,937
==========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.70%
Citigroup Inc. 872,065 44,728,214
==========================================================================
PERSONAL PRODUCTS-2.15%
Avon Products, Inc. 758,582 27,877,889
- --------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 629,469 28,647,134
==========================================================================
56,525,023
==========================================================================
PHARMACEUTICALS-3.94%
Merck & Co. Inc. 586,928 29,229,014
- --------------------------------------------------------------------------
Pfizer Inc. 2,912,826 74,480,961
==========================================================================
103,709,975
==========================================================================
PROPERTY & CASUALTY INSURANCE-6.78%
Berkshire Hathaway Inc.-Class A(a) 467 51,124,825
- --------------------------------------------------------------------------
Chubb Corp. (The) 474,478 25,688,239
- --------------------------------------------------------------------------
Progressive Corp. (The) 3,335,993 79,830,312
- --------------------------------------------------------------------------
XL Capital Ltd.-Class A 258,114 21,756,429
==========================================================================
178,399,805
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
PUBLISHING-2.27%
Gannett Co., Inc. 343,862 $ 18,895,217
- --------------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 230,364 15,683,181
- --------------------------------------------------------------------------
Washington Post Co. (The)-Class B 32,464 25,194,986
==========================================================================
59,773,384
==========================================================================
RAILROADS-0.96%
Union Pacific Corp. 220,216 25,357,872
==========================================================================
SEMICONDUCTORS-0.93%
Analog Devices, Inc. 651,466 24,521,180
==========================================================================
SOFT DRINKS-1.15%
Coca-Cola Co. (The) 578,493 30,260,969
==========================================================================
SYSTEMS SOFTWARE-3.78%
Microsoft Corp. 1,680,670 49,529,345
- --------------------------------------------------------------------------
Symantec Corp.(a) 2,467,798 49,849,520
==========================================================================
99,378,865
==========================================================================
Total Domestic Common Stocks (Cost
$1,571,573,960) 1,899,327,839
==========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-19.17%
ARGENTINA-0.60%
Tenaris S.A.-ADR (Oil & Gas Equipment &
Services) 325,621 15,942,404
==========================================================================
FINLAND-1.28%
Nokia Oyj-ADR (Communications Equipment) 1,195,091 33,594,008
==========================================================================
FRANCE-3.02%
Lucent Technologies Inc.-Wts., expiring
12/10/07 (Communications Equipment)(a) 2 --
- --------------------------------------------------------------------------
Renault S.A. (Automobile Manufacturers)(b) 116,359 18,655,097
- --------------------------------------------------------------------------
Sanofi-Aventis-ADR (Pharmaceuticals) 236,020 9,504,525
- --------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas)(b) 632,604 51,352,610
==========================================================================
79,512,232
==========================================================================
GERMANY-0.08%
Henkel KGaA (Household Products)(b) 42,939 2,046,979
==========================================================================
ISRAEL-1.65%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 1,050,781 43,344,716
==========================================================================
JAPAN-3.74%
Fujitsu Ltd. (Computer Hardware) 4,853,000 35,781,762
- --------------------------------------------------------------------------
Hitachi, Ltd. (Electronic Equipment
Manufacturers)(b) 4,336,000 30,654,165
- --------------------------------------------------------------------------
Nintendo Co., Ltd. (Home Entertainment
Software)(b) 48,500 17,709,631
- --------------------------------------------------------------------------
Sega Sammy Holdings Inc. (Leisure Products) 877,200 14,210,426
==========================================================================
98,355,984
==========================================================================
</Table>
AIM V.I. Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
NETHERLANDS-2.16%
Koninklijke (Royal) Phillips Electronics N.V.
(Consumer Electronics)(b) 615,230 $ 26,081,435
- --------------------------------------------------------------------------
Unilever N.V. (Packaged Foods & Meats)(b) 992,203 30,853,992
==========================================================================
56,935,427
==========================================================================
SOUTH KOREA-1.38%
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services) 1,329,820 36,370,577
==========================================================================
SWITZERLAND-0.38%
UBS A.G. (Diversified Capital Markets)(b) 167,097 9,987,591
==========================================================================
UNITED KINGDOM-4.88%
Barclays PLC (Diversified Banks)(b) 2,147,679 29,807,549
- --------------------------------------------------------------------------
Cadbury Schweppes PLC
(Packaged Foods & Meats)(b) 4,577,174 62,284,186
- --------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals) 696,701 36,486,232
==========================================================================
128,577,967
==========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $377,817,336) 504,667,885
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
FOREIGN PREFERRED STOCKS-0.60%
GERMANY-0.60%
Henkel KGaA-Pfd. (Household Products) (Cost
$16,007,623)(b) 297,000 $ 15,686,665
==========================================================================
MONEY MARKET FUNDS-6.98%
Liquid Assets Portfolio-Institutional
Class(c) 91,907,270 91,907,270
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 91,907,270 91,907,270
==========================================================================
Total Money Market Funds (Cost
$183,814,540) 183,814,540
==========================================================================
TOTAL INVESTMENTS-98.91% (Cost
$2,149,213,459) 2,603,496,929
==========================================================================
OTHER ASSETS LESS LIABILITIES-1.09% 28,786,085
==========================================================================
NET ASSETS-100.00% $2,632,283,014
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $295,119,900, which
represented 11.21% of the Fund's Net Assets. See Note 1A.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Core Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $1,965,398,919) $2,419,682,389
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $183,814,540) 183,814,540
=============================================================
Total investments (Cost $2,149,213,459) 2,603,496,929
=============================================================
Foreign currencies, at value (Cost $363,330) 366,489
- -------------------------------------------------------------
Cash 140,340
- -------------------------------------------------------------
Receivables for:
Investments sold 29,802,286
- -------------------------------------------------------------
Fund shares sold 67,651
- -------------------------------------------------------------
Dividends 3,842,691
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 177,072
- -------------------------------------------------------------
Other assets 191
=============================================================
Total assets 2,637,893,649
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 3,413,781
- -------------------------------------------------------------
Trustee deferred compensation and
retirement plans 418,582
- -------------------------------------------------------------
Accrued administrative services fees 1,680,602
- -------------------------------------------------------------
Accrued distribution fees -- Series II 24,310
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 10,595
- -------------------------------------------------------------
Accrued operating expenses 62,765
=============================================================
Total liabilities 5,610,635
=============================================================
Net assets applicable to shares outstanding $2,632,283,014
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,534,895,943
- -------------------------------------------------------------
Undistributed net investment income 45,529,121
- -------------------------------------------------------------
Undistributed net realized gain (loss) (402,597,275)
- -------------------------------------------------------------
Unrealized appreciation 454,455,225
=============================================================
$2,632,283,014
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $2,594,190,061
_____________________________________________________________
=============================================================
Series II $ 38,092,953
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 87,371,257
_____________________________________________________________
=============================================================
Series II 1,293,867
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 29.69
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 29.44
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$899,538) $ 23,421,553
- -------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$193,056) 7,714,534
=============================================================
Total investment income 31,136,087
=============================================================
EXPENSES:
Advisory fees 8,072,890
- -------------------------------------------------------------
Administrative services fees 3,425,707
- -------------------------------------------------------------
Custodian fees 37,326
- -------------------------------------------------------------
Distribution fees -- Series II 48,926
- -------------------------------------------------------------
Transfer agent fees 16,141
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 49,146
- -------------------------------------------------------------
Other 39,102
=============================================================
Total expenses 11,689,238
=============================================================
Less: Fees waived and expense offset
arrangement (63,366)
=============================================================
Net expenses 11,625,872
=============================================================
Net investment income 19,510,215
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$304,557) 255,077,725
- -------------------------------------------------------------
Foreign currencies (531,104)
=============================================================
254,546,621
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (39,541,647)
- -------------------------------------------------------------
Foreign currencies 157,388
=============================================================
(39,384,259)
=============================================================
Net realized and unrealized gain 215,162,362
=============================================================
Net increase in net assets resulting from
operations $234,672,577
_____________________________________________________________
=============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Core Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- --------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 19,510,215 $ 30,024,489
- --------------------------------------------------------------------------
Net realized gain 254,546,621 133,384,161
- --------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) (39,384,259) 153,292,057
==========================================================================
Net increase in net assets resulting
from operations 234,672,577 316,700,707
==========================================================================
Distributions to shareholders from net
investment income:
Series I -- (14,522,140)
- --------------------------------------------------------------------------
Series ll -- (203,586)
==========================================================================
Decrease in net assets resulting
from distributions -- (14,725,726)
==========================================================================
Share transactions-net:
Series l (336,299,214) 1,153,932,649
- --------------------------------------------------------------------------
Series ll (5,071,464) 32,686,606
==========================================================================
Net increase (decrease) in net
assets resulting from share
transactions (341,370,678) 1,186,619,255
==========================================================================
Net increase (decrease) in net
assets (106,698,101) 1,488,594,236
==========================================================================
NET ASSETS:
Beginning of period 2,738,981,115 1,250,386,879
==========================================================================
End of period (including undistributed
net investment income of $45,529,121
and $26,018,906, respectively) $2,632,283,014 $2,738,981,115
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Core Equity Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Core Equity Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Core Equity Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
K. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
AIM V.I. Core Equity Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the following annual rates of the
Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.65%
- -------------------------------------------------------------------
Over $250 million 0.60%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. In addition, the Fund may also
benefit from a one time credit used to offset custodian expenses. These credits
are used to pay certain expenses incurred by the Fund. To the extent that the
annualized expense ratio does not exceed the expense limitation, AIM will retain
its ability to be reimbursed for such fee waivers or reimbursements prior to the
end of each fiscal year. AIM did not waive fees and/or reimburse expenses during
the period under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the Fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $49,605.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$252,912 for accounting and fund administrative services and reimbursed
$3,172,795 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. Core Equity Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $140,001,437 $212,185,109 $(260,279,276) $ 91,907,270 $3,770,164
- ----------------------------------------------------------------------------------------------------------------------
Premier Portfolio-
Institutional Class 140,001,437 212,185,109 (260,279,276) 91,907,270 3,751,314
======================================================================================================================
Subtotal $280,002,874 $424,370,218 $(520,558,552) $183,814,540 $7,521,478
======================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $ 18,777,590 $144,793,920 $(163,571,510) $ -- $ 193,056
======================================================================================================================
Total Investments in Affiliates $298,780,464 $569,164,138 $(684,130,062) $183,814,540 $7,714,534
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $1,211,948, which resulted in net realized gains
of $304,557, and securities purchases of $12,753,873.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of (i) custodian credits which
result from periodic overnight cash balances at the custodian and (ii) a one
time custodian fee credit used to offset custodian fees. For the six months
ended June 30, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $13,761.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$7,534 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
AIM V.I. Core Equity Fund
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, there were no securities on loan to brokers. For the six
months ended June 30, 2007, the Fund received dividends on cash collateral
investments of $193,056 for securities lending transactions during the period,
which are net of compensation to counterparties.
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of December
31, 2006 to utilizing $620,301,601 of capital loss carryforward in the fiscal
year ended December 31, 2007.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $472,694,739
- -----------------------------------------------------------------------------
December 31, 2010 157,184,466
- -----------------------------------------------------------------------------
December 31, 2011 21,217,854
=============================================================================
Total capital loss carryforward $651,097,059
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of May 1, 2006, the date of the
reorganization of AIM V.I. Core Stock Fund and AIM V.I. Premier Equity Fund,
into the Fund are realized on securities held in each Fund at such date, the
capital loss carryforward may be further limited for up to five years from the
date of the reorganization.
AIM V.I. Core Equity Fund
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $774,626,712 and
$1,024,121,310, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 484,072,071
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (34,712,827)
===========================================================================================================
Net unrealized appreciation of investment securities $ 449,359,244
___________________________________________________________________________________________________________
===========================================================================================================
Cost of investments for tax purposes is $2,154,137,685.
</Table>
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Sold:
Series I 549,741 $ 15,518,084 6,743,339 $ 168,070,113
- -----------------------------------------------------------------------------------------------------------
Series II 94,008 2,616,289 392,367 10,002,894
===========================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 506,735 13,717,305
- -----------------------------------------------------------------------------------------------------------
Series II -- -- 7,574 203,586
===========================================================================================================
Issued in connection with
acquisitions(b):
Series I -- -- 64,659,654 1,621,011,995
- -----------------------------------------------------------------------------------------------------------
Series II -- -- 1,126,308 28,069,390
===========================================================================================================
Reacquired:
Series I (12,359,639) (351,817,298) (25,886,608) (648,866,764)
- -----------------------------------------------------------------------------------------------------------
Series II (270,519) (7,687,753) (221,253) (5,589,264)
===========================================================================================================
(11,986,409) $(341,370,678) 47,328,116 $1,186,619,255
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) There are five entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 56% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
(b) As of the opening of business on May 1, 2006, the Fund acquired all the
net assets of AIM V.I. Core Stock Fund and AIM V.I. Premier Equity Fund
pursuant to the plans of reorganization approved by the Trustees of the
Fund on November 14, 2005 and by the shareholders of AIM V.I. Core Stock
Fund and AIM V.I. Premier Equity Fund, respectively, on April 4, 2006.
The acquisition was accomplished by a tax-free exchange of 65,785,962
shares of the Fund for 4,265,009 shares outstanding of AIM V.I. Core
Stock Fund and 67,047,704 shares outstanding of AIM V.I. Premier Equity
Fund as of the close of business on April 28, 2006. Each class of shares
of AIM V.I. Core Stock Fund and AIM V.I. Premier Equity Fund was
exchanged for the like class of shares of the Fund based on the relative
net asset value of AIM V.I. Core Stock Fund and AIM V.I. Premier Equity
Fund to the net asset value of the Fund as of the close of business on
April 28, 2006. AIM V.I. Core Stock Fund 's net assets as of the close
of business on April 28, 2006 of $85,632,841 including $5,569,111 of
unrealized appreciation and AIM V.I. Premier Equity Fund's net assets as
of the close of business on April 28, 2006 of $1,563,448,544 including
$199,249,945 of unrealized appreciation, were combined with the net
assets of the Fund immediately before the acquisition of $1,233,787,778.
The combined aggregate net assets of the Fund immediately following the
reorganization were $2,882,869,163.
NOTE 12--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Core Equity Fund
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 27.22 $ 23.45 $ 22.60 $ 20.94 $ 16.99 $ 20.20
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.21(a) 0.34(a) 0.24(a) 0.30(b) 0.17(a) 0.12(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 2.26 3.58 0.96 1.58 3.97 (3.27)
=================================================================================================================================
Total from investment
operations 2.47 3.92 1.20 1.88 4.14 (3.15)
=================================================================================================================================
Less dividends from net
investment income -- (0.15) (0.35) (0.22) (0.19) (0.06)
=================================================================================================================================
Net asset value, end of period $ 29.69 $ 27.22 $ 23.45 $ 22.60 $ 20.94 $ 16.99
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 9.08% 16.70% 5.31% 8.97% 24.42% (15.58)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,594,190 $2,699,252 $1,246,529 $1,487,462 $1,555,475 $1,385,050
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expense to average net
assets: 0.87%(d) 0.89% 0.89% 0.91% 0.81%(e) 0.78%
=================================================================================================================================
Ratio of net investment income
to average net assets 1.46%(d) 1.35% 1.08% 1.25%(b) 0.91% 0.67%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 32% 45% 52% 52% 31% 113%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $0.23 and 0.92%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$2,652,965,774.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.82%.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.02 $ 23.33 $22.48 $20.85 $16.94 $ 20.19
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17(a) 0.28(a) 0.18(a) 0.21(b) 0.12(a) 0.07(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 2.25 3.55 0.96 1.60 3.96 (3.26)
=================================================================================================================================
Total from investment operations 2.42 3.83 1.14 1.81 4.08 (3.19)
=================================================================================================================================
Less dividends from net investment income -- (0.14) (0.29) (0.18) (0.17) (0.06)
=================================================================================================================================
Net asset value, end of period $ 29.44 $ 27.02 $23.33 $22.48 $20.85 $ 16.94
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.96% 16.42% 5.08% 8.67% 24.15% (15.79)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $38,093 $39,729 $3,858 $4,173 $3,808 $ 1,949
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets: 1.12%(d) 1.14% 1.14% 1.16% 1.06%(e) 1.03%
=================================================================================================================================
Ratio of net investment income to average net
assets 1.21%(d) 1.10% 0.83% 1.00%(b) 0.66% 0.42%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 32% 45% 52% 52% 31% 113%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $0.14 and 0.67%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$39,465,027.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.07%.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Core Equity Fund
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Core Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,090.80 $4.51 $1,020.48 $4.36 0.87%
Series II 1,000.00 1,089.60 5.80 1,019.24 5.61 1.12
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Core Equity Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Core Equity Fund (the Fund) Committee considers each Sub-Committee's provided to the Fund by AIM under the
investment advisory agreement with A I M recommendations in making its annual Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendation to the Board whether to of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, approve the continuance of each AIM Fund's the credentials and experience of the
the Board as a whole and the disinterested investment advisory agreement and officers and employees of AIM who provide
or "independent" Trustees, voting sub-advisory agreement, if applicable these services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another year. qualifications of AIM to provide these
the Fund's investment advisory agreement services included the Board's
for another year, effective July 1, 2007. The independent Trustees, as mentioned consideration of AIM's portfolio and
In doing so, the Board determined that the above, are assisted in their annual product review process, various back
Fund's advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee structure common interests of all of the AIM Funds distribution, fund operations, shareholder
permits the Trustees to focus on the in their deliberations. The Board services and compliance. The Board
performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas generally have improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio managers review and negotiation between the calendar years to the performance of funds
for their assigned funds and other members Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
of management and review with these focus to a greater extent on certain not managed by AIM, and against the
individuals the performance, investment aspects of these arrangements in some performance of all funds in the Lipper
objective(s), policies, strategies and years than others, and that the Trustees' Variable Annuity Underlying Funds -
limitations of these funds. deliberations and conclusions in a Large-Cap Core Index. The Board also
particular year may be based in part on reviewed the methodology used by Lipper to
In addition to their meetings their deliberations and conclusions of identify the Fund's peers. The Board noted
throughout the year, the Sub-Committees these same arrangements throughout the that the Fund's performance was above the
meet at designated contract renewal year and in prior years. median performance of its peers for the
meetings each year to conduct an in-depth one and five year periods, and comparable
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF to such performance for the three year
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION period. The Board noted that the Fund's
the contract renewal process, the Trustees performance was above the performance of
receive comparative performance and fee The discussion below serves as a the Index for the one and five year
data regarding all the AIM Funds prepared summary of the Senior Officer's periods, and comparable to such Index for
by an independent company, Lipper, Inc., independent written evaluation, as well as the three year period. The Board also
under the direction and supervision of the a discussion of the material factors and considered the steps AIM has taken over
independent Senior Officer who also related conclusions that formed the basis the last several years to improve the
prepares a separate analysis of this for the Board's approval of the Fund's quality and efficiency of the services
information for the Trustees. Each advisory agreement. Unless otherwise that AIM provides to the AIM Funds. The
Sub-Committee then makes recommendations stated, information set forth below is as Board concluded that AIM continues to be
to the Investments Committee regarding the of June 27, 2007 and does not reflect any responsive to the Board's focus on fund
performance, fees and expenses of their changes that may have occurred since that performance. Although the independent
assigned funds. The Investments Committee date, including but not limited to changes written evaluation of the Fund's Senior
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, Officer (discussed below) only considered
expense limitations and/or fee waivers. Fund performance
(continued)
AIM V.I. Core Equity Fund
through the most recent calendar year, the have on the Fund's estimated total mining the reasonableness of the proposed
Board also reviewed more recent Fund expenses. The Board concluded that the management fees of the AIM Funds,
performance and this review did not change levels of fee waivers/expense limitations including the Fund. The Board noted that
their conclusions. for the Fund were fair and reasonable. they had relied upon the Senior Officer's
written evaluation instead of a
C. ADVISORY FEES AND FEE WAIVERS After taking account of the Fund's competitive bidding process. In
contractual advisory fee rate, as well as determining whether to continue the Fund's
The Board compared the Fund's contractual the comparative advisory fee information advisory agreement, the Board considered
advisory fee rate to the contractual and the fee waivers/expense limitations the Senior Officer's written evaluation.
advisory fee rates of funds in the Fund's discussed above, the Board concluded that
Lipper peer group that are not managed by the Fund's advisory fees were fair and G. COLLATERAL BENEFITS TO AIM AND ITS
AIM, at a common asset level and as of the reasonable. AFFILIATES
end of the past calendar year. The Board
noted that the Fund's advisory fee rate D. ECONOMIES OF SCALE AND BREAKPOINTS The Board considered various other
was comparable to the median advisory fee benefits received by AIM and its
rate of its peers. The Board also reviewed The Board considered the extent to which affiliates resulting from AIM's
the methodology used by Lipper and noted there are economies of scale in AIM's relationship with the Fund, including the
that the contractual fee rates shown by provision of advisory services to the fees received by AIM and its affiliates
Lipper include any applicable long-term Fund. The Board also considered whether for their provision of administrative,
contractual fee waivers. The Board also the Fund benefits from such economies of transfer agency and distribution services
compared the Fund's contractual advisory scale through contractual breakpoints in to the Fund. The Board considered the
fee rate to the contractual advisory fee the Fund's advisory fee schedule or performance of AIM and its affiliates in
rates of other clients of AIM and its through advisory fee waivers or expense providing these services and the
affiliates with investment strategies limitations. The Board noted that the organizational structure employed by AIM
comparable to those of the Fund, including Fund's contractual advisory fee schedule and its affiliates to provide these
three mutual funds advised by AIM and one includes one breakpoint and that the level services. The Board also considered that
mutual fund sub-advised by an AIM of the Fund's advisory fees, as a these services are provided to the Fund
affiliate. The Board noted that the Fund's percentage of the Fund's net assets, has pursuant to written contracts which are
rate was: (i) above the rate for one of decreased as net assets increased because reviewed and approved on an annual basis
the mutual funds and comparable to the of the breakpoint. The Board also noted by the Board. The Board concluded that AIM
rates for the other two mutual funds; and that AIM's contractual advisory fee waiver and its affiliates were providing these
(ii) comparable to the sub-advisory fee discussed above includes breakpoints based services in a satisfactory manner and in
rate for the sub-advised mutual fund. on net asset levels. Based on this accordance with the terms of their
information, the Board concluded that the contracts, and were qualified to continue
Additionally, the Board compared the Fund's advisory fees appropriately reflect to provide these services to the Fund.
Fund's contractual advisory fee rate to economies of scale at current asset
the total advisory fees paid by numerous levels. The Board also noted that the Fund The Board considered the benefits
separately managed accounts/wrap accounts shares directly in economies of scale realized by AIM as a result of portfolio
advised by an AIM affiliate. The Board through lower fees charged by third party brokerage transactions executed through
noted that the Fund's rate was generally service providers based on the combined "soft dollar" arrangements. Under these
above the rates for the separately managed size of all of the AIM Funds and arrangements, portfolio brokerage
accounts/wrap accounts. The Board affiliates. commissions paid by the Fund and/or other
considered that management of the funds advised by AIM are used to pay for
separately managed accounts/wrap accounts E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
by the AIM affiliate involves different OF AIM noted that soft dollar arrangements shift
levels of services and different the payment obligation for the research
operational and regulatory requirements The Board reviewed information from AIM and executions services from AIM to the
than AIM's management of the Fund. The concerning the costs of the advisory and funds and therefore may reduce AIM's
Board concluded that these differences are other services that AIM and its affiliates expenses. The Board also noted that
appropriately reflected in the fee provide to the Fund and the profitability research obtained through soft dollar
structure for the Fund and the separately of AIM and its affiliates in providing arrangements may be used by AIM in making
managed accounts/wrap accounts. these services. The Board also reviewed investment decisions for the Fund and may
information concerning the financial therefore benefit Fund shareholders. The
The Board noted that AIM has condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
contractually agreed to waive advisory Board also reviewed with AIM the arrangements were appropriate. The Board
fees of the Fund through December 31, 2009 methodology used to prepare the also concluded that, based on their review
and that this fee waiver includes profitability information. The Board and representations made by AIM, these
breakpoints based on net asset levels. The considered the overall profitability of arrangements were consistent with
Board considered the contractual nature of AIM, as well as the profitability of AIM regulatory requirements.
this fee waiver and noted that it remains in connection with managing the Fund. The
in effect until December 31, 2009. The Board noted that AIM continues to operate The Board considered the fact that the
Board noted that, according to information at a net profit, although increased Fund's uninvested cash and cash collateral
provided by AIM, this fee waiver reduces expenses in recent years have reduced the from any securities lending arrangements
the Fund's effective advisory fees to a profitability of AIM and its affiliates. may be invested in money market funds
level generally in line with the median The Board concluded that the Fund's advised by AIM pursuant to procedures
effective advisory fees for the Fund's advisory fees were fair and reasonable, approved by the Board. The Board noted
peers, as determined by AIM. The Board and that the level of profits realized by that AIM will receive advisory fees from
also noted that AIM has contractually AIM and its affiliates from providing these affiliated money market funds
agreed to waive fees and/or limit expenses services to the Fund was not excessive in attributable to such investments, although
of the Fund through at least April 30, light of the nature, quality and extent of AIM has contractually agreed to waive the
2009 in an amount necessary to limit total the services provided. The Board advisory fees payable by the Fund with
annual operating expenses to a specified considered whether AIM is financially respect to its investment of uninvested
percentage of average daily net assets for sound and has the resources necessary to cash in these affiliated money market
each class of the Fund. The Board perform its obligations under the Fund's funds through at least April 30, 2009. The
considered the contractual nature of this advisory agreement, and concluded that AIM Board considered the contractual nature of
fee waiver and noted that it remains in has the financial resources necessary to this fee waiver and noted that it remains
effect until at least April 30, 2009. The fulfill these obligations. in effect until at least April 30, 2009.
Board reviewed the Fund's effective The Board concluded that the Fund's
advisory fee rate, after taking account of F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
these fee waivers/expense limitations, and FUND'S SENIOR OFFICER collateral from any securities lending
considered the effect these fee arrangements in the affiliated money
waivers/expense limitations would The Board noted that, upon their market funds is in the best interests of
direction, the Senior Officer of the Fund, the Fund and its shareholders.
who is independent of AIM and AIM's
affiliates, had prepared an independent
written evaluation to assist the Board in
deter-
AIM V.I. Diversified Income Fund
Semiannual Report to Shareholders o June 30, 2007
FIXED INCOME
Intermediate-Term Taxable
Investment Grade
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group
Inc.
THIS REPORT MUST BE ACCOMPANIED OR
PRECEDED BY A CURRENTLY EFFECTIVE FUND
PROSPECTUS AND VARIABLE PRODUCT
PROSPECTUS, WHICH CONTAIN MORE COMPLETE
INFORMATION, INCLUDING SALES CHARGES AND
EXPENSES. INVESTORS SHOULD READ EACH
CAREFULLY BEFORE INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Diversified Income Fund
Fund performance The net annual Fund operating expense
======================================================================================= ratio set forth in the most recent Fund
PERFORMANCE SUMMARY prospectus as of the date of this report
for Series I and Series II shares was
FUND VS. INDEXES 0.75% and 1.00%, respectively.(1) The
total annual Fund operating expense ratio
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. set forth in the most recent Fund
If variable product issuer charges were included, returns would be lower. prospectus as of the date of this report
for Series I and Series II shares was
Series I Shares 1.33% 1.10% and 1.35%, respectively. The expense
Series II Shares 1.22 ratios presented above may vary from the
Lehman Brothers U.S. Aggregate Bond Index(1) (Broad Market Index) 0.98 expense ratios presented in other sections
Lehman Brothers U.S. Credit Index(1) (Style-Specific Index) 0.76 of this report that are based on expenses
Lipper VUF Corporate Debt BBB-Rated Funds Index(1) (Peer Group Index) 1.14 incurred during the period covered by this
Lipper BBB Rated Funds Index(1) (Former Peer Group Index) 1.35 report.
Source: (1) Lipper Inc. AIM V.I. Diversified Income Fund, a
series portfolio of AIM Variable Insurance
The unmanaged Lehman Brothers U.S. Aggregate Bond Index (the Lehman Aggregate), which Funds, is currently offered through
represents the U.S. investment-grade fixed-rate bond market (including government and insurance companies issuing variable
corporate securities, mortgage pass-through securities and asset-backed securities), is products. You cannot purchase shares of
compiled by Lehman Brothers, a global investment bank. the Fund directly. Performance figures
given represent the Fund and are not
The Lehman Brothers U.S. Credit Index consists of publicly issued U.S. corporate and intended to reflect actual variable
specified foreign debentures and secured notes that meet the specified maturity, product values. They do not reflect sales
liquidity, and quality requirements. It is compiled by Lehman Brothers. To qualify, charges, expenses and fees assessed in
bonds must be SEC-registered. connection with a variable product. Sales
charges, expenses and fees, which are
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Corporate determined by the variable product
Debt BBB-Rated Funds Index as its peer group instead of the Lipper BBB Rated Funds issuers, will vary and will lower the
Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund to be compared total return.
with the Lipper VUF Corporate Debt BBB-Rated Funds Index. The unmanaged Lipper VUF
Corporate Debt BBB-Rated Funds Index is an equally weighted representation of the Per NASD requirements, the most recent
largest variable insurance underlying funds in the Lipper Corporate Debt BBB-Rated month-end performance data at the Fund
Funds category. Lipper Inc. is an independent mutual fund performance monitor. level, excluding variable product charges,
is available on the AIM automated
The unmanaged Lipper BBB Rated Funds Index represents an average of the largest information line, 866-702-4402. As
BBB-rated bond funds tracked by Lipper Inc. mentioned above, for the most recent
month-end performance including variable
The Fund is not managed to track the performance of any particular index, including product charges, please contact your
the indexes defined here, and consequently, the performance of the Fund may deviate variable product issuer or financial
significantly from the performance of the indexes. advisor.
A direct investment cannot be made in an index. Unless otherwise indicated, index Had the advisor not waived fees and/or
results include reinvested dividends, and they do not reflect sales charges. reimbursed expenses, performance would
Performance of an index of funds reflects fund expenses; performance of a market index have been lower.
does not.
======================================================================================= (1) Total annual operating expenses less
any contractual fee waivers and/or
========================================== performance of Series I shares (for expense reimbursements by the advisor
FUND PERFORMANCE periods prior to inception of Series in effect through at least April 30,
As of 6/30/07 II shares) adjusted to reflect the Rule 2009. See current prospectus for more
SERIES I SHARES 12b-1 fees applicable to Series II shares. information.
Inception (5/5/93) 4.86% The inception date of Series I shares is
10 Years 3.73 May 5, 1993.
5 Years 5.36
1 Year 6.63 The performance of the Fund's Series I
and Series II share classes will differ
SERIES II SHARES primarily due to different class expenses.
10 Years 3.46%
5 Years 5.10 The performance data quoted represent
1 Year 6.33 past performance and cannot guarantee
========================================== comparable future results; current
performance may be lower or higher.
Series II shares' inception date is March Please contact your variable product
14, 2002. Returns since that date are issuer or financial advisor for the most
historical. All other returns are the recent month-end variable product
blended returns of the historical performance. Performance figures reflect
performance of Series II shares since Fund expenses, reinvested distributions
their inception and the restated and changes in net asset value.
historical Investment return and principal value
will fluctuate so that you may have a
gain or loss when you sell shares.
AIM V.I. Diversified Income Fund
PORTFOLIO COMPOSITION
By industry
<Table>
<Caption>
- ----------------------------------------------------------
Other Diversified Financial Services 15.1%
- ----------------------------------------------------------
Government Obligations 14.7
- ----------------------------------------------------------
Property & Casualty Insurance 8.3
- ----------------------------------------------------------
Diversified Banks 7.7
- ----------------------------------------------------------
Broadcasting & Cable TV 6.6
- ----------------------------------------------------------
Integrated Telecommunication Services 6.6
- ----------------------------------------------------------
Consumer Finance 6.4
- ----------------------------------------------------------
Regional Banks 4.4
- ----------------------------------------------------------
Wireless Telecommunication Services 3.6
- ----------------------------------------------------------
Other Industries, Each With Less Than 3% of
Total Net Assets 37.3
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities (10.7)
__________________________________________________________
==========================================================
Based on Total Investments
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
BONDS & NOTES-81.92%
AEROSPACE & DEFENSE-0.74%
Systems 2001 Asset Trust LLC (United
Kingdom)- Series 2001, Class G, Pass
Through Ctfs., (INS-MBIA Insurance Corp.)
6.66%, 09/15/13 (Acquired
02/09/05-10/27/05; Cost $343,480)(a)(b)(c) $ 312,751 $ 324,396
=======================================================================
AIRLINES-0.45%
Southwest Airlines Co., Unsec. Deb., 7.38%,
03/01/27(b) 190,000 196,399
=======================================================================
ALTERNATIVE CARRIERS-0.18%
Level 3 Financing Inc., Sr. Unsec. Gtd.
Unsub. Global Notes, 9.25%, 11/01/14(b) 80,000 81,000
=======================================================================
ALUMINUM-0.19%
Novelis Inc. (Canada), Sr. Unsec. Gtd. Global
Notes, 7.25%, 02/15/15(b) 80,000 82,400
=======================================================================
APPAREL RETAIL-0.30%
Gap Inc. (The), Unsec. Notes, 6.90%,
09/15/07(b) 130,000 130,163
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.60%
Bank of New York Institutional Capital
Trust-Series A, Trust Pfd. Capital
Securities, 7.78%, 12/01/26 (Acquired
06/12/03; Cost $298,178)(a)(b) 250,000 260,698
=======================================================================
AUTO PARTS & EQUIPMENT-0.27%
Lear Corp.-Series B, Sr. Unsec. Gtd. Global
Notes, 8.75%, 12/01/16(b) 80,000 76,800
- -----------------------------------------------------------------------
Visteon Corp., Sr. Unsec. Global Notes,
8.25%, 08/01/10(b) 40,000 40,000
=======================================================================
116,800
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
BIOTECHNOLOGY-0.95%
Amgen Inc.; Sr. Unsec. Notes,
5.85%, 06/01/17 (Acquired 05/24/07; Cost
$209,670)(a)(b) $ 210,000 $ 207,543
- -----------------------------------------------------------------------
6.38%, 06/01/37 (Acquired 05/24/07; Cost
$209,775)(a)(b) 210,000 206,482
=======================================================================
414,025
=======================================================================
BROADCASTING & CABLE TV-5.42%
Clear Channel Communications Inc., Sr. Unsec.
Sub. Global Notes, 4.63%, 01/15/08(b) 750,000 744,840
- -----------------------------------------------------------------------
Comcast Cable Communications Holdings Inc.,
Unsec. Gtd. Global Notes, 9.46%,
11/15/22(b) 440,000 562,126
- -----------------------------------------------------------------------
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12(b) 485,000 581,083
- -----------------------------------------------------------------------
Cox Enterprises, Inc., Notes, 7.88%, 09/15/10
(Acquired 05/02/07; Cost $128,774)(a)(b) 120,000 126,892
- -----------------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Notes, 7.88%, 12/15/07(b) 155,000 156,066
- -----------------------------------------------------------------------
-Series B, Sr. Unsec. Notes, 7.63%,
04/01/11(b) 55,000 54,863
- -----------------------------------------------------------------------
Hearst-Argyle Television Inc., Sr. Unsec.
Unsub. Notes, 7.00%, 11/15/07(b) 145,000 145,663
=======================================================================
2,371,533
=======================================================================
BUILDING PRODUCTS-0.26%
Masco Corp., Unsec. Notes, 4.63%, 08/15/07(b) 115,000 114,878
=======================================================================
CASINOS & GAMING-0.41%
Verizon New York Inc., Unsec. Deb., 7.00%,
12/01/33(b) 180,000 179,575
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
COMMERCIAL PRINTING-0.18%
Quebecor World Capital Corp. (Canada), Sr.
Notes, 8.75%, 03/15/16 (Acquired 01/11/07;
Cost $78,800)(a)(b) $ 80,000 $ 79,000
=======================================================================
COMPUTER & ELECTRONICS RETAIL-0.46%
RadioShack Corp., Unsec. Notes, 6.95%,
09/01/07(b) 200,000 200,480
=======================================================================
CONSUMER FINANCE-6.39%
Capital One Capital III, Jr. Gtd. Sub. Notes,
7.69%, 08/15/36(b) 260,000 269,425
- -----------------------------------------------------------------------
Ford Motor Credit Co. LLC,
Sr. Unsec. Notes,
4.95%, 01/15/08(b) 1,000,000 993,360
- -----------------------------------------------------------------------
6.63%, 06/16/08(b) 240,000 240,055
- -----------------------------------------------------------------------
8.00%, 12/15/16(b) 230,000 220,837
- -----------------------------------------------------------------------
Unsec. Floating Rate Medium Term Notes,
6.19%, 09/28/07(b)(d) 590,000 590,431
- -----------------------------------------------------------------------
General Motors Acceptance Corp., Series GM,
Sr. Unsec. Unsub. Medium Term Notes, 6.31%,
11/30/07(b) 482,000 482,554
=======================================================================
2,796,662
=======================================================================
DEPARTMENT STORES-0.23%
JCPenney Corp. Inc.-Series A, Medium Term
Notes, 6.50%, 12/15/07(b) 100,000 100,472
=======================================================================
DIVERSIFIED BANKS-7.70%
Bangkok Bank PCL (Hong Kong), Unsec. Sub.
Notes, 9.03%, 03/15/29 (Acquired
04/21/05-05/11/06; Cost $493,483)(a)(b) 400,000 480,036
- -----------------------------------------------------------------------
BankAmerica Institutional-Series A, Gtd.
Trust Pfd. Capital Securities, 8.07%,
12/31/26 (Acquired 02/15/06-09/26/06; Cost
$209,596)(a)(b) 200,000 208,878
- -----------------------------------------------------------------------
Barclays Bank PLC (United Kingdom), Floating
Rate Global Notes, 4.85%, 08/08/07
(Acquired 04/06/06; Cost $99,481)(a)(b)(d) 100,000 100,010
- -----------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Unsec. Gtd. Unsub. Notes, 5.92%
(Acquired 03/22/07; Cost $220,000)(a)(b)(e) 220,000 205,814
- -----------------------------------------------------------------------
Centura Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.85%, 06/01/27
(Acquired 05/22/03; Cost $632,715)(a)(b) 500,000 520,935
- -----------------------------------------------------------------------
First Empire Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.23%, 02/01/27(b) 260,000 271,783
- -----------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series
1, Unsec. Sub. Floating Rate Euro Notes,
5.63%(b)(d)(e) 180,000 158,415
- -----------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Gtd. Sub. Second Tier Euro Bonds,
8.38%(b)(e) 100,000 104,453
- -----------------------------------------------------------------------
National Bank of Canada (Canada), Floating
Rate Euro Deb., 5.56%, 08/29/87(b)(d) 200,000 163,665
- -----------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)- Series B, Unsec. Sub. Floating
Rate Euro Notes, 5.63%(b)(d)(e) 280,000 242,066
- -----------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
DIVERSIFIED BANKS-(CONTINUED)
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,
8.25%, 11/01/24(b) $ 140,000 $ 167,875
- -----------------------------------------------------------------------
RBD Capital S.A. (Luxembourg), Euro Notes,
6.50%, 08/11/08(b) 110,000 110,690
- -----------------------------------------------------------------------
RBS Capital Trust III, Jr. Gtd. Sub. Trust
Pfd. Global Notes, 5.51%,(b)(e) 120,000 115,430
- -----------------------------------------------------------------------
Sumitomo Mitsui Banking Corp. (Japan), Sub.
Second Tier Euro Notes, 8.15%(b)(e) 280,000 287,515
- -----------------------------------------------------------------------
VTB Capital S.A. (Russia), Sr. Floating Rate
Notes, 6.11%, 09/21/07 (Acquired 12/14/05;
Cost $230,000)(a)(b)(d) 230,000 230,154
=======================================================================
3,367,719
=======================================================================
DIVERSIFIED CHEMICALS-0.46%
Hercules Inc., Unsec. Deb., 6.60%,
08/01/27(b) 200,000 200,090
=======================================================================
DIVERSIFIED METALS & MINING-0.22%
Reynolds Metals Co., Medium Term Notes,
7.00%, 05/15/09(b) 94,000 95,528
=======================================================================
ELECTRIC UTILITIES-1.31%
Duke Energy Indiana, Inc., Unsec. Deb.,
7.85%, 10/15/07(b) 65,000 65,406
- -----------------------------------------------------------------------
PacifiCorp, First Mortgage Bonds, 5.75%,
04/01/37(b) 400,000 377,068
- -----------------------------------------------------------------------
Tenaska Alabama Partners L.P., Sr. Sec.
Notes, 7.00%, 06/30/21 (Acquired
05/03/07-05/21/07; Cost $132,154)(a)(b) 128,513 132,047
=======================================================================
574,521
=======================================================================
FOOD RETAIL-0.20%
Safeway Inc., Sr. Unsec. Notes, 7.00%,
09/15/07(b) 88,000 88,210
=======================================================================
GENERAL MERCHANDISE STORES-0.66%
Pantry, Inc. (The), Sr. Gtd. Sub. Global
Notes, 7.75%, 02/15/14(b) 80,000 78,400
- -----------------------------------------------------------------------
Target Corp., Sr. Unsec. Notes, 5.38%,
05/01/17(b) 220,000 211,985
=======================================================================
290,385
=======================================================================
HEALTH CARE DISTRIBUTORS-0.23%
McKesson Corp., Unsec. Unsub. Notes, 6.40%,
03/01/08(b) 100,000 100,498
=======================================================================
HEALTH CARE SERVICES-0.50%
Orlando Lutheran Towers Inc., Bonds, 7.75%,
07/01/11(b) 95,000 94,391
- -----------------------------------------------------------------------
8.00%, 07/01/17 125,000 125,469
=======================================================================
219,860
=======================================================================
HOMEBUILDING-0.95%
D.R. Horton, Inc.,
Sr. Unsec. Gtd. Notes, 8.00%, 02/01/09(b) 200,000 206,296
- -----------------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 08/15/11(b) 200,000 207,588
=======================================================================
413,884
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
INTEGRATED OIL & GAS-1.98%
ConocoPhillips, Unsec. Deb., 7.13%,
03/15/28(b) $ 300,000 $ 308,349
- -----------------------------------------------------------------------
Husky Oil Ltd. (Canada), Unsec. Sub. Yankee
Bonds, 8.90%, 08/15/28(b) 540,000 558,225
=======================================================================
866,574
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-6.57%
CenturyTel, Inc.-Series F, Sr. Unsec. Notes,
6.30%, 01/15/08(b) 190,000 190,712
- -----------------------------------------------------------------------
Embarq Corp., Sr. Unsec. Notes,
7.08%, 06/01/16(b) 150,000 151,409
- -----------------------------------------------------------------------
8.00%, 06/01/36(b) 380,000 387,114
- -----------------------------------------------------------------------
Pacific Bell, Unsec. Deb., 7.38%, 07/15/43(b) 380,000 381,113
- -----------------------------------------------------------------------
Southwestern Bell Telephone L.P., Unsec.
Unsub. Deb., 7.20%, 10/15/26(b) 180,000 185,843
- -----------------------------------------------------------------------
Telecom Italia Capital S.A. (Italy), Unsec.
Gtd. Unsub. Global Notes, 4.00%,
11/15/08(b) 230,000 225,639
- -----------------------------------------------------------------------
Verizon California Inc.-Series G, Unsec.
Deb., 5.50%, 01/15/09(b) 80,000 80,018
- -----------------------------------------------------------------------
Verizon Communications Inc., Sr. Unsec.
Notes, 6.25%, 04/01/37(b) 230,000 223,861
- -----------------------------------------------------------------------
Verizon Florida Inc.-Series F, Sr. Unsec.
Deb., 6.13%, 01/15/13(b) 150,000 150,837
- -----------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Unsec. Global
Deb., 4.63%, 03/15/13(b) 958,000 898,949
=======================================================================
2,875,495
=======================================================================
INTERNET RETAIL-0.91%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13(b) 400,000 400,252
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.55%
Dryden Investor Trust, Bonds, 7.16%, 07/23/08
(Acquired 04/10/06; Cost $23,671)(a)(b) 23,253 23,662
- -----------------------------------------------------------------------
Jefferies Group, Inc.,
Sr. Unsec. Notes, 6.45%, 06/08/27(b) 400,000 395,788
- -----------------------------------------------------------------------
-Series B, Sr. Unsec. Notes, 7.50%,
08/15/07(b) 50,000 50,098
- -----------------------------------------------------------------------
Lazard Group, Sr. Unsec. Notes, 6.85%,
06/15/17 (Acquired 06/18/07; Cost
$209,374)(a)(b) 210,000 210,344
=======================================================================
679,892
=======================================================================
LIFE & HEALTH INSURANCE-1.50%
Americo Life Inc., Notes, 7.88%, 05/01/13
(Acquired 04/25/03; Cost $93,875)(a)(b) 95,000 96,709
- -----------------------------------------------------------------------
Prudential Holdings, LLC-Series B, Bonds,
(INS-Financial Security Assurance Inc.)
7.25%, 12/18/23 (Acquired
01/22/04-01/29/04; Cost $588,417)(a)(b)(c) 500,000 559,715
=======================================================================
656,424
=======================================================================
METAL & GLASS CONTAINERS-0.33%
Owens-Brockway Glass Container Inc., Sr.
Unsec. Gtd. Global Notes, 8.25%,
05/15/13(b) 140,000 145,250
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
MOVIES & ENTERTAINMENT-1.47%
News America Holdings Inc., Sr. Unsec. Gtd.
Deb., 7.75%, 12/01/45(b) $ 380,000 $ 416,412
- -----------------------------------------------------------------------
Time Warner Inc., Sr. Unsec. Gtd. Deb.,
6.50%, 11/15/36(b) 240,000 229,111
=======================================================================
645,523
=======================================================================
MULTI-UTILITIES-1.09%
Dominion Capital Trust I, Jr. Unsec. Gtd.
Trust Pfd. Capital Securities, 7.83%,
12/01/27(b) 400,000 417,096
- -----------------------------------------------------------------------
Dominion Resources, Inc., Notes, 4.13%,
02/15/08(b) 61,000 60,489
=======================================================================
477,585
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-0.09%
PHI Inc., Sr. Unsec. Gtd. Global Notes,
7.13%, 04/15/13(b) 40,000 38,600
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.50%
Canadian Natural Resources Ltd. (Canada),
Unsec. Global Notes, 6.25%, 03/15/38(b) 230,000 218,252
- -----------------------------------------------------------------------
Pemex Project Funding Master Trust (Mexico),
Unsec. Gtd. Unsub. Global Notes, 8.63%,
02/01/22(b) 360,000 440,082
=======================================================================
658,334
=======================================================================
OIL & GAS REFINING & MARKETING-0.54%
Premcor Refining Group Inc. (The), Sr. Unsec.
Global Notes, 9.50%, 02/01/13(b) 220,000 234,744
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-10.12%
BankAmerica Capital II-Series 2, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
8.00%, 12/15/26(b) 130,000 135,677
- -----------------------------------------------------------------------
BankAmerica Capital III, Gtd. Floating Rate
Trust Pfd. Capital Securities, 5.93%,
01/15/27(b)(d) 410,000 399,513
- -----------------------------------------------------------------------
General Electric Capital Corp., Unsec.
Floating Rate Putable Deb., 5.34%,
09/01/10(b)(d) 50,000 49,449
- -----------------------------------------------------------------------
International Lease Finance Corp.-Series R,
Medium Term Notes, 5.65%, 06/01/14(b) 150,000 148,818
- -----------------------------------------------------------------------
Mantis Reef Ltd. (Cayman Islands), Notes,
4.69%, 11/14/08 (Acquired 02/23/07; Cost
$316,109)(a)(b) 320,000 315,117
- -----------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Sub.
Bonds, 9.87% (Acquired 06/16/04-03/03/06;
Cost $787,636)(a)(b)(e) 700,000 728,931
- -----------------------------------------------------------------------
NB Capital Trust IV, Gtd. Sub. Trust Pfd.
Capital Securities, 8.25%, 04/15/27(b) 280,000 291,928
- -----------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2,
Class A1, Global Bonds, (INS-MBIA Insurance
Corp.) 9.69%, 08/15/09(b)(c) 301,500 314,076
- -----------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands), Sr. Notes, 9.25%, 03/15/30
(Acquired 01/10/03-09/22/04; Cost
$525,327)(a)(b) 453,889 498,901
- -----------------------------------------------------------------------
Class A-1a, Sr. Floating Rate Notes, 5.69%,
01/25/36 (Acquired 03/21/05; Cost
$452,129)(a)(b)(d)(f) 452,129 451,168
- -----------------------------------------------------------------------
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Residential Capital LLC, Sr. Unsec. Gtd.
Floating Rate Notes, 5.86%, 06/09/08(b)(d) $ 395,000 $ 391,188
- -----------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate
Pass Through Ctfs., 6.32% (Acquired
12/07/04-04/03/06; Cost
$130,332)(a)(b)(d)(e) 130,000 130,418
- -----------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 6.30%
(Acquired 11/10/06; Cost
$220,260)(a)(b)(d)(e) 220,000 216,755
- -----------------------------------------------------------------------
UFJ Finance Aruba AEC (Japan), Gtd. Sub.
Second Tier Euro Bonds, 8.75%,
11/13/49(b)(e) 250,000 260,048
- -----------------------------------------------------------------------
Windsor Financing LLC, Sr. Gtd. Notes, 5.88%,
07/15/17 (Acquired 02/07/06; Cost
$97,725)(a)(b) 97,725 95,319
=======================================================================
4,427,306
=======================================================================
PACKAGED FOODS & MEATS-0.62%
Heinz (H.J.) Co., Notes, 6.43%, 12/01/08
(Acquired 05/30/07; Cost $273,108)(a)(b) 270,000 273,270
=======================================================================
PAPER PACKAGING-0.48%
Sealed Air Corp., Sr. Unsec. Notes, 5.38%,
04/15/08 (Acquired 05/18/07; Cost
$209,572)(a)(b) 210,000 209,830
=======================================================================
PAPER PRODUCTS-0.18%
International Paper Co., Notes, 5.13%,
11/15/12(b) 80,000 76,872
=======================================================================
PROPERTY & CASUALTY INSURANCE-8.31%
Allstate Corp. (The) Jr. Sub. Global Deb.,
6.13%, 05/15/37(b) 150,000 144,864
- -----------------------------------------------------------------------
6.50%, 05/15/57(b) 100,000 95,314
- -----------------------------------------------------------------------
First American Capital Trust I, Gtd. Trust
Pfd. Capital Securities, 8.50%, 04/15/12(b) 790,000 860,262
- -----------------------------------------------------------------------
North Front Pass-Through Trust, Pass Through
Ctfs. Bonds, 5.81%, 12/15/24 (Acquired
12/08/04; Cost $351,994)(a)(b) 350,000 346,402
- -----------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec.
Sub. Deb., 8.00%, 09/15/34 (Acquired
04/29/05-06/09/05; Cost $352,536)(a)(b) 330,000 317,721
- -----------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56%, (Acquired
06/15/06; Cost $870,000)(a)(b)(e) 870,000 897,814
- -----------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia), Gtd.
Sub. Bonds, 6.80% (Acquired
04/25/07-06/29/07; Cost $393,124)(a)(b)(e) 400,000 389,224
- -----------------------------------------------------------------------
Safeco Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.07%, 07/15/37(b) 420,000 437,216
- -----------------------------------------------------------------------
Travelers Cos. Inc. (The), Sr. Unsec. Medium
Term Notes, 6.25%, 06/15/37(b) 150,000 146,563
=======================================================================
3,635,380
=======================================================================
PUBLISHING-0.38%
PRIMEDIA Inc., Sr. Sec. Gtd. Global Notes,
8.88%, 05/15/11(b) 160,000 164,733
=======================================================================
RAILROADS-0.17%
Canadian Pacific Railway Co. (Canada), Unsec.
Global Bonds, 5.95%, 05/15/37(b) 80,000 76,120
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.65%
Realogy Corp.,
Sr. Floating Rate Notes, 7.06%, 10/20/09
(Acquired 10/13/06; Cost $45,000)(a)(b)(d) $ 45,000 $ 44,712
- -----------------------------------------------------------------------
Sr. Notes, 7.50%, 10/15/16 (Acquired
10/13/06-10/16/06; Cost $245,686)(a)(b) 245,000 240,058
=======================================================================
284,770
=======================================================================
REGIONAL BANKS-4.39%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd.
Floating Rate Notes, 6.91%, 03/01/34(b)(d) 600,000 613,194
- -----------------------------------------------------------------------
Greater Bay Bancorp-Series B, Sr. Notes,
5.25%, 03/31/08(b) 85,000 84,543
- -----------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate Trust
Pfd. Capital Securities, 5.93%,
06/01/28(b)(d) 100,000 96,657
- -----------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes,
6.05%, 06/01/17(b) 480,000 469,234
- -----------------------------------------------------------------------
TCF National Bank, Sub. Notes, 5.00%,
06/15/14(b) 175,000 172,382
- -----------------------------------------------------------------------
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12(b) 450,000 484,528
=======================================================================
1,920,538
=======================================================================
REINSURANCE-1.92%
Reinsurance Group of America, Inc., Jr.
Unsec. Sub. Deb., 6.75%, 12/15/65(b) 380,000 370,375
- -----------------------------------------------------------------------
Stingray Pass-Through Trust, Pass Through
Ctfs., 5.90%, 01/12/15 (Acquired
01/07/05-11/03/05; Cost $493,840)(a)(b) 500,000 470,990
=======================================================================
841,365
=======================================================================
SPECIALIZED REIT'S-1.16%
Health Care Property Investors, Inc.
Sr. Sec. Floating Rate Medium Term Notes,
5.81%, 09/15/08(b)(d) 165,000 165,076
- -----------------------------------------------------------------------
Sr. Unsec. Notes, 5.63%, 05/01/17(b) 180,000 171,105
- -----------------------------------------------------------------------
Health Care REIT, Inc., Sr. Notes, 5.88%,
05/15/15(b) 175,000 170,667
=======================================================================
506,848
=======================================================================
SPECIALTY CHEMICALS-0.45%
Valspar Corp. (The), Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12(b) 100,000 98,906
- -----------------------------------------------------------------------
6.05%, 05/01/17(b) 100,000 98,340
=======================================================================
197,246
=======================================================================
STEEL-0.51%
United States Steel Corp., Sr. Unsec. Unsub.
Notes, 6.05%, 06/01/17(b) 150,000 146,531
- -----------------------------------------------------------------------
6.65%, 06/01/37(b) 80,000 77,564
=======================================================================
224,095
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS-1.28%
United Rentals North America, Inc., Sr.
Unsec. Gtd. Global Notes, 6.50%,
02/15/12(b) $ 80,000 $ 78,700
- -----------------------------------------------------------------------
Western Power Distribution Holdings Ltd.
(United Kingdom), Unsec. Unsub. Notes,
6.88%, 12/15/07 (Acquired 01/12/07; Cost
$80,832)(a)(b) 80,000 80,235
- -----------------------------------------------------------------------
7.38%, 12/15/28 (Acquired
01/25/05-03/03/05; Cost $428,237)(a)(b) 375,000 399,341
=======================================================================
558,276
=======================================================================
TRUCKING-1.53%
Roadway Corp., Sr. Sec. Gtd. Global Notes,
8.25%, 12/01/08(b) 650,000 670,839
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.98%
Alamosa Delaware Inc., Sr. Gtd. Global Notes,
8.50%, 01/31/12(b) 190,000 200,496
- -----------------------------------------------------------------------
Nextel Communications, Inc.-Series D, Sr.
Gtd. Notes, 7.38%, 08/01/15(b) 390,000 391,884
- -----------------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec. Gtd. Global
Notes, 6.13%, 11/15/08(b) 230,000 231,513
- -----------------------------------------------------------------------
Sprint Nextel Corp., Deb., 9.25%, 04/15/22(b) 235,000 270,257
- -----------------------------------------------------------------------
Vodafone Group PLC (United Kingdom),
Unsec. Global Bonds, 6.15%, 02/27/37(b) 90,000 84,082
- -----------------------------------------------------------------------
Unsec. Global Notes, 5.63%, 02/27/17(b) 130,000 124,657
=======================================================================
1,302,889
=======================================================================
Total Bonds & Notes (Cost $36,563,768) 35,848,226
=======================================================================
U.S. MORTGAGE-BACKED SECURITIES-15.80%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-1.19%
Pass Through Ctfs.,
8.50%, 03/01/10(b) 141 142
- -----------------------------------------------------------------------
6.50%, 05/01/16 to 08/01/32(b) 25,792 26,311
- -----------------------------------------------------------------------
6.00%, 05/01/17 to 11/01/33(b) 258,258 257,653
- -----------------------------------------------------------------------
5.50%, 09/01/17(b) 91,941 90,899
- -----------------------------------------------------------------------
7.00%, 08/01/21(b) 140,038 145,133
=======================================================================
520,138
=======================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-14.06%
Pass Through Ctfs.,
7.00%, 02/01/16 to 09/01/32(b) 45,880 47,488
- -----------------------------------------------------------------------
6.50%, 05/01/16 to 10/01/35(b) 68,675 70,038
- -----------------------------------------------------------------------
5.00%, 11/01/18(b) 87,662 85,055
- -----------------------------------------------------------------------
7.50%, 04/01/29 to 10/01/29(b) 103,537 108,389
- -----------------------------------------------------------------------
6.50%, 05/01/31(b) 93,804(g) 95,643
- -----------------------------------------------------------------------
8.00%, 04/01/32(b) 6,248 6,587
- -----------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
FEDERAL NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)
Pass Through Ctfs., TBA,
5.50%, 07/01/22(b)(h) $ 877,000 $ 863,982
- -----------------------------------------------------------------------
6.00%, 07/01/22(b)(h) 2,191,000 2,200,929
- -----------------------------------------------------------------------
6.50%, 07/01/37(b)(h) 2,649,000 2,674,249
=======================================================================
6,152,360
=======================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-0.55%
Pass Through Ctfs.,
7.50%, 06/15/23(b) 17,991 18,834
- -----------------------------------------------------------------------
8.50%, 11/15/24(b) 16,027 17,305
- -----------------------------------------------------------------------
7.00%, 07/15/31 to 08/15/31(b) 4,548 4,740
- -----------------------------------------------------------------------
6.50%, 11/15/31 to 09/15/32(b) 37,510 38,295
- -----------------------------------------------------------------------
6.00%, 12/15/31 to 11/15/32(b) 55,214 55,104
- -----------------------------------------------------------------------
5.50%, 02/15/34(b) 110,723(g) 107,662
=======================================================================
241,940
=======================================================================
Total U.S. Mortgage-Backed Securities
(Cost $6,962,435) 6,914,438
=======================================================================
ASSET-BACKED SECURITIES-5.84%
COLLATERALIZED MORTGAGE OBLIGATIONS-0.86%
Federal Home Loan Bank (FHLB)-Series TQ-2015,
Class A, Pass Through Ctfs., 5.07%,
10/20/15(b) 116,985 114,401
- -----------------------------------------------------------------------
US Bank N.A., Sr. Medium Term Notes, 5.92%,
05/25/12(b) 260,000 261,229
=======================================================================
375,630
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.98%
Citicorp Lease Pass-Through Trust-Series
1999-1, Class A2, Pass Through Ctfs.,
8.04%, 12/15/19 (Acquired
07/14/00-07/27/05; Cost $781,505)(a)(b) 675,000 771,455
- -----------------------------------------------------------------------
Patrons' Legacy 2003-III-LILACS-III-Series A,
Ctfs., 5.65%, 01/17/17 (Acquired 11/04/04;
Cost $487,214)(a)(f) 475,141 458,373
- -----------------------------------------------------------------------
Patrons' Legacy, 2004-1-LILACS-1-Series A,
Ctfs., 6.67%, 03/04/19 (Acquired 04/30/04;
Cost $972,222)(a)(f) 972,222 948,087
=======================================================================
2,177,915
=======================================================================
Total Asset-Backed Securities (Cost
$2,603,910) 2,553,545
=======================================================================
MUNICIPAL OBLIGATIONS-2.58%
Blount (County of), Tennessee Health &
Educational Facilities Board (Asbury Inc.)
Series 2007 B, Refunding Taxable RB, 7.50%,
04/01/09(b) 70,000 69,897
- -----------------------------------------------------------------------
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO,
(INS-Ambac Assurance Corp.) 4.96%,
04/01/20(b)(c) 130,000 120,623
- -----------------------------------------------------------------------
Florida (State of) Development Finance Corp.
(Palm Bay Academy Inc.); Series 2006 B,
Taxable RB, 7.50%, 05/15/17(b) 65,000 62,672
- -----------------------------------------------------------------------
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
Indianapolis (City of), Indiana Local Public
Improvement Bond Bank;
Series 2005 A, Taxable RB,
5.22%, 07/15/20(b) $ 125,000 $ 118,761
- -----------------------------------------------------------------------
5.28%, 01/15/22(b) 100,000 94,658
- -----------------------------------------------------------------------
Industry (City of), California Urban
Development Agency (Project 3); Series
2003, Taxable Allocation RB, (INS-MBIA
Insurance Corp.) 6.10%, 05/01/24(b)(c) 650,000 663,566
=======================================================================
Total Municipal Obligations (Cost
$1,154,565) 1,130,177
=======================================================================
U.S. GOVERNMENT AGENCY SECURITIES-2.16%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-0.67%
Unsec. Floating Rate Global Notes, 3.92%,
02/17/09(b)(d) 300,000 292,866
=======================================================================
STUDENT LOAN MARKETING ASSOCIATION-1.49%
SLMA Corp., Medium Term Notes, 5.05%,
11/14/14(b) 400,000 333,292
- -----------------------------------------------------------------------
SLMA Corp. Series A, Medium Term Notes,
3.63%, 03/17/08(b) 130,000 127,990
- -----------------------------------------------------------------------
SLMA Med Term Note, Unsec. Unsub. Floating
Rate Medium Term Notes, 5.27%,
03/15/10(b)(d) 200,000 192,366
=======================================================================
653,648
=======================================================================
Total U.S. Government Agency Securities
(Cost $972,875) 946,514
=======================================================================
<Caption>
SHARES
PREFERRED STOCKS-1.25%
LIFE & HEALTH INSURANCE-0.42%
Aegon N.V., 6.38% Pfd. (Netherlands) 7,500 182,700
=======================================================================
RETAIL REIT'S-0.16%
Mills Corp. (The)-Series B, 9.00% Pfd.(b) 2,590 70,335
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.67%
Telephone & Data Systems, Inc.-Series A,
7.60% Pfd. 12,000 294,000
=======================================================================
Total Preferred Stocks (Cost $564,930) 547,035
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
SHARES VALUE
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
COMMERCIAL PAPER-0.91%
BROADCASTING & CABLE TV-0.91%
Cox Communications Inc., Floating Rate
Commercial Paper, 5.62%, 08/15/07, 5.61%,
08/15/07 (Acquired 08/15/07; Cost
$400,000)(a)(b)(d)(i) $ 400,000 $ 400,028
=======================================================================
<Caption>
SHARES
COMMON STOCKS & OTHER EQUITY INTERESTS-0.23%
BROADCASTING & CABLE TV-0.23%
Adelphia Business Solutions(j) 900 28,125
- -----------------------------------------------------------------------
Adelphia Recovery Trust-Series ACC-1(j) 87,412 7,430
- -----------------------------------------------------------------------
Time Warner Cable, Inc.-Class A(j) 1,627 63,730
=======================================================================
99,285
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.00%
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
11/15/00; Cost $0)(a)(f)(k)(l) 275 0
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $91,575) 99,285
=======================================================================
MONEY MARKET FUNDS-1.93%
Liquid Assets Portfolio-Institutional
Class(m) 423,306 423,306
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(m) 423,306 423,306
=======================================================================
Total Money Market Funds (Cost $846,612) 846,612
=======================================================================
TOTAL INVESTMENTS-112.62% (Cost $50,160,670) 49,285,860
=======================================================================
OTHER ASSETS LESS LIABILITIES-(12.62)% (5,524,651)
=======================================================================
NET ASSETS-100.00% $43,761,209
_______________________________________________________________________
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
LILACS - Life Insurance and Life Annuities Based Certificates
Pfd. - Preferred
RB - Revenue Bonds
REGS - Regulation S
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $12,657,464,
which represented 28.92% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(b) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate value of these securities at June 30, 2007
was $46,331,334, which represented 105.87% of the Fund's Net Assets. See
Note 1A.
(c) Principal and/or interest payments are secured by the bond insurance company
listed.
(d) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on June 30, 2007.
(e) Perpetual bond with no specified maturity date.
(f) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at June 30, 2007 was
$1,857,628, which represented 4.24% of the Fund's Net Assets.
(g) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 1M and Note 7.
(h) Security purchased on forward commitment basis. This security is subject to
dollar roll transactions. See Note 1J.
(i) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(j) Non-income producing security acquired as part of the Adelphia
Communications bankruptcy reorganization.
(k) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(l) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June 30,
2007 represented 0.00% of the Fund's Net Assets. See Note 1A.
(m) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Diversified Income Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (cost $49,314,058) $ 48,439,248
- -------------------------------------------------------------
Investments in affiliated money market funds
(cost $846,612) 846,612
=============================================================
Total investments (cost $50,160,670) 49,285,860
=============================================================
Receivables for:
Investments sold 3,125,724
- -------------------------------------------------------------
Variation margin 65,111
- -------------------------------------------------------------
Fund shares sold 883
- -------------------------------------------------------------
Dividends and Interest 594,370
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 45,489
- -------------------------------------------------------------
Other assets 1,012
=============================================================
Total assets 53,118,449
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 8,546,226
- -------------------------------------------------------------
Fund shares reacquired 120,288
- -------------------------------------------------------------
Amount due custodian 582,115
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 52,133
- -------------------------------------------------------------
Accrued administrative services fees 23,479
- -------------------------------------------------------------
Accrued distribution fees -- Series II 416
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,529
- -------------------------------------------------------------
Accrued transfer agent fees 667
- -------------------------------------------------------------
Accrued operating expenses 28,387
=============================================================
Total liabilities 9,357,240
=============================================================
Net assets applicable to shares outstanding $ 43,761,209
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 61,336,007
- -------------------------------------------------------------
Undistributed net investment income 4,161,346
- -------------------------------------------------------------
Undistributed net realized gain (loss) (20,904,345)
- -------------------------------------------------------------
Unrealized appreciation (depreciation) (831,799)
=============================================================
$ 43,761,209
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $ 43,102,977
_____________________________________________________________
=============================================================
Series II $ 658,232
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 5,137,235
_____________________________________________________________
=============================================================
Series II 79,196
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 8.39
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 8.31
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $1,444,110
- ------------------------------------------------------------
Dividends 24,216
- ------------------------------------------------------------
Dividends from affiliated money market funds 9,910
============================================================
Total investment income 1,478,236
============================================================
EXPENSES:
Advisory fees 135,385
- ------------------------------------------------------------
Administrative services fees 64,939
- ------------------------------------------------------------
Custodian fees 8,399
- ------------------------------------------------------------
Distribution fees -- Series II 864
- ------------------------------------------------------------
Transfer agent fees 3,771
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 9,210
- ------------------------------------------------------------
Professional services fees 24,868
- ------------------------------------------------------------
Other 9,615
============================================================
Total expenses 257,051
============================================================
Less: Fees waived and expense offset arrangement (87,018)
- ------------------------------------------------------------
Net expenses 170,033
============================================================
Net investment income 1,308,203
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (173,713)
- ------------------------------------------------------------
Foreign currencies 2,502
- ------------------------------------------------------------
Foreign currency contracts 9,143
- ------------------------------------------------------------
Futures contracts (447,515)
- ------------------------------------------------------------
Credit default swap agreements 2,762
============================================================
(606,821)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (395,840)
- ------------------------------------------------------------
Foreign currencies 33
- ------------------------------------------------------------
Foreign currency contracts (3,937)
- ------------------------------------------------------------
Futures contracts 334,512
- ------------------------------------------------------------
Credit default swap agreements 1,771
============================================================
(63,461)
============================================================
Net realized and unrealized gain (loss) (670,282)
============================================================
Net increase in net assets resulting from
operations $ 637,921
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Diversified Income Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,308,203 $ 2,813,644
- -----------------------------------------------------------------------------------------
Net realized gain (loss) (606,821) (153,102)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (63,461) (511,132)
=========================================================================================
Net increase in net assets resulting from operations 637,921 2,149,410
=========================================================================================
Distributions to shareholders from net investment income:
Series I -- (2,878,667)
- -----------------------------------------------------------------------------------------
Series II -- (41,567)
=========================================================================================
Decrease in net assets resulting from distributions -- (2,920,234)
=========================================================================================
Share transactions-net:
Series I (4,268,809) (7,560,790)
- -----------------------------------------------------------------------------------------
Series II (63,876) (179,546)
=========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (4,332,685) (7,740,336)
=========================================================================================
Net increase (decrease) in net assets (3,694,764) (8,511,160)
=========================================================================================
NET ASSETS:
Beginning of period 47,455,973 55,967,133
=========================================================================================
End of period (including undistributed net investment
income of $4,161,346 and $2,853,143, respectively) $43,761,209 $47,455,973
_________________________________________________________________________________________
=========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Diversified Income Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Diversified Income Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is to achieve a high level of current
income.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote provided by an
independent pricing service. Evaluated quotes provided by the pricing
service are valued based on a model which may include end of day net
present values, spreads, ratings, industry, and company performance.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
AIM V.I. Diversified Income Fund
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. LOWER-RATED SECURITIES -- The Fund may invest in lower-quality debt
securities, i.e., "junk bonds". Investments in lower-rated securities or
unrated securities of comparable quality tend to be more sensitive to
economic conditions than higher rated securities. Junk bonds involve a
greater risk of default by the issuer because such securities are generally
unsecured and are often subordinated to other creditors' claims.
J. DOLLAR ROLL TRANSACTIONS -- 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 purchase a substantially
similar security (same type, coupon and maturity) from the institution at
an agreed upon price and future date. The mortgage-backed securities to be
purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories. Based on the typical structure of dollar roll
transactions by the Fund, the dollar roll transactions are accounted for as
financing transactions in which the Fund receives compensation as either a
"fee" or a "drop". "Fee" income which is agreed upon amongst the parties at
the commencement of the dollar roll and the "drop" which is the difference
between the selling price and the repurchase price of the mortgage-backed
securities are amortized to income. During the period between the sale and
purchase settlement dates, the Fund will not be entitled to receive
interest and principal payments on securities purchased and not yet
settled. Proceeds of the sale may 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 are considered
borrowings under the 1940 Act. At the time the Fund enters into the dollar
roll, it will segregate liquid assets having a dollar value equal to the
purchase price.
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 purchase under the
agreement. In the event that 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 purchase the securities. The return earned
by the Fund with the proceeds of the dollar roll transaction may not exceed
the return on the securities sold.
K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are
AIM V.I. Diversified Income Fund
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments (net of estimated
foreign tax withholding) are included with the net realized and unrealized
gain or loss from investments in the Statement of Operations. Reported net
realized foreign currency gains or losses arise from (i) sales of foreign
currencies, (ii) currency gains or losses realized between the trade and
settlement dates on securities transactions, and (iii) the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign currency gains and losses
arise from changes in the fair values of assets and liabilities, other than
investments in securities at fiscal period end, resulting from changes in
exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
L. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
M. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
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 received or
made 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. If the Fund were unable
to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to
maintain the margin deposits on the futures contracts. Risks may exceed
amounts recognized in the Statement of Assets and Liabilities.
N. COVERED CALL OPTIONS WRITTEN -- The Fund may write call options, including
options on futures. 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.
Written call options are recorded as a liability in the Statement of Assets
and Liabilities. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. 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. Realized gains and losses on these contracts are included in the
Statement of Operations. A risk in writing a call option is that the Fund
gives up the opportunity for profit if the market price of the security
increases and the option is exercised.
An option on a futures contract gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying futures
contract on the exercise date. The value of a futures contract fluctuates
with changes in the market values of the securities underlying the futures
contract. In writing futures contract options, the principal risk is that
the Fund could bear a loss on the options that would be only partially
offset (or not offset at all) by the increased value or reduced cost of
underlying portfolio securities. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
O. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. 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, securities index, 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. Realized and unrealized gains and losses on these contracts are
included in the Statement of Operations. A risk in buying an option is that
the Fund pays a premium whether or not the option is exercised. In
addition, there can be no assurance that a liquid secondary market will
exist for any option purchased.
P. SWAP AGREEMENTS -- The Fund may enter into various swap transactions,
including interest rate, index, currency exchange rate and credit default
swap contracts ("CDS") for investment purposes or to manage interest rate,
currency or credit risk.
Interest rate, index, and currency exchange rate swap agreements are
two-party contracts entered into primarily to exchange the returns (or
differentials in rates of returns) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged
or "swapped" between the parties are calculated with respect to a notional
amount, i.e., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index.
A CDS is an agreement between two parties ("Counterparties") to exchange
the credit risk of an issuer. A buyer of a CDS is said to buy protection by
paying a fixed payment over the life of the agreement to the seller of the
CDS. If a defined credit event occurs (such as payment default or
bankruptcy),
AIM V.I. Diversified Income Fund
the Fund as a protection buyer would cease paying its fixed payment, the
Fund would deliver the corresponding bonds, or other similar bonds issued
by the same reference entity to the seller, and the seller would pay the
full notional value, or the "par value", of the referenced obligation to
the Fund. A seller of a CDS is said to sell protection and thus would
receive the fixed payment stream. If a credit event occurs, the Fund as a
protection seller would cease to receive the fixed payment stream, the Fund
would pay the buyer the full notional value of the referenced obligation,
and the Fund would receive the corresponding bonds or similar bonds issued
by the same reference entity. If no credit event occurs, the Fund receives
the fixed payment over the life of the agreement. As the seller, the Fund
would effectively add leverage to its portfolio because, in addition to its
total net assets, the Fund would be subject to investment exposure on the
notional amount of the CDS. Because the CDS is a bilateral agreement
between Counterparties, the transaction can alternatively be settled by a
cash payment in the case of a credit event.
Changes in the value of swap agreements are recognized as unrealized
gains (losses) in the Statement of Operations by "marking to market" on a
daily basis to reflect the value of the swap agreement at the end of each
trading day. The Fund accrues for the fixed payments on swap agreements on
a daily basis with the net amount accrued, recorded as a component of
realized gain (loss) on the Statement of Operations. A liquidation payment
received or made at the termination of a swap agreement is recorded as
realized gain (loss) on the Statement of Operations. The Fund segregates
liquid securities having a value at least equal to the amount of the
potential obligation of a Fund under any swap transaction. Entering into
these agreements involves, to varying degrees, lack of liquidity and
elements of credit, market, and counterparty risk in excess of amounts
recognized on the Statement of Assets and Liabilities.
Q. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.60%
- -------------------------------------------------------------------
Over $250 million 0.55%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 0.75% and Series
II shares to 1.00% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $86,329.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $40,144
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase
AIM V.I. Diversified Income Fund
and own Series II shares of the Fund. For the six months ended June 30, 2007,
expenses incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $119,019 $ 5,331,816 $ (5,027,529) $423,306 $4,969
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 119,019 5,331,816 (5,027,529) 423,306 4,941
=================================================================================================================================
Total Investments in Affiliates $238,038 $10,663,632 $(10,055,058) $846,612 $9,910
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $689.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,287 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
AIM V.I. Diversified Income Fund
NOTE 7--FUTURES CONTRACTS
On June 30, 2007, $204,527 principal amount of U.S. Mortgage-Backed obligations
were pledged as collateral to cover margin requirements for open futures
contracts.
<Table>
<Caption>
OPEN FUTURES CONTRACTS AT PERIOD END
- --------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ VALUE APPRECIATION
CONTRACT CONTRACTS COMMITMENT 06/30/07 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 26 Sept-07/Long $ 5,298,312 $ 19,441
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 64 Sept-07/Long 6,661,000 7,403
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 46 Sept-07/Long 4,862,344 (13,228)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bonds 19 Sept-07/Long 2,047,250 29,395
==========================================================================================================================
$18,868,906 $ 43,011
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2007 $ 2,582,661
- -----------------------------------------------------------------------------
December 31, 2008 4,437,761
- -----------------------------------------------------------------------------
December 31, 2009 6,105,069
- -----------------------------------------------------------------------------
December 31, 2010 6,879,053
- -----------------------------------------------------------------------------
December 31, 2014 341,884
=============================================================================
Total capital loss carryforward $20,346,428
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $18,665,373 and
$21,950,964, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 148,271
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,019,463)
===============================================================================
Net unrealized appreciation (depreciation) of investment
securities $ (871,192)
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $50,157,052.
</Table>
AIM V.I. Diversified Income Fund
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
----------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Sold:
Series I 194,363 $ 1,634,266 305,992 $ 2,591,467
- -------------------------------------------------------------------------------------------------------------------
Series II 3,643 30,111 12,578 106,190
===================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 345,164 2,878,667
- -------------------------------------------------------------------------------------------------------------------
Series II -- -- 5,026 41,567
===================================================================================================================
Reacquired:
Series I (704,314) (5,903,075) (1,533,737) (13,030,924)
- -------------------------------------------------------------------------------------------------------------------
Series II (11,241) (93,987) (38,705) (327,303)
===================================================================================================================
(517,549) $(4,332,685) (903,682) $ (7,740,336)
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 75% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Diversified Income Fund
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.28 $ 8.43 $ 8.74 $ 8.82 $ 8.60 $ 9.13
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.24 0.46 0.40 0.36 0.42 0.55
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.13) (0.08) (0.15) 0.08 0.37 (0.35)
=================================================================================================================================
Total from investment operations 0.11 0.38 0.25 0.44 0.79 0.20
=================================================================================================================================
Less dividends from net investment income -- (0.53) (0.56) (0.52) (0.57) (0.73)
=================================================================================================================================
Net asset value, end of period $ 8.39 $ 8.28 $ 8.43 $ 8.74 $ 8.82 $ 8.60
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.33% 4.48% 2.90% 5.03% 9.24% 2.30%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $43,103 $46,743 $55,065 $65,069 $71,860 $70,642
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.75%(c) 0.75% 0.89% 1.01% 0.95% 0.94%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.14%(c) 1.10% 1.08% 1.01% 0.95% 0.94%
=================================================================================================================================
Ratio of net investment income to average net assets 5.80%(c) 5.47% 4.54% 4.01% 4.71% 6.15%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 42% 78% 92% 113% 153% 86%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$44,805,229.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
----------------------------------------------------------------------
MARCH 14,
2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------------------------ DECEMBER 31,
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.21 $8.36 $8.67 $8.78 $8.58 $ 8.97
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.23 0.44 0.38 0.33 0.40 0.42
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.13) (0.09) (0.15) 0.08 0.37 (0.08)
=================================================================================================================================
Total from investment operations 0.10 0.35 0.23 0.41 0.77 0.34
=================================================================================================================================
Less dividends from net investment income -- (0.50) (0.54) (0.52) (0.57) (0.73)
=================================================================================================================================
Net asset value, end of period $ 8.31 $8.21 $8.36 $8.67 $8.78 $ 8.58
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.22% 4.17% 2.67% 4.69% 9.02% 3.90%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 658 $ 713 $ 902 $ 980 $ 762 $ 124
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(c) 1.00% 1.14% 1.26% 1.20% 1.19%(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.39%(c) 1.35% 1.33% 1.26% 1.20% 1.19%(d)
=================================================================================================================================
Ratio of net investment income to average net assets 5.55%(c) 5.22% 4.29% 3.76% 4.46% 5.90%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 42% 78% 92% 113% 153% 86%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of $697,159.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Diversified Income Fund
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM
Distributors, Inc. ("ADI") (Order No. 05-1318). The WVASC makes findings of fact
that AIM and ADI entered into certain arrangements permitting market timing of
the AIM Funds and failed to disclose these arrangements in the prospectuses for
such Funds, and conclusions of law to the effect that AIM and ADI violated the
West Virginia securities laws. The WVASC orders AIM and ADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, AIM's time to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Diversified Income Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,013.30 $3.74 $1,021.08 $3.76 0.75%
Series II 1,000.00 1,012.20 4.99 1,019.84 5.01 1.00
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Diversified Income Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Diversified Income Fund (the Fund) Committee considers each SubCommittee's provided to the Fund by AIM under the
investment advisory agreement with A I M recommendations in making its annual Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendation to the Board whether to of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, approve the continuance of each AIM Fund's the credentials and experience of the
the Board as a whole and the disinterested investment advisory agreement and officers and employees of AIM who provide
or "independent" Trustees, voting sub-advisory agreement, if applicable these services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another year. qualifications of AIM to provide these
the Fund's investment advisory agreement services included the Board's
for another year, effective July 1, 2007. The independent Trustees, as mentioned consideration of AIM's portfolio and
In doing so, the Board determined that the above, are assisted in their annual product review process, various back
Fund's advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio review and negotiation between the calendar years to the performance of funds
managers for their assigned funds and Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
other members of management and review focus to a greater extent on certain not managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds -
strategies and limitations of these funds. deliberations and conclusions in a Corporate Debt BBB-Rated Index. The Board
particular year may be based in part on also reviewed the methodology used by
In addition to their meetings their deliberations and conclusions of Lipper to identify the Fund's peers. The
throughout the year, the Sub-Committees these same arrangements throughout the Board noted that the Fund's performance
meet at designated contract renewal year and in prior years. was comparable to the median performance
meetings each year to conduct an in-depth of its peers for the one and three year
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF periods, and below such performance for
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION the five year period. The Board noted that
the contract renewal process, the Trustees the Fund's performance was below the
receive comparative performance and fee The discussion below serves as a summary performance of the Index for the one and
data regarding all the AIM Funds prepared of the Senior Officer's independent five year periods, and comparable to such
by an independent company, Lipper, Inc., written evaluation, as well as a performance for the three year period. The
under the direction and supervision of the discussion of the material factors and Board also considered the steps AIM has
independent Senior Officer who also related conclusions that formed the basis taken over the last several years to
prepares a separate analysis of this for the Board's approval of the Fund's improve the quality and efficiency of the
information for the Trustees. Each advisory agreement. Unless otherwise services that AIM provides to the AIM
Sub-Committee then makes recommendations stated, information set forth below is as Funds. The Board concluded that AIM
to the Investments Committee regarding the of June 27, 2007 and does not reflect any continues to be responsive to the Board's
performance, fees and expenses of their changes that may have occurred since that focus on fund performance. Although the
assigned funds. The Investments Committee date, including but not limited to changes independent written evaluation of the
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, Fund's Senior Officer (dis-
expense limitations and/or fee waivers.
(continued)
AIM V.I. Diversified Income Fund
cussed below) only considered Fund expense limitations. The Board noted that reviewed and approved on an annual basis
performance through the most recent the Fund's contractual advisory fee by the Board. The Board concluded that AIM
calendar year, the Board also reviewed schedule includes one break-point but and its affiliates were providing these
more recent Fund performance and this that, due to the Fund's asset level at the services in a satisfactory manner and in
review did not change their conclusions. end of the past calendar year and the way accordance with the terms of their
in which the breakpoint has been contracts, and were qualified to continue
C. ADVISORY FEES AND FEE WAIVERS structured, the Fund has yet to benefit to provide these services to the Fund.
from the breakpoint. Based on this
The Board compared the Fund's contractual information, the Board concluded that the The Board considered the benefits
advisory fee rate to the contractual Fund's advisory fees would reflect realized by AIM as a result of portfolio
advisory fee rates of funds in the Fund's economies of scale at higher asset levels. brokerage transactions executed through
Lipper peer group that are not managed by The Board also noted that the Fund shares "soft dollar" arrangements. Under these
AIM, at a common asset level and as of the directly in economies of scale through arrangements, portfolio brokerage
end of the past calendar year. The Board lower fees charged by third party service commissions paid by the Fund and/or other
noted that the Fund's advisory fee rate providers based on the combined size of funds advised by AIM are used to pay for
was comparable to the median advisory fee all of the AIM Funds and affiliates. research and execution services. The Board
rate of its peers. The Board also reviewed noted that soft dollar arrangements shift
the methodology used by Lipper and noted E. PROFITABILITY AND FINANCIAL RESOURCES the payment obligation for the research
that the contractual fee rates shown by OF AIM and executions services from AIM to the
Lipper include any applicable long-term funds and therefore may reduce AIM's
contractual fee waivers. The Board also The Board reviewed information from AIM expenses. The Board also noted that
compared the Fund's contractual advisory concerning the costs of the advisory and research obtained through soft dollar
fee rate to the contractual advisory fee other services that AIM and its affiliates arrangements may be used by AIM in making
rates of other clients of AIM and its provide to the Fund and the profitability investment decisions for the Fund and may
affiliates with investment strategies of AIM and its affiliates in providing therefore benefit Fund shareholders. The
comparable to those of the Fund, including these services. The Board also reviewed Board concluded that AIM's soft dollar
two mutual funds advised by AIM. The Board information concerning the financial arrangements were appropriate. The Board
noted that the Fund's rate was above below condition of AIM and its affiliates. The also concluded that, based on their review
the rates for the two mutual funds. Board also reviewed with AIM the and representations made by AIM, these
methodology used to prepare the arrangements were consistent with
Additionally, the Board compared the profitability information. The Board regulatory requirements.
Fund's contractual advisory fee rate to considered the overall profitability of
the total advisory fees paid by numerous AIM, as well as the profitability of AIM The Board considered the fact that the
separately managed accounts/wrap accounts in connection with managing the Fund. The Fund's uninvested cash and cash collateral
advised by an AIM affiliate. The Board Board noted that AIM continues to operate from any securities lending arrangements
noted that the Fund's rate was generally at a net profit, although increased may be invested in money market funds
above the rates for the separately managed expenses in recent years have reduced the advised by AIM pursuant to procedures
accounts/wrap accounts. The Board profitability of AIM and its affiliates. approved by the Board. The Board noted
considered that management of the The Board concluded that the Fund's that AIM will receive advisory fees from
separately managed accounts/wrap accounts advisory fees were fair and reasonable, these affiliated money market funds
by the AIM affiliate involves different and that the level of profits realized by attributable to such investments, although
levels of services and different AIM and its affiliates from providing AIM has contractually agreed to waive the
operational and regulatory requirements services to the Fund was not excessive in advisory fees payable by the Fund with
than AIM's management of the Fund. The light of the nature, quality and extent of respect to its investment of uninvested
Board concluded that these differences are the services provided. The Board cash in these affiliated money market
appropriately reflected in the fee considered whether AIM is financially funds through at least April 30, 2009. The
structure for the Fund and the separately sound and has the resources necessary to Board considered the contractual nature of
managed accounts/wrap accounts. perform its obligations under the Fund's this fee waiver and noted that it remains
advisory agreement, and concluded that AIM in effect until at least April 30, 2009.
The Board noted that AIM has has the financial resources necessary to The Board concluded that the Fund's
contractually agreed to waive fees and/or fulfill these obligations. investment of uninvested cash and cash
limit expenses of the Fund through at collateral from any securities lending
least April 30, 2009 in an amount F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
necessary to limit total annual operating FUND'S SENIOR OFFICER market funds is in the best interests of
expenses to a specified percentage of the Fund and its shareholders.
average daily net assets for each class of The Board noted that, upon their
the Fund. The Board considered the direction, the Senior Officer of the Fund,
contractual nature of this fee waiver and who is independent of AIM and AIM's
noted that it remains in effect until at affiliates, had prepared an independent
least April 30, 2009. The Board reviewed written evaluation to assist the Board in
the Fund's effective advisory fee rate, determining the reasonableness of the
after taking account of this expense proposed management fees of the AIM Funds,
limitation, and considered the effect this including the Fund. The Board noted that
expense limitation would have on the they had relied upon the Senior Officer's
Fund's estimated total expenses. The Board written evaluation instead of a
concluded that the levels of fee competitive bidding process. In
waivers/expense limitations for the Fund determining whether to continue the Fund's
were fair and reasonable. advisory agreement, the Board considered
the Senior Officer's written evaluation.
After taking account of the Fund's
contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
the comparative advisory fee information AFFILIATES
and the expense limitation discussed
above, the Board concluded that the Fund's The Board considered various other
advisory fees were fair and reasonable. benefits received by AIM and its
affiliates resulting from AIM's
D. ECONOMIES OF SCALE AND BREAKPOINTS relationship with the Fund, including the
fees received by AIM and its affiliates
The Board considered the extent to which for their provision of administrative,
there are economies of scale in AIM's transfer agency and distribution services
provision of advisory services to the to the Fund. The Board considered the
Fund. The Board also considered whether performance of AIM and its affiliates in
the Fund benefits from such economies of providing these services and the
scale through contractual breakpoints in organizational structure employed by AIM
the Fund's advisory fee schedule or and its affiliates to provide these
through advisory fee waivers or services. The Board also considered that
these services are provided to the Fund
pursuant to written contracts which are
AIM V.I. Dynamics Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Mid-Cap Growth
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Dynamics Fund
Fund performance products. You cannot purchase shares of
======================================================================================= the Fund directly. Performance figures
PERFORMANCE SUMMARY given represent the Fund and are not
intended to reflect actual variable
FUND VS. INDEXES product values. They do not reflect sales
charges, expenses and fees assessed in
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. connection with a variable product. Sales
If variable product issuer charges were included, returns would be lower. charges, expenses and fees, which are
determined by the variable product
Series I Shares 14.17% issuers, will vary and will lower the
Series II Shares 13.97 total return.
S&P 500 Index(1) (Broad Market Index) 6.96
Russell Midcap Growth Index(1) (Style-Specific Index) 10.97 Per NASD requirements, the most recent
Lipper VUF Mid-Cap Growth Funds Index(1) (Peer Group Index) 13.13 month-end performance data at the Fund
Lipper Mid-Cap Growth Funds Index(1) (Former Peer Group Index) 14.70 level, excluding variable product charges,
is available on the AIM automated
Source: (1) Lipper Inc. information line, 866-702-4402. As
mentioned above, for the most recent
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks month-end performance including variable
frequently used as a general measure of U.S. stock market performance. product charges, please contact your
variable product issuer or financial
The unmanaged Russell Midcap -- REGISTERED TRADEMARK -- Growth Index is a advisor.
subset of the Russell Midcap -- REGISTERED TRADEMARK -- Index, which represents
the performance of the stocks of domestic mid-capitalization companies; the
Growth subset measures the performance of Russell Midcap companies with higher
price/book ratios and higher forecasted growth values. The Russell Midcap Growth
Index and the Russell Midcap Index are trademarks/service marks of the Frank
Russell Company. Russell -- REGISTERED TRADEMARK -- is a trademark of the Frank
Russell Company.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Mid-Cap
Growth Funds Index as its peer group instead of the Lipper Mid-Cap Growth Funds Index.
In 2006, Lipper began publishing VUF indexes, allowing the Fund to be compared with the
Lipper VUF Mid-Cap Growth Index. The unmanaged Lipper VUF Mid-Cap Growth Funds Index is
an equally weighted representation of the largest variable insurance underlying funds
in the Lipper Mid-Cap Growth Funds category. Lipper Inc. is an independent mutual fund
performance monitor.
The unmanaged Lipper Mid-Cap Growth Funds Index represents an average of the
performance of the largest mid-capitalization growth funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== primarily due to different class expenses.
FUND PERFORMANCE
As of 6/30/07 The performance data quoted represent
SERIES I SHARES past performance and cannot guarantee
Inception (8/22/97) 7.24% comparable future results; current
5 Years 15.30 performance may be lower or higher. Please
1 Year 23.46 contact your variable product issuer or
financial advisor for the most recent
SERIES II SHARES month-end variable product performance.
Inception 6.97% Performance figures reflect Fund expenses,
5 Years 15.00 reinvested distributions and changes in
1 Year 23.15 net asset value. Investment return and
========================================== principal value will fluctuate so that you
may have a gain or loss when you sell
Series II shares' inception date is April shares.
30, 2004. Returns since that date are
historical. All other returns are the The total annual Fund operating expense
blended returns of the historical ratio set forth in the most recent Fund
performance of Series II shares since prospectus as of the date of this report
their inception and the restated for Series I and Series II shares was
historical performance of Series I shares 1.13% and 1.38%, respectively. The expense
(for periods prior to inception of Series ratios presented above may vary from the
II shares) adjusted to reflect the Rule expense ratios presented in other sections
12b-1 fees applicable to Series II shares. of this report that are based on expenses
The inception date of Series I shares is incurred during the period covered by this
August 22, 1997. report.
The performance of the Fund's Series I AIM V.I. Dynamics Fund, a series
and Series II share classes will differ portfolio of AIM Variable Insurance Funds,
is currently offered through insurance
companies issuing variable
AIM V.I. Dynamics Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- -------------------------------------------------------------
Information Technology 18.7%
- -------------------------------------------------------------
Consumer Discretionary 17.6
- -------------------------------------------------------------
Industrials 16.6
- -------------------------------------------------------------
Health Care 13.7
- -------------------------------------------------------------
Financials 9.4
- -------------------------------------------------------------
Energy 7.9
- -------------------------------------------------------------
Telecommunication Services 5.3
- -------------------------------------------------------------
Materials 5.0
- -------------------------------------------------------------
Consumer Staples 2.8
- -------------------------------------------------------------
Utilities 0.9
- -------------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 2.1
_____________________________________________________________
=============================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.89%
ADVERTISING-1.99%
Clear Channel Outdoor Holdings, Inc.-Class
A(a) 36,422 $ 1,032,199
- -----------------------------------------------------------------------
Focus Media Holding Ltd.-ADR (China)(a) 35,309 1,783,105
=======================================================================
2,815,304
=======================================================================
AEROSPACE & DEFENSE-2.77%
Precision Castparts Corp. 17,998 2,184,237
- -----------------------------------------------------------------------
Spirit Aerosystems Holdings, Inc.-Class A(a) 48,269 1,740,098
=======================================================================
3,924,335
=======================================================================
AGRICULTURAL PRODUCTS-0.87%
Corn Products International, Inc. 26,976 1,226,059
=======================================================================
AIR FREIGHT & LOGISTICS-1.08%
UTI Worldwide, Inc. 56,943 1,525,503
=======================================================================
ALTERNATIVE CARRIERS-1.10%
Level 3 Communications, Inc.(a) 266,928 1,561,529
=======================================================================
APPAREL RETAIL-2.74%
Abercrombie & Fitch Co.-Class A 16,446 1,200,229
- -----------------------------------------------------------------------
Aeropostale, Inc.(a) 32,055 1,336,053
- -----------------------------------------------------------------------
Ross Stores, Inc. 43,664 1,344,851
=======================================================================
3,881,133
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
APPAREL, ACCESSORIES & LUXURY GOODS-2.89%
Coach, Inc.(a) 22,879 $ 1,084,236
- -----------------------------------------------------------------------
Polo Ralph Lauren Corp. 16,742 1,642,557
- -----------------------------------------------------------------------
Under Armour, Inc.-Class A(a) 29,837 1,362,059
=======================================================================
4,088,852
=======================================================================
APPLICATION SOFTWARE-3.86%
Amdocs Ltd.(a) 36,573 1,456,337
- -----------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 62,426 1,370,875
- -----------------------------------------------------------------------
Citrix Systems, Inc.(a) 44,958 1,513,736
- -----------------------------------------------------------------------
TIBCO Software Inc.(a) 124,995 1,131,204
=======================================================================
5,472,152
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.32%
AllianceBernstein Holding L.P. 14,203 1,236,939
- -----------------------------------------------------------------------
American Capital Strategies, Ltd. 14,980 636,950
=======================================================================
1,873,889
=======================================================================
BIOTECHNOLOGY-1.47%
Cephalon, Inc.(a) 17,000 1,366,630
- -----------------------------------------------------------------------
Genzyme Corp.(a) 11,100 714,840
=======================================================================
2,081,470
=======================================================================
BUILDING PRODUCTS-0.41%
NCI Building Systems, Inc.(a) 11,715 577,901
=======================================================================
</Table>
AIM V.I. Dynamics Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
CASINOS & GAMING-2.37%
International Game Technology 35,299 $ 1,401,370
- -----------------------------------------------------------------------
Scientific Games Corp.-Class A(a) 55,883 1,953,111
=======================================================================
3,354,481
=======================================================================
COMMUNICATIONS EQUIPMENT-1.88%
Comverse Technology, Inc.(a) 47,050 980,993
- -----------------------------------------------------------------------
Riverbed Technology, Inc.(a) 38,515 1,687,727
=======================================================================
2,668,720
=======================================================================
COMPUTER HARDWARE-0.52%
NCR Corp.(a) 13,906 730,621
=======================================================================
COMPUTER STORAGE & PERIPHERALS-2.45%
Intermec Inc.(a) 35,928 909,338
- -----------------------------------------------------------------------
Logitech International S.A.
(Switzerland)(a)(b) 25,861 685,178
- -----------------------------------------------------------------------
Network Appliance, Inc.(a) 21,137 617,200
- -----------------------------------------------------------------------
Qlogic Corp.(a) 75,486 1,256,842
=======================================================================
3,468,558
=======================================================================
CONSTRUCTION & ENGINEERING-2.16%
Foster Wheeler Ltd.(a) 28,579 3,057,667
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.22%
Joy Global Inc. 29,621 1,727,793
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.89%
Fidelity National Information Services, Inc. 24,229 1,315,150
- -----------------------------------------------------------------------
VeriFone Holdings, Inc.(a) 38,631 1,361,743
=======================================================================
2,676,893
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-3.09%
Corrections Corp. of America(a) 38,247 2,413,768
- -----------------------------------------------------------------------
HIS Inc.-Class A(a) 42,668 1,962,728
=======================================================================
4,376,496
=======================================================================
DIVERSIFIED METALS & MINING-0.41%
Titanium Metals Corp.(a) 18,413 587,375
=======================================================================
DRUG RETAIL-0.97%
Shoppers Drug Mart Corp. (Canada) 29,636 1,372,996
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.04%
Acuity Brands, Inc. 22,084 1,331,223
- -----------------------------------------------------------------------
Cooper Industries, Ltd.-Class A 27,384 1,563,353
=======================================================================
2,894,576
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.14%
Agilent Technologies, Inc.(a) 39,908 1,534,064
- -----------------------------------------------------------------------
Amphenol Corp.-Class A 42,054 1,499,225
=======================================================================
3,033,289
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
FERTILIZERS & AGRICULTURAL CHEMICALS-0.85%
Potash Corp. of Saskatchewan Inc. (Canada) 15,438 $ 1,203,701
=======================================================================
GENERAL MERCHANDISE STORES-0.58%
Dollar Tree Stores, Inc.(a) 19,005 827,668
=======================================================================
HEALTH CARE DISTRIBUTORS-0.89%
Schein (Henry), Inc.(a) 23,600 1,260,948
=======================================================================
HEALTH CARE EQUIPMENT-2.50%
Gen-Probe Inc.(a) 22,000 1,329,240
- -----------------------------------------------------------------------
Hologic, Inc.(a) 15,100 835,181
- -----------------------------------------------------------------------
ResMed Inc.(a) 15,300 631,278
- -----------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 17,600 748,176
=======================================================================
3,543,875
=======================================================================
HEALTH CARE FACILITIES-1.13%
Psychiatric Solutions, Inc.(a) 44,100 1,599,066
=======================================================================
HEALTH CARE SERVICES-0.24%
Express Scripts, Inc.(a) 6,800 340,068
=======================================================================
HEALTH CARE SUPPLIES-0.55%
Immucor, Inc.(a) 28,000 783,160
=======================================================================
HEALTH CARE TECHNOLOGY-1.04%
Allscripts Healthcare Solutions, Inc.(a) 30,800 784,784
- -----------------------------------------------------------------------
Cerner Corp.(a) 12,500 693,375
=======================================================================
1,478,159
=======================================================================
HOTELS, RESORTS & CRUISE LINES-1.90%
Hilton Hotels Corp. 37,407 1,252,012
- -----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 21,386 1,434,359
=======================================================================
2,686,371
=======================================================================
HOUSEWARES & SPECIALTIES-1.02%
Jarden Corp.(a) 33,748 1,451,501
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.37%
Monster Worldwide Inc.(a) 12,645 519,709
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.92%
KGEN Power Corp. (Acquired 01/12/07; Cost
$865,032)(a)(c) 61,788 1,297,548
=======================================================================
INDUSTRIAL CONGLOMERATES-1.58%
McDermott International, Inc.(a) 26,896 2,235,595
=======================================================================
INDUSTRIAL MACHINERY-1.10%
Kaydon Corp. 29,876 1,557,137
=======================================================================
INTERNET SOFTWARE & SERVICES-0.78%
Digital River, Inc.(a) 24,331 1,100,978
=======================================================================
</Table>
AIM V.I. Dynamics Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-1.49%
FBR Capital Markets Corp. (Acquired 07/14/06;
Cost $690,000)(a)(c)(d) 46,000 $ 699,660
- -----------------------------------------------------------------------
Lazard Ltd.-Class A (Bermuda) 15,800 711,474
- -----------------------------------------------------------------------
Schwab (Charles) Corp. (The) 34,300 703,836
=======================================================================
2,114,970
=======================================================================
IT CONSULTING & OTHER SERVICES-0.95%
Cognizant Technology Solutions Corp.-Class
A(a) 18,005 1,351,995
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-2.17%
Advanced Magnetics, Inc.(a) 11,268 655,347
- -----------------------------------------------------------------------
Covance Inc.(a) 10,200 699,312
- -----------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 45,000 1,722,150
=======================================================================
3,076,809
=======================================================================
MANAGED HEALTH CARE-1.40%
Aveta, Inc. (Acquired 12/21/05-05/22/06; Cost
$1,300,095)(a)(c) 90,000 720,000
- -----------------------------------------------------------------------
Humana Inc.(a) 20,800 1,266,928
=======================================================================
1,986,928
=======================================================================
MARINE-0.82%
American Commercial Lines Inc.(a) 44,751 1,165,764
=======================================================================
METAL & GLASS CONTAINERS-2.23%
Crown Holdings, Inc.(a) 40,816 1,019,175
- -----------------------------------------------------------------------
Owens-Illinois, Inc.(a) 61,130 2,139,550
=======================================================================
3,158,725
=======================================================================
MORTGAGE REIT'S-1.90%
KKR Financial Holdings LLC 55,698 1,387,437
- -----------------------------------------------------------------------
RAIT Financial Trust 50,052 1,302,353
=======================================================================
2,689,790
=======================================================================
OIL & GAS DRILLING-2.01%
ENSCO International Inc. 33,660 2,053,597
- -----------------------------------------------------------------------
Hercules Offshore, Inc.(a)(e) 24,500 793,310
=======================================================================
2,846,907
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.41%
Cameron International Corp.(a) 21,324 1,524,026
- -----------------------------------------------------------------------
National-Oilwell Varco Inc.(a) 18,100 1,886,744
=======================================================================
3,410,770
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.36%
Carrizo Oil & Gas, Inc.(a) 13,500 559,845
- -----------------------------------------------------------------------
Pioneer Natural Resources Co. 20,000 974,200
- -----------------------------------------------------------------------
Rosetta Resources, Inc.(a)(d) 14,156 304,920
- -----------------------------------------------------------------------
Southwestern Energy Co.(a) 33,868 1,507,126
=======================================================================
3,346,091
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
OIL & GAS STORAGE & TRANSPORTATION-1.10%
Williams Cos., Inc. (The) 49,193 $ 1,555,483
=======================================================================
PERSONAL PRODUCTS-0.96%
Bare Escentuals, Inc.(a) 39,780 1,358,487
=======================================================================
PHARMACEUTICALS-2.31%
Adams Respiratory Therapeutics, Inc.(a) 47,201 1,859,247
- -----------------------------------------------------------------------
Shire PLC (United Kingdom)(b) 57,000 1,412,954
=======================================================================
3,272,201
=======================================================================
PROPERTY & CASUALTY INSURANCE-0.28%
LandAmerica Financial Group, Inc. 4,087 394,355
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.98%
CB Richard Ellis Group, Inc.-Class A(a) 50,692 1,850,258
- -----------------------------------------------------------------------
Meruelo Maddux Properties, Inc.(a) 117,727 960,652
=======================================================================
2,810,910
=======================================================================
REGIONAL BANKS-0.78%
Signature Bank(a) 32,397 1,104,738
=======================================================================
RESTAURANTS-1.05%
Burger King Holdings Inc. 56,382 1,485,102
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.58%
KLA-Tencor Corp. 12,955 711,877
- -----------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 24,853 1,519,016
=======================================================================
2,230,893
=======================================================================
SEMICONDUCTORS-2.67%
Maxim Integrated Products, Inc. 33,472 1,118,299
- -----------------------------------------------------------------------
NVIDIA Corp.(a) 31,342 1,294,738
- -----------------------------------------------------------------------
ON Semiconductor Corp.(a) 128,155 1,373,822
=======================================================================
3,786,859
=======================================================================
SPECIALIZED FINANCE-1.62%
Chicago Mercantile Exchange Holdings
Inc.-Class A 2,136 1,141,393
- -----------------------------------------------------------------------
IntercontinentalExchange Inc.(a) 7,800 1,153,230
=======================================================================
2,294,623
=======================================================================
SPECIALTY CHEMICALS-0.55%
Wacker Chemie A.G. (Germany)(b) 3,289 776,698
=======================================================================
SPECIALTY STORES-1.98%
Dick's Sporting Goods, Inc.(a) 24,127 1,403,468
- -----------------------------------------------------------------------
PetSmart, Inc. 43,387 1,407,908
=======================================================================
2,811,376
=======================================================================
STEEL-0.95%
Allegheny Technologies, Inc. 12,770 1,339,318
=======================================================================
TIRES & RUBBER-1.06%
Goodyear Tire & Rubber Co. (The)(a) 43,376 1,507,750
=======================================================================
</Table>
AIM V.I. Dynamics Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-4.19%
American Tower Corp.-Class A(a) 34,632 $ 1,454,544
- -----------------------------------------------------------------------
Crown Castle International Corp.(a) 39,139 1,419,571
- -----------------------------------------------------------------------
Leap Wireless International, Inc.(a) 9,794 827,593
- -----------------------------------------------------------------------
NII Holdings Inc.(a) 27,736 2,239,405
=======================================================================
5,941,113
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $116,243,993) 138,681,731
=======================================================================
MONEY MARKET FUNDS-2.04%
Liquid Assets Portfolio-Institutional
Class(f) 1,444,018 1,444,018
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 1,444,018 1,444,018
=======================================================================
Total Money Market Funds (Cost
$2,888,036) 2,888,036
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.93% (Cost
$119,132,029) 141,569,767
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-0.31%
Premier Portfolio-Institutional Class (Cost
$435,641)(f)(g) 435,641 $ 435,641
=======================================================================
TOTAL INVESTMENTS-100.24% (Cost $119,567,670) 142,005,408
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.24)% (339,606)
=======================================================================
NET ASSETS-100.00% $141,665,802
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $2,874,830, which
represented 2.03% of the Fund's Net Assets. See Note 1A.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $2,717,208,
which represented 1.92% of the Fund's Net Assets. These securities are
considered to be illiquid. The Fund is limited to investing 15% of net
assets in illiquid securities at the time of purchase.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at June 30, 2007 was $1,004,580, which represented 0.71% of the
Fund's Net Assets. See Note 1A.
(e) All or a portion of this security was out on loan at June 30, 2007.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Dynamics Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $116,243,993)* $138,681,731
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $3,323,677) 3,323,677
=============================================================
Total investments (Cost $119,567,670) 142,005,408
=============================================================
Foreign currencies, at value (Cost $3,477) 3,554
- -------------------------------------------------------------
Receivables for:
Investments sold 1,025,549
- -------------------------------------------------------------
Fund shares sold 11,930
- -------------------------------------------------------------
Dividends 81,300
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 16,941
=============================================================
Total assets 143,144,682
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 254,265
- -------------------------------------------------------------
Investments purchased from affiliates 376,376
- -------------------------------------------------------------
Fund shares reacquired 263,644
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 24,084
- -------------------------------------------------------------
Collateral upon return of securities loaned 435,641
- -------------------------------------------------------------
Accrued administrative services fees 82,345
- -------------------------------------------------------------
Accrued distribution fees -- Series II 9
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,742
- -------------------------------------------------------------
Accrued transfer agent fees 2,389
- -------------------------------------------------------------
Accrued operating expenses 36,385
=============================================================
Total liabilities 1,478,880
=============================================================
Net assets applicable to shares outstanding $141,665,802
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $184,466,136
- -------------------------------------------------------------
Undistributed net investment income (loss) (338,463)
- -------------------------------------------------------------
Undistributed net realized gain (loss) (64,899,701)
- -------------------------------------------------------------
Unrealized appreciation 22,437,830
=============================================================
$141,665,802
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $141,655,922
_____________________________________________________________
=============================================================
Series II $ 9,880
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 7,236,711
_____________________________________________________________
=============================================================
Series II 508.7
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 19.57
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 19.42
_____________________________________________________________
=============================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $430,719 were on loan
to brokers.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$1,464) $ 283,177
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$14,687) 106,937
============================================================
Total investment income 390,114
============================================================
EXPENSES:
Advisory fees 477,734
- ------------------------------------------------------------
Administrative services fees 183,789
- ------------------------------------------------------------
Custodian fees 7,178
- ------------------------------------------------------------
Distribution fees -- Series II 19
- ------------------------------------------------------------
Transfer agent fees 7,317
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 10,453
- ------------------------------------------------------------
Other 30,584
============================================================
Total expenses 717,074
============================================================
Less: Fees waived and expense offset
arrangement (4,394)
============================================================
Net expenses 712,680
============================================================
Net investment income (loss) (322,566)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
(losses) from securities sold to affiliates
of $(68,625)) 7,625,471
- ------------------------------------------------------------
Foreign currencies (1,565)
- ------------------------------------------------------------
Option contracts written 32,650
============================================================
7,656,556
============================================================
Change in net unrealized appreciation of:
Investment securities 9,269,455
- ------------------------------------------------------------
Foreign currencies 102
- ------------------------------------------------------------
Option contracts written 2,018
============================================================
9,271,575
============================================================
Net realized and unrealized gain 16,928,131
============================================================
Net increase in net assets resulting from
operations $16,605,565
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Dynamics Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (322,566) $ (666,257)
- ------------------------------------------------------------------------------
Net realized gain 7,656,556 20,090,705
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) 9,271,575 (3,354,694)
==============================================================================
Net increase in net assets resulting from
operations 16,605,565 16,069,754
==============================================================================
Share transactions-net:
Series I 4,260,751 (6,931,540)
- ------------------------------------------------------------------------------
Series II (6,500) --
==============================================================================
Net increase (decrease) in net assets
resulting from share transactions 4,254,251 (6,931,540)
==============================================================================
Net increase in net assets 20,859,816 9,138,214
==============================================================================
NET ASSETS:
Beginning of period 120,805,986 111,667,772
==============================================================================
End of period (including undistributed net
investment income (loss) of $(338,463) and
$(15,897), respectively) $141,665,802 $120,805,986
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Dynamics Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Dynamics Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term capital growth.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Dynamics Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
K. CALL OPTIONS WRITTEN AND PURCHASED -- The Fund may write and buy call
options. A call option gives the purchaser of such option the right to buy,
and the writer the obligation to sell, the underlying security at the
stated exercise price during the option period. 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
AIM V.I. Dynamics Fund
above the current market value of the underlying security at the time the
option is written. When the Fund writes a call option, an amount equal to
the premium received by the Fund is recorded as an asset and an equivalent
liability in the Statement of Assets and Liabilities. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. 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. Realized and unrealized gains and losses on
these contracts are included in the Statement of Operation. A risk in
writing a call option is that the Fund gives up the opportunity for profit
if the market price of the security increases and the option is exercised.
L. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. 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, securities index, 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. Realized and unrealized gains and losses on these contracts are
included in the Statement of Operations. A risk in buying an option is that
the Fund pays a premium whether or not the option is exercised. In
addition, there can be no assurance that a liquid secondary market will
exist for any option purchased.
M. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund
pays an advisory fee to AIM at the annual rate of 0.75% of the Fund's average
daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.745%
- --------------------------------------------------------------------
Next $250 million 0.73%
- --------------------------------------------------------------------
Next $500 million 0.715%
- --------------------------------------------------------------------
Next $1.5 billion 0.70%
- --------------------------------------------------------------------
Next $2.5 billion 0.685%
- --------------------------------------------------------------------
Next $2.5 billion 0.67%
- --------------------------------------------------------------------
Next $2.5 billion 0.655%
- --------------------------------------------------------------------
Over $10 billion 0.64%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. AIM did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $3,786.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
AIM V.I. Dynamics Fund
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $158,994
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $2,966,101 $17,436,461 $(18,958,544) $1,444,018 $46,242
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 2,966,101 17,436,461 (18,958,544) 1,444,018 46,008
=================================================================================================================================
Subtotal $5,932,202 $34,872,922 $(37,917,088) $2,888,036 $92,250
=================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class $2,528,752 $41,148,143 $(43,241,254) $ 435,641 $ 14,687
=================================================================================================================================
Total Investments in Affiliates $8,460,954 $76,021,065 $(81,158,342) $3,323,677 $106,937
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $430,615, which resulted in net realized gains
(losses) of $(68,625), and securities purchases of $701,572.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $608.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to
AIM V.I. Dynamics Fund
fund such deferred compensation amounts. Those Trustees who defer compensation
have the option to select various AIM Funds in which their deferral accounts
shall be deemed to be invested. Finally, certain current Trustees are eligible
to participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,443 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, securities with an aggregate value of $430,719 were on
loan to brokers. The loans were secured by cash collateral of $435,641 received
by the Fund and subsequently invested in affiliated money market funds. For the
six months ended June 30, 2007, the Fund received dividends on cash collateral
investments of $14,687 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -----------------------------------------------------------------------------------
Beginning of period 210 $ 36,370
- -----------------------------------------------------------------------------------
Closed (101) (14,631)
- -----------------------------------------------------------------------------------
Expired (109) (21,739)
===================================================================================
End of period -- $ --
___________________________________________________________________________________
===================================================================================
</Table>
NOTE 10--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
AIM V.I. Dynamics Fund
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $ 1,883,553
- -----------------------------------------------------------------------------
December 31, 2010 70,625,929
=============================================================================
Total capital loss carryforward $72,509,482
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $64,335,862 and
$57,612,540, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX
BASIS
- ---------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $25,303,618
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,899,276)
===========================================================================
Net unrealized appreciation of investment securities $22,404,342
___________________________________________________________________________
===========================================================================
Cost of investments for tax purposes is $119,601,066.
</Table>
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,268,436 $ 23,855,741 4,310,698 $ 69,372,528
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- -- --
======================================================================================================================
Reacquired:
Series I (1,074,110) (19,594,990) (4,826,869) (76,304,068)
- ----------------------------------------------------------------------------------------------------------------------
Series II (329) (6,500) -- --
======================================================================================================================
193,997 $ 4,254,251 (516,171) $ (6,931,540)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are three entities that are each record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 72% of the
outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with these
entities whereby these entities sell units of interest in separate accounts
funding variable products that are invested in the Fund. The Fund, AIM
and/or AIM affiliates may make payments to these entities, which are
considered to be related to the Fund, for providing services to the Fund,
AIM and or AIM affiliates including but not limited to services such as,
securities brokerage, third party record keeping and account servicing and
administrative services. The Trust has no knowledge as to whether all or any
portion of the shares owned of record by these entities are also owned
beneficially.
NOTE 13--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Dynamics Fund
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
--------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 17.15 $ 14.77 $ 13.34 $ 11.77 $ 8.54 $ 12.54
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.05)(a) (0.09) (0.04) (0.09) (0.07) (0.00)(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 2.47 2.47 1.47 1.66 3.30 (4.00)
=================================================================================================================================
Total from investment
operations 2.42 2.38 1.43 1.57 3.23 (4.00)
=================================================================================================================================
Net asset value, end of
period $ 19.57 $ 17.15 $ 14.77 $ 13.34 $ 11.77 $ 8.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 14.11% 16.11% 10.72% 13.34% 37.82% (31.90)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $141,656 $120,792 $111,655 $123,609 $169,269 $116,135
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 1.12%(d) 1.12% 1.16% 1.14% 1.14% 1.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or
expense reimbursements 1.13%(d) 1.13% 1.17% 1.14% 1.15% 1.12%
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.51)%(d) (0.51)% (0.29)% (0.62)% (0.70)% (0.75)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 46% 142% 110% 64% 129% 110%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) The net investment income (loss) per share was calculated after
permanent book tax differences, such as net operating losses, which were
reclassified from accumulated net investment income (loss) to paid in
capital. Had net investment income (loss) per share been calculated
using the current method, which is before reclassification of net
operating losses, net investment income (loss) per share would have been
$(0.08) for the year ended December 31, 2002.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$128,436,546.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
---------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $17.04 $14.71 $13.32 $11.94
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.12) (0.07) (0.07)
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.45 2.45 1.46 1.45
=================================================================================================================
Total from investment operations 2.38 2.33 1.39 1.38
=================================================================================================================
Net asset value, end of period $19.42 $17.04 $14.71 $13.32
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 13.97% 15.84% 10.44% 11.56%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 14 $ 12 $ 11
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.37%(c) 1.37% 1.41% 1.40%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.38%(c) 1.38% 1.42% 1.40%(d)
=================================================================================================================
Ratio of net investment income (loss) to average net assets (0.76)%(c) (0.76)% (0.54)% (0.88)%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 46% 142% 110% 64%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of $14,906.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Dynamics Fund
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Dynamics Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,141.70 $5.95 $1,019.24 $5.61 1.12%
Series II 1,000.00 1,139.70 7.27 1,018.00 6.85 1.37
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Dynamics Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Dynamics Fund (the Fund) investment Committee considers each Sub-Committee's provided to the Fund by AIM under the
advisory agreement with A I M Advisors, recommendations in making its annual Fund's advisory agreement, the performance
Inc. (AIM). During contract renewal recommendation to the Board whether to of AIM in providing these services, and
meetings held on June 25-27, 2007, the approve the continuance of each AIM Fund's the credentials and experience of the
Board as a whole and the disinterested or investment advisory agreement and officers and employees of AIM who provide
"independent" Trustees, voting separately, sub-advisory agreement, if applicable these services. The Board's review of the
approved the continuance of the Fund's (advisory agreements), for another year. qualifications of AIM to provide these
investment advisory agreement for another services included the Board's
year, effective July 1, 2007. In doing so, The independent Trustees, as mentioned consideration of AIM's portfolio and
the Board determined that the Fund's above, are assisted in their annual product review process, various back
advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's
Officer. Over the course of each year, the AIM Funds are the result of years of performance during the past one, three and
Sub-Committees meet with portfolio review and negotiation between the five calendar years to the performance of
managers for their assigned funds and Trustees and AIM, that the Trustees may funds in the Fund's Lipper peer group that
other members of management and review focus to a greater extent on certain are not managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds -
strategies and limitations of these funds. deliberations and conclusions in a Mid-Cap Growth Index. The Board also
particular year may be based in part on reviewed the methodology used by Lipper to
In addition to their meetings their deliberations and conclusions of identify the Fund's peers. The Board noted
throughout the year, the Sub-Committees these same arrangements throughout the that the Fund's performance was above the
meet at designated contract renewal year and in prior years. median performance of its peers for the
meetings each year to conduct an in-depth one and three year periods, and comparable
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF to such performance for the five year
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION period. The Board noted that the Fund's
the contract renewal process, the Trustees performance was above the performance of
receive comparative performance and fee The discussion below serves as a summary the Index for the one and three year
data regarding all the AIM Funds prepared of the Senior Officer's independent periods, and comparable to such Index for
by an independent company, Lipper, Inc., written evaluation, as well as a the five year period. The Board also
under the direction and supervision of the discussion of the material factors and considered the steps AIM has taken over
independent Senior Officer who also related conclusions that formed the basis the last several years to improve the
prepares a separate analysis of this for the Board's approval of the Fund's quality and efficiency of the services
information for the Trustees. Each advisory agreement. Unless otherwise that AIM provides to the AIM Funds. The
Sub-Committee then makes recommendations stated, information set forth below is as Board concluded that AIM continues to be
to the Investments Committee regarding the of June 27, 2007 and does not reflect any responsive to the Board's focus on fund
performance, fees and expenses of their changes that may have occurred since that performance. Although the independent
assigned funds. The Investments Committee date, including but not limited to changes written evaluation of the Fund's Senior
considers each Sub-Committee's to the Fund's performance, advisory fees, Officer (discussed below) only considered
recom- expense limitations and/or fee waivers. Fund performance
(continued)
AIM V.I. Dynamics Fund
through the most recent calendar year, the whether to implement any fee waivers for bidding process. In determining whether to
Board also reviewed more recent Fund the Fund. continue the Fund's advisory agreement,
performance and this review did not change the Board considered the Senior Officer's
their conclusions. After taking account of the Fund's written evaluation.
contractual advisory fee rate, as well as
C. ADVISORY FEES AND FEE WAIVERS the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
and the expense limitation discussed AFFILIATES
The Board compared the Fund's contractual above, the Board concluded that the Fund's
advisory fee rate to the contractual advisory fees were fair and reasonable. The Board considered various other
advisory fee rates of funds in the Fund's benefits received by AIM and its
Lipper peer group that are not managed by D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
AIM, at a common asset level and as of the relationship with the Fund, including the
end of the past calendar year. The Board The Board considered the extent to which fees received by AIM and its affiliates
noted that the Fund's advisory fee rate there are economies of scale in AIM's for their provision of administrative,
was comparable to the median advisory fee provision of advisory services to the transfer agency and distribution services
rate of its peers. The Board also reviewed Fund. The Board also considered whether to the Fund. The Board considered the
the methodology used by Lipper and noted the Fund benefits from such economies of performance of AIM and its affiliates in
that the contractual fee rates shown by scale through contractual breakpoints in providing these services and the
Lipper include any applicable long-term the Fund's advisory fee schedule or organizational structure employed by AIM
contractual fee waivers. The Board also through advisory fee waivers or expense and its affiliates to provide these
compared the Fund's contractual advisory limitations. The Board noted that the services. The Board also considered that
fee rate to the contractual advisory fee Fund's contractual advisory fee schedule these services are provided to the Fund
rates of other clients of AIM and its currently does not include any breakpoints pursuant to written contracts which are
affiliates with investment strategies but that the amendment to the Fund's reviewed and approved on an annual basis
comparable to those of the Fund, including contractual advisory fee schedule by the Board. The Board concluded that AIM
three mutual funds advised by AIM, one discussed above provides for seven and its affiliates were providing these
mutual fund sub-advised by an AIM breakpoints. Based on this information, services in a satisfactory manner and in
affiliate, and one offshore fund advised the Board concluded that the Fund's accordance with the terms of their
and sub-advised by AIM affiliates. The advisory fees will appropriately reflect contracts, and were qualified to continue
Board noted that the Fund's rate was: (i) economies of scale upon the Board's to provide these services to the Fund.
above the rates for two of the mutual approval of the amendment to the Fund's
funds and the same as the rate for the contractual advisory fee schedule. The The Board considered the benefits
third mutual fund; (ii) above the Board also noted that the Fund shares realized by AIM as a result of portfolio
sub-advisory fee rate for the sub-advised directly in economies of scale through brokerage transactions executed through
mutual fund, although the advisory fee lower fees charged by third party service "soft dollar" arrangements. Under these
rate for such sub-advised mutual fund was providers based on the combined size of arrangements, portfolio brokerage
comparable to the Fund's; and (iii) below all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
the advisory fee rate for the offshore funds advised by AIM are used to pay for
fund. E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
OF AIM noted that soft dollar arrangements shift
The Board noted that AIM has the payment obligation for the research
contractually agreed to waive fees and/or The Board reviewed information from AIM and executions services from AIM to the
limit expenses of the Fund through at least concerning the costs of the advisory and funds and therefore may reduce AIM's
April 30, 2009 in an amount necessary to other services that AIM and its affiliates expenses. The Board also noted that
limit total annual operating expenses to a provide to the Fund and the profitability research obtained through soft dollar
specified percentage of average daily net of AIM and its affiliates in providing arrangements may be used by AIM in making
assets for each class of the Fund. The these services. The Board also reviewed investment decisions for the Fund and may
Board considered the contractual nature of information concerning the financial therefore benefit Fund shareholders. The
this fee waiver and noted that it remains condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
in effect until at least April 30, 2009. Board also reviewed with AIM the arrangements were appropriate. The Board
The Board reviewed the Fund's effective methodology used to prepare the also concluded that, based on their review
advisory fee rate, after taking account of profitability information. The Board and representations made by AIM, these
this expense limitation, and considered the considered the overall profitability of arrangements were consistent with
effect this expense limitation would have AIM, as well as the profitability of AIM regulatory requirements.
on the Fund's estimated total expenses. The in connection with managing the Fund. The
Board concluded that the levels of fee Board noted that AIM continues to operate The Board considered the fact that the
waivers/expense limitations for the Fund at a net profit, although increased Fund's uninvested cash and cash collateral
were fair and reasonable. expenses in recent years have reduced the from any securities lending arrangements
profitability of AIM and its affiliates. may be invested in money market funds
The Board noted that AIM has not The Board concluded that the Fund's advised by AIM pursuant to procedures
proposed any advisory fee waivers for the advisory fees were fair and reasonable, approved by the Board. The Board noted
Fund. However, the Board also noted that and that the level of profits realized by that AIM will receive advisory fees from
AIM has recommended that the Board approve AIM and its affiliates from providing these affiliated money market funds
an amendment to the Fund's contractual services to the Fund was not excessive in attributable to such investments, although
advisory fee schedule that would implement light of the nature, quality and extent of AIM has contractually agreed to waive the
the contractual advisory fee waiver that the services provided. The Board advisory fees payable by the Fund with
had been formerly committed to by AIM, considered whether AIM is financially respect to its investment of uninvested
which waiver provided for lower effective sound and has the resources necessary to cash in these affiliated money market
fee rates at all asset levels than the perform its obligations under the Fund's funds through at least April 30, 2009. The
Fund's current contractual advisory fee advisory agreement, and concluded that AIM Board considered the contractual nature of
schedule. The Board noted that AIM's has the financial resources necessary to this fee waiver and noted that it remains
recommendation was made in response to the fulfill these obligations. in effect until at least April 30, 2009.
recommendation of the independent Senior The Board concluded that the Fund's
Officer that AIM consider whether the F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
advisory fee waivers for certain equity AIM FUND'S SENIOR OFFICER collateral from any securities lending
Funds, including the Fund, should be arrangements in the affiliated money
simplified. The Board concluded that it The Board noted that, upon their market funds is in the best interests of
would be appropriate to approve the direction, the Senior Officer of the Fund, the Fund and its shareholders.
proposed amendment to the Fund's who is independent of AIM and AIM's
contractual advisory fee schedule and that affiliates, had prepared an independent
it was not necessary at this time to written evaluation to assist the Board in
discuss with AIM determining the reasonableness of the
proposed management fees of the AIM Funds,
including the Fund. The Board noted that
they had relied upon the Senior Officer's
written evaluation instead of a
competitive
AIM V.I. Financial Services Fund
Semiannual Report to Shareholders o June 30, 2007
SECTOR EQUITY
Sectors
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Financial Services Fund
Fund performance AIM V.I. Financial Services Fund, a
======================================================================================= series portfolio of AIM Variable Insurance
PERFORMANCE SUMMARY Funds, is currently offered through
insurance companies issuing variable
FUND VS. INDEXES products. You cannot purchase shares of
the Fund directly. Performance figures
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. given represent the Fund and are not
If variable product issuer charges were included, returns would be lower. intended to reflect actual variable
product values. They do not reflect sales
Series I Shares 0.29% charges, expenses and fees assessed in
Series II Shares 0.11 connection with a variable product. Sales
S&P 500 Index(1) (Broad Market Index) 6.96 charges, expenses and fees, which are
S&P 500 Financials Index(1) (Style-Specific Index) -0.79 determined by the variable product
Lipper VUF Financial Services Funds Category Average(1) (Peer Group Index) 1.05 issuers, will vary and will lower the
Lipper Financial Services Funds Index(1) (Former Peer Group Index) -0.20 total return.
Source: (1) Lipper Inc. Per NASD requirements, the most recent
month-end performance data at the Fund
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks level, excluding variable product charges,
frequently used as a general measure of U.S. stock market performance. is available on the AIM automated
information line, 866-702-4402. As
The S&P 500 Financials Index is a market capitalization weighted index of mentioned above, for the most recent
companies involved in activities such as banking, consumer finance, investment banking month-end performance including variable
and brokerage, asset management, insurance and investment, and real estate, including product charges, please contact your
REITs. variable product issuer or financial
advisor.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Financial
Services Funds Category Average as its peer group instead of the Lipper Financial
Services Funds Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund
to be compared with the Lipper VUF Financial Services Funds Category Average. The
unmanaged Lipper VUF Financial Services Funds Category Average represents the average
of all the variable insurance underlying financial services funds tracked by Lipper
Inc. Lipper Inc. is an independent mutual fund performance monitor.
The unmanaged Lipper Financial Services Funds Index represents an average of the
largest financial-services funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index,
including the indexes defined here, and consequently, the performance of the Fund may
deviate significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== The performance of the Fund's Series I
FUND PERFORMANCE and Series II share classes will differ
As of 6/30/07 primarily due to different class expenses.
SERIES I SHARES
Inception (9/20/99) 8.23% The performance data quoted represent
5 Years 9.03 past performance and cannot guarantee
1 Year 15.49 comparable future results; current
performance may be lower or higher. Please
SERIES II SHARES contact your variable product issuer or
Inception 7.96% financial advisor for the most recent
5 Years 8.76 month-end variable product performance.
1 Year 15.14 Performance figures reflect Fund expenses,
========================================== reinvested distributions and changes in
net asset value. Investment return and
Series II shares' inception date is April principal value will fluctuate so that you
30, 2004. Returns since that date are may have a gain or loss when you sell
historical. All other returns are the shares.
blended returns of the historical
performance of Series II shares since The total annual Fund operating expense
their inception and the restated ratio set forth in the most recent Fund
historical performance of Series I shares prospectus as of the date of this report
(for periods prior to inception of Series for Series I and Series II shares was
II shares) adjusted to reflect the Rule 1.13% and 1.38%, respectively. The expense
12b-1 fees applicable to Series II shares. ratios presented above may vary from the
The inception date of Series I shares is expense ratios presented in other sections
September 20, 1999. of this report that are based on expenses
incurred during the period covered by this
report.
AIM V.I. Financial Services Fund
PORTFOLIO COMPOSITION*
By industry, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Other Diversified Financial Services 15.9%
- ----------------------------------------------------------
Thrifts & Mortgage Finance 12.2
- ----------------------------------------------------------
Investment Banking & Brokerage 10.6
- ----------------------------------------------------------
Asset Management & Custody Banks 10.5
- ----------------------------------------------------------
Insurance Brokers 8.8
- ----------------------------------------------------------
Property & Casualty Insurance 8.1
- ----------------------------------------------------------
Regional Banks 7.9
- ----------------------------------------------------------
Multi-Line Insurance 6.4
- ----------------------------------------------------------
Consumer Finance 5.9
- ----------------------------------------------------------
Diversified Banks 5.6
- ----------------------------------------------------------
Diversified Capital Markets 2.3
- ----------------------------------------------------------
Life & Health Insurance 1.8
- ----------------------------------------------------------
Specialized Consumer Services 1.8
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 2.2
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.81%
ASSET MANAGEMENT & CUSTODY BANKS-10.49%
Bank of New York Mellon Corp. 133,128 $ 5,516,824
- ----------------------------------------------------------------------
Blackstone Group L.P. (The)(a) 23,972 701,661
- ----------------------------------------------------------------------
FBR Capital Markets Corp.(a) 45,711 772,516
- ----------------------------------------------------------------------
Federated Investors, Inc.-Class B 107,201 4,109,014
- ----------------------------------------------------------------------
State Street Corp. 32,832 2,245,709
======================================================================
13,345,724
======================================================================
CONSUMER FINANCE-5.92%
Capital One Financial Corp. 96,010 7,531,024
======================================================================
DIVERSIFIED BANKS-5.64%
U.S. Bancorp 89,642 2,953,704
- ----------------------------------------------------------------------
Wachovia Corp. 82,299 4,217,824
======================================================================
7,171,528
======================================================================
DIVERSIFIED CAPITAL MARKETS-2.30%
UBS A.G.-(Switzerland) 48,724 2,923,927
======================================================================
INSURANCE BROKERS-8.81%
AON Corp. 75,365 3,211,303
- ----------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 189,812 5,861,394
- ----------------------------------------------------------------------
National Financial Partners Corp. 46,203 2,139,661
======================================================================
11,212,358
======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-10.60%
Merrill Lynch & Co., Inc. 88,407 $ 7,389,057
- ----------------------------------------------------------------------
Morgan Stanley 72,610 6,090,527
======================================================================
13,479,584
======================================================================
LIFE & HEALTH INSURANCE-1.77%
Prudential Financial, Inc. 9,920 964,522
- ----------------------------------------------------------------------
StanCorp Financial Group, Inc. 24,563 1,289,066
======================================================================
2,253,588
======================================================================
MULTI-LINE INSURANCE-6.36%
American International Group, Inc. 22,677 1,588,070
- ----------------------------------------------------------------------
Genworth Financial Inc.-Class A 49,257 1,694,441
- ----------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 48,850 4,812,214
======================================================================
8,094,725
======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-15.92%
Bank of America Corp. 91,576 4,477,151
- ----------------------------------------------------------------------
Citigroup Inc. 165,829 8,505,369
- ----------------------------------------------------------------------
JPMorgan Chase & Co. 150,102 7,272,442
======================================================================
20,254,962
======================================================================
</Table>
AIM V.I. Financial Services Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-8.13%
ACE Ltd. 74,187 $ 4,638,171
- ----------------------------------------------------------------------
MBIA Inc. 53,193 3,309,668
- ----------------------------------------------------------------------
Security Capital Assurance Ltd. 77,487 2,392,024
======================================================================
10,339,863
======================================================================
REGIONAL BANKS-7.89%
Fifth Third Bancorp 134,155 5,335,344
- ----------------------------------------------------------------------
Popular, Inc. 83,280 1,338,310
- ----------------------------------------------------------------------
SunTrust Banks, Inc. 24,889 2,133,983
- ----------------------------------------------------------------------
Zions Bancorp 15,919 1,224,330
======================================================================
10,031,967
======================================================================
SPECIALIZED CONSUMER SERVICES-1.80%
H&R Block, Inc. 97,790 2,285,352
======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-12.18%
Fannie Mae 142,788 $ 9,328,340
- ----------------------------------------------------------------------
Freddie Mac 74,553 4,525,367
- ----------------------------------------------------------------------
Hudson City Bancorp, Inc. 134,176 1,639,631
======================================================================
15,493,338
======================================================================
Total Common Stocks & Other Equity
Interests (Cost $98,379,710) 124,417,940
======================================================================
MONEY MARKET FUNDS-0.24%
Liquid Assets Portfolio-Institutional
Class(b) 151,537 151,537
- ----------------------------------------------------------------------
Premier Portfolio-Institutional Class(b) 151,537 151,537
======================================================================
Total Money Market Funds (Cost $303,074) 303,074
======================================================================
TOTAL INVESTMENTS-98.05% (Cost $98,682,784) 124,721,014
======================================================================
OTHER ASSETS LESS LIABILITIES-1.95% 2,479,031
======================================================================
NET ASSETS-100.00% $127,200,045
______________________________________________________________________
======================================================================
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Financial Services Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $98,379,710) $124,417,940
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $303,074) 303,074
=============================================================
Total Investments (Cost $98,682,784) 124,721,014
=============================================================
Foreign currencies, at value (Cost $35,858) 36,153
- -------------------------------------------------------------
Receivables for:
Investments sold 2,668,511
- -------------------------------------------------------------
Fund shares sold 8,276
- -------------------------------------------------------------
Dividends 217,684
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 18,003
- -------------------------------------------------------------
Other assets 1,450
=============================================================
Total assets 127,671,091
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 238,138
- -------------------------------------------------------------
Fund shares reacquired 89,050
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 27,655
- -------------------------------------------------------------
Accrued administrative services fees 84,513
- -------------------------------------------------------------
Accrued distribution fees -- Series II 2,073
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,881
- -------------------------------------------------------------
Accrued transfer agent fees 980
- -------------------------------------------------------------
Accrued operating expenses 24,756
=============================================================
Total liabilities 471,046
=============================================================
Net assets applicable to shares outstanding $127,200,045
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 87,634,732
- -------------------------------------------------------------
Undistributed net investment income 2,897,916
- -------------------------------------------------------------
Undistributed net realized gain 10,619,352
- -------------------------------------------------------------
Unrealized appreciation 26,048,045
=============================================================
$127,200,045
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $123,849,210
_____________________________________________________________
=============================================================
Series II $ 3,350,835
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 7,094,741
_____________________________________________________________
=============================================================
Series II 193,150
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 17.46
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 17.35
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$31,135) $1,646,337
- ------------------------------------------------------------
Dividends from affiliated money market funds 109,485
============================================================
Total investment income 1,755,822
============================================================
EXPENSES:
Advisory fees 518,650
- ------------------------------------------------------------
Administrative services fees 197,551
- ------------------------------------------------------------
Custodian fees 2,710
- ------------------------------------------------------------
Distribution fees -- Series II 3,502
- ------------------------------------------------------------
Transfer agent fees 4,483
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 10,923
- ------------------------------------------------------------
Other 16,877
============================================================
Total expenses 754,696
============================================================
Less: Fees waived (963)
============================================================
Net expenses 753,733
============================================================
Net investment income 1,002,089
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 4,394,432
- ------------------------------------------------------------
Foreign currencies 816
============================================================
4,395,248
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (5,116,107)
- ------------------------------------------------------------
Foreign currencies 9,897
============================================================
(5,106,210)
============================================================
Net realized and unrealized gain (loss) (710,962)
============================================================
Net increase in net assets resulting from
operations $ 291,127
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Financial Services Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,002,089 $ 1,919,264
- ------------------------------------------------------------------------------
Net realized gain 4,395,248 7,599,322
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) (5,106,210) 10,902,597
==============================================================================
Net increase in net assets resulting from
operations 291,127 20,421,183
==============================================================================
Distributions to shareholders from net
investment income:
Series I -- (2,166,144)
- ------------------------------------------------------------------------------
Series II -- (20,378)
==============================================================================
Total distributions from net investment
income -- (2,186,522)
==============================================================================
Distributions to shareholders from net
realized gains:
Series I -- (834,392)
- ------------------------------------------------------------------------------
Series II -- (7,888)
==============================================================================
Total distributions from net realized
gains -- (842,280)
==============================================================================
Decrease in net assets resulting from
distributions -- (3,028,802)
==============================================================================
Share transactions-net:
Series I (22,522,025) (12,475,511)
- ------------------------------------------------------------------------------
Series II 1,674,764 1,586,646
==============================================================================
Net increase (decrease) in net assets
resulting from share transactions (20,847,261) (10,888,865)
==============================================================================
Net increase (decrease) in net assets (20,556,134) 6,503,516
==============================================================================
NET ASSETS:
Beginning of period 147,756,179 141,252,663
==============================================================================
End of period (including undistributed net
investment income of $2,897,916 and
$1,895,827, respectively) $127,200,045 $147,756,179
______________________________________________________________________________
==============================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Financial Services Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is capital growth.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
AIM V.I. Financial Services Fund
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
AIM V.I. Financial Services Fund
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- Single
Sector/Non-Diversified -- The Fund's investments are concentrated in a
comparatively narrow segment of the economy. Consequently, the Fund may
tend to be more volatile than other mutual funds, and the value of the
Fund's investments may tend to rise and fall more rapidly.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
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 FEES PAID TO AFFILIATES
The Trust has entered into a master investment agreement with A I M Advisors,
Inc. ("AIM). Under the terms of the investment advisory agreement, the Fund pays
an advisory fee to AIM at the annual rate of 0.75% of the Fund's average daily
net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007, AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Next $250 million 0.74%
- -------------------------------------------------------------------
Next $500 million 0.73%
- -------------------------------------------------------------------
Next $1.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.71%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.69%
- -------------------------------------------------------------------
Over $10 billion 0.68%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. In addition, the Fund may also
benefit from a one time credit to be used to offset custodian expenses. These
credits are used to pay certain expenses incurred by the Fund. To the extent
that the annualized expense ratio does not exceed the expense limitation, AIM
will retain its ability to be reimbursed for such fee waivers or reimbursements
prior to the end of each fiscal year. AIM did not waive fees and/or reimburse
expenses during the period under this expense limitation.
AIM V.I. Financial Services Fund
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $963.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,794 for accounting and fund administrative services and reimbursed $172,757
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in an affiliated money market fund. The
Fund and the money market fund below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in an affiliated money market fund
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/2006 AT COST FROM SALES 06/30/2007 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $ 5,826,336 $ 6,500,074 $(12,174,873) $151,537 $ 54,894
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 5,826,337 6,500,074 (12,174,874) 151,537 54,591
=================================================================================================================================
Total Investments in Affiliates $11,652,673 $13,000,148 $(24,349,747) $303,074 $109,485
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,474 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
AIM V.I. Financial Services Fund
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $4,874,012 and
$17,755,249, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $27,288,010
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,170,087)
===============================================================================
Net unrealized appreciation of investment securities $25,117,923
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $99,603,091.
</Table>
NOTE 8--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 421,929 $ 7,351,334 1,717,516 $ 28,153,085
- ----------------------------------------------------------------------------------------------------------------------
Series II 134,951 2,345,287 94,756 1,577,115
======================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 175,405 3,000,536
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- 1,660 28,266
======================================================================================================================
Reacquired:
Series I (1,716,730) (29,873,359) (2,756,103) (43,629,132)
- ----------------------------------------------------------------------------------------------------------------------
Series II (37,870) (670,523) (1,101) (18,735)
======================================================================================================================
(1,197,720) $(20,847,261) (767,867) $(10,888,865)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 81% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 9--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Financial Services Fund
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.41 $ 15.26 $ 14.61 $ 13.54 $ 10.50 $ 12.42
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13(a) 0.23(a) 0.19(a) 0.15 0.08 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.08) 2.28 0.66 1.02 3.02 (1.93)
=================================================================================================================================
Total from investment operations 0.05 2.51 0.85 1.17 3.10 (1.85)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.26) (0.20) (0.10) (0.06) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.10) -- -- -- --
=================================================================================================================================
Total distributions -- (0.36) (0.20) (0.10) (0.06) (0.07)
=================================================================================================================================
Net asset value, end of period $ 17.46 $ 17.41 $ 15.26 $ 14.61 $ 13.54 $ 10.50
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.29% 16.52% 5.84% 8.68% 29.58% (14.90)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $123,849 $146,092 $141,241 $203,879 $210,352 $142,403
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.09%(c) 1.12% 1.12% 1.12% 1.09% 1.09%
=================================================================================================================================
Ratio of net investment income to average
net assets 1.45%(c) 1.44% 1.30% 0.89% 0.87% 0.57%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 4% 14% 22% 67% 65% 72%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$136,627,981.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
-------------------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2007 2006 2005 2004
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.33 $15.23 $14.59 $ 13.50
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10(a) 0.20(a) 0.15(a) 0.12
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.08) 2.26 0.67 1.07
===========================================================================================================================
Total from investment operations 0.02 2.46 0.82 1.19
===========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.26) (0.18) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.10) -- --
===========================================================================================================================
Total distributions -- (0.36) (0.18) (0.10)
===========================================================================================================================
Net asset value, end of period $ 17.35 $17.33 $15.23 $ 14.59
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 0.11% 16.22% 5.61% 8.85%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 3,351 $1,664 $ 11 $ 11
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 1.34%(c) 1.37% 1.37% 1.38%(d)
===========================================================================================================================
Ratio of net investment income to average net assets 1.20%(c) 1.19% 1.05% 0.63%(d)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(e) 4% 14% 22% 67%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$2,824,723.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Financial Services Fund
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other mutual
funds and that the defendants concealed such payments from investors by
disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Financial Services Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,002.90 $5.41 $1,019.39 $5.46 1.09%
Series II 1,000.00 1,001.10 6.65 1,018.15 6.71 1.34
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Financial Services Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM Committee considers each Sub-Committee's A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations and makes its own PROVIDED BY AIM
the Investment Company Act of 1940 to recommendations regarding the performance,
approve annually the renewal of the AIM fees and expenses of the AIM Funds to the The Board reviewed the advisory services
V.I. Financial Services Fund (the Fund) full Board. Moreover, the Investments provided to the Fund by AIM under the
investment advisory agreement with A I M Committee considers each Sub-Committee's Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendations in making its annual of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, recommendation to the Board whether to the credentials and experience of the
the Board as a whole and the disinterested approve the continuance of each AIM Fund's officers and employees of AIM who provide
or "independent" Trustees, voting investment advisory agreement and these services. The Board's review of the
separately, approved the continuance of sub-advisory agreement, if applicable qualifications of AIM to provide these
the Fund's investment advisory agreement (advisory agreements), for another year. services included the Board's
for another year, effective July 1, 2007. consideration of AIM's portfolio and
In doing so, the Board determined that the The independent Trustees, as mentioned product review process, various back
Fund's advisory agreement is in the best above, are assisted in their annual office support functions provided by AIM,
interests of the Fund and its shareholders evaluation of the advisory agreements by and AIM's equity and fixed income trading
and that the compensation to AIM under the the independent Senior Officer. One operations. The Board concluded that the
Fund's advisory agreement is fair and responsibility of the Senior Officer is to nature, extent and quality of the advisory
reasonable. manage the process by which the AIM Funds' services provided to the Fund by AIM were
proposed management fees are negotiated appropriate and that AIM currently is
The independent Trustees met separately during the annual contract renewal process providing satisfactory advisory services
during their evaluation of the Fund's to ensure that they are negotiated in a in accordance with the terms of the Fund's
investment advisory agreement with manner which is at arms' length and advisory agreement. In addition, based on
independent legal counsel from whom they reasonable. Accordingly, the Senior their ongoing meetings throughout the year
received independent legal advice, and the Officer must either supervise a with the Fund's portfolio managers, the
independent Trustees also received competitive bidding process or prepare an Board concluded that these individuals are
assistance during their deliberations from independent written evaluation. The Senior competent and able to continue to carry
the independent Senior Officer, a Officer has recommended that an out their responsibilities under the
full-time officer of the AIM Funds who independent written evaluation be provided Fund's advisory agreement.
reports directly to the independent and, upon the direction of the Board, has
Trustees. The following discussion more prepared an independent written In determining whether to continue the
fully describes the process employed by evaluation. Fund's advisory agreement, the Board
the Board to evaluate the performance of considered the prior relationship between
the AIM Funds (including the Fund) During the annual contract renewal AIM and the Fund, as well as the Board's
throughout the year and, more process, the Board considered the factors knowledge of AIM's operations, and
specifically, during the annual contract discussed below under the heading "Factors concluded that it was beneficial to
renewal meetings. and Conclusions and Summary of Independent maintain the current relationship, in
Written Fee Evaluation" in evaluating the part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS fairness and reasonableness of the Fund's also considered the steps that AIM and its
advisory agreement at the contract renewal affiliates have taken over the last
The Board's Investments Committee has meetings and at their meetings throughout several years to improve the quality and
established three Sub-Committees which are the year as part of their ongoing efficiency of the services they provide to
responsible for overseeing the management oversight of the Fund. The Fund's advisory the Funds in the areas of investment
of a number of the series portfolios of agreement was considered separately, performance, product line diversification,
the AIM Funds. This Sub-Committee structure although the Board also considered the distribution, fund operations, shareholder
permits the Trustees to focus on the common interests of all of the AIM Funds services and compliance. The Board
performance of the AIM Funds that have in their deliberations. The Board concluded that the quality and efficiency
been assigned to them. The Sub-Committees comprehensively considered all of the of the services AIM and its affiliates
meet throughout the year to review the information provided to them and did not provide to the AIM Funds in each of these
performance of their assigned funds, and identify any particular factor that was areas have generally improved, and support
the Sub-Committees review monthly and controlling. Furthermore, each Trustee may the Board's approval of the continuance of
quarterly comparative performance have evaluated the information provided the Fund's advisory agreement.
information and periodic asset flow data differently from one another and
for their assigned funds. These materials attributed different weight to the various B. FUND PERFORMANCE
are prepared under the direction and factors. The Trustees recognized that the
supervision of the independent Senior advisory arrangements and resulting The Board compared the Fund's performance
Officer. Over the course of each year, the advisory fees for the Fund and the other during the past one, three and five
Sub-Committees meet with portfolio managers AIM Funds are the result of years of calendar years to the performance of funds
for their assigned funds and other members review and negotiation between the in the Fund's Lipper peer group that are
of management and review with these Trustees and AIM, that the Trustees may not managed by AIM, and against the
individuals the performance, investment focus to a greater extent on certain performance of all funds in the S&P 500
objective(s), policies, strategies and aspects of these arrangements in some Financials Index. The Board also reviewed
limitations of these funds. years than others, and that the Trustees' the methodology used by Lipper to identify
deliberations and conclusions in a the Fund's peers. The Board noted that the
In addition to their meetings particular year may be based in part on Fund's performance was comparable to the
throughout the year, the Sub-Committees their deliberations and conclusions of median performance of its peers for the
meet at designated contract renewal these same arrangements throughout the past one year period, and below such
meetings each year to conduct an in-depth year and in prior years. performance for the three and five year
review of the performance, fees and periods. The Board noted that the Fund's
expenses of their assigned funds. During FACTORS AND CONCLUSIONS AND SUMMARY OF performance was below the performance of
the contract renewal process, the Trustees INDEPENDENT WRITTEN FEE EVALUATION the Index for the one, three and five year
receive comparative performance and fee periods. The Board noted that AIM made
data regarding all the AIM Funds prepared The discussion below serves as a summary changes to the Fund's portfolio management
by an independent company, Lipper, Inc., of the Senior Officer's independent team in 2004, which need more time to be
under the direction and supervision of the written evaluation, as well as a evaluated before a conclusion can be
independent Senior Officer who also discussion of the material factors and reached that the changes have adequately
prepares a separate analysis of this related conclusions that formed the basis addressed the Fund's underperformance. The
information for the Trustees. Each for the Board's approval of the Fund's Board also considered the steps AIM has
Sub-Committee then makes recommendations advisory agreement. Unless otherwise taken over the last several years to
to the Investments Committee regarding the stated, information set forth below is as improve the quality and efficiency of the
performance, fees and expenses of their of June 27, 2007 and does not reflect any services that AIM provides to the AIM
assigned funds. The Investments changes that may have occurred since that Funds. The Board concluded that AIM
date, including but not limited to changes continues to be responsive
to the Fund's performance, advisory fees,
expense limitations and/or fee waivers.
(continued)
AIM V.I. Financial Services Fund
to the Board's focus on fund performance. After taking account of the Fund's the Fund's advisory agreement, the Board
However, due to the Fund's contractual advisory fee rate, as well as considered the Senior Officer's written
underperformance, the Board also concluded the comparative advisory fee information evaluation.
that it would be appropriate for the Board and the expense limitation discussed
to continue to closely monitor and review above, the Board concluded that the Fund's G. COLLATERAL BENEFITS TO AIM AND ITS
the performance of the Fund. Although the advisory fees were fair and reasonable. AFFILIATES
independent written evaluation of the
Fund's Senior Officer (discussed below) D. ECONOMIES OF SCALE AND BREAKPOINTS The Board considered various other
only considered Fund performance through benefits received by AIM and its
the most recent calendar year, the Board The Board considered the extent to which affiliates resulting from AIM's
also reviewed more recent Fund performance there are economies of scale in AIM's relationship with the Fund, including the
and this review did not change their provision of advisory services to the fees received by AIM and its affiliates
conclusions. Fund. The Board also considered whether for their provision of administrative,
the Fund benefits from such economies of transfer agency and distribution services
C. ADVISORY FEES AND FEE WAIVERS scale through contractual breakpoints in to the Fund. The Board considered the
the Fund's advisory fee schedule or performance of AIM and its affiliates in
The Board compared the Fund's contractual through advisory fee waivers or expense providing these services and the
advisory fee rate to the contractual limitations. The Board noted that the organizational structure employed by AIM
advisory fee rates of funds in the Fund's Fund's contractual advisory fee schedule and its affiliates to provide these
Lipper peer group that are not managed by currently does not include any breakpoints services. The Board also considered that
AIM, at a common asset level and as of the but that the amendment to the Fund's these services are provided to the Fund
end of the past calendar year. The Board contractual advisory fee schedule pursuant to written contracts which are
noted that the Fund's advisory fee rate discussed above provides for seven reviewed and approved on an annual basis
was below the median advisory fee rate of breakpoints. Based on this information, by the Board. The Board concluded that AIM
its peers. The Board also reviewed the the Board concluded that the Fund's and its affiliates were providing these
methodology used by Lipper and noted that advisory fees will appropriately reflect services in a satisfactory manner and in
the contractual fee rates shown by Lipper economies of scale upon the Board's accordance with the terms of their
include any applicable long-term approval of the amendment to the Fund's contracts, and were qualified to continue
contractual fee waivers. The Board also contractual advisory fee schedule. The to provide these services to the Fund.
compared the Fund's contractual advisory Board also noted that the Fund shares
fee rate to the contractual advisory fee directly in economies of scale through The Board considered the benefits
rates of other clients of AIM and its lower fees charged by third party service realized by AIM as a result of portfolio
affiliates with investment strategies providers based on the combined size of brokerage transactions executed through
comparable to those of the Fund, including all of the AIM Funds and affiliates. "soft dollar" arrangements. Under these
one mutual fund advised by AIM. The Board arrangements, portfolio brokerage
noted that the Fund's rate was comparable E. PROFITABILITY AND FINANCIAL RESOURCES commissions paid by the Fund and/or other
to the rate for the mutual fund. OF AIM funds advised by AIM are used to pay for
research and execution services. The Board
The Board noted that AIM has The Board reviewed information from AIM noted that soft dollar arrangements shift
contractually agreed to waive fees and/or concerning the costs of the advisory and the payment obligation for the research
limit expenses of the Fund through at other services that AIM and its affiliates and executions services from AIM to the
least April 30, 2009 in an amount provide to the Fund and the profitability funds and therefore may reduce AIM's
necessary to limit total annual operating of AIM and its affiliates in providing expenses. The Board also noted that
expenses to a specified percentage of these services. The Board also reviewed research obtained through soft dollar
average daily net assets for each class of information concerning the financial arrangements may be used by AIM in making
the Fund. The Board considered the condition of AIM and its affiliates. The investment decisions for the Fund and may
contractual nature of this fee waiver and Board also reviewed with AIM the therefore benefit Fund shareholders. The
noted that it remains in effect until at methodology used to prepare the Board concluded that AIM's soft dollar
least April 30, 2009. The Board reviewed profitability information. The Board arrangements were appropriate. The Board
the Fund's effective advisory fee rate, considered the overall profitability of also concluded that, based on their review
after taking account of this expense AIM, as well as the profitability of AIM and representations made by AIM, these
limitation, and considered the effect this in connection with managing the Fund. The arrangements were consistent with
expense limitation would have on the Board noted that AIM continues to operate regulatory requirements.
Fund's estimated total expenses. The Board at a net profit, although increased
concluded that the levels of fee expenses in recent years have reduced the The Board considered the fact that the
waivers/expense limitations for the Fund profitability of AIM and its affiliates. Fund's uninvested cash and cash collateral
were fair and reasonable. The Board concluded that the Fund's from any securities lending arrangements
advisory fees were fair and reasonable, may be invested in money market funds
The Board noted that AIM has not and that the level of profits realized by advised by AIM pursuant to procedures
proposed any advisory fee waivers for the AIM and its affiliates from providing approved by the Board. The Board noted
Fund. However, the Board also noted that services to the Fund was not excessive in that AIM will receive advisory fees from
AIM has recommended that the Board approve light of the nature, quality and extent of these affiliated money market funds
an amendment to the Fund's contractual the services provided. The Board attributable to such investments, although
advisory fee schedule that would implement considered whether AIM is financially AIM has contractually agreed to waive the
the contractual advisory fee waiver that sound and has the resources necessary to advisory fees payable by the Fund with
had been formerly committed to by AIM, perform its obligations under the Fund's respect to its investment of uninvested
which waiver provided for lower effective advisory agreement, and concluded that AIM cash in these affiliated money market
fee rates at all asset levels than the has the financial resources necessary to funds through at least April 30, 2009. The
Fund's current contractual advisory fee fulfill these obligations. Board considered the contractual nature of
schedule. The Board noted that AIM's this fee waiver and noted that it remains
recommendation was made in response to the F. INDEPENDENT WRITTEN EVALUATION OF THE in effect until at least April 30, 2009.
recommendation of the independent Senior FUND'S SENIOR OFFICER The Board concluded that the Fund's
Officer that AIM consider whether the investment of uninvested cash and cash
advisory fee waivers for certain equity The Board noted that, upon their collateral from any securities lending
AIM Funds, including the Fund, should be direction, the Senior Officer of the Fund, arrangements in the affiliated money
simplified. The Board concluded that it who is independent of AIM and AIM's market funds is in the best interests of
would be appropriate to approve the affiliates, had prepared an independent the Fund and its shareholders.
proposed amendment to the Fund's written evaluation to assist the Board in
contractual advisory fee schedule and that determining the reasonableness of the
it was not necessary at this time to proposed management fees of the AIM Funds,
discuss with AIM whether to implement any including the Fund. The Board noted that
fee waivers for the Fund. they had relied upon the Senior Officer's
written evaluation instead of a
competitive bidding process. In
determining whether to continue
AIM V.I. Global Health Care Fund
Semiannual Report to Shareholders o June 30, 2007
SECTOR EQUITY
Sectors
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Global Health Care Fund
Fund performance product values. They do not reflect sales
======================================================================================= charges, expenses and fees assessed in
PERFORMANCE SUMMARY connection with a variable product. Sales
charges, expenses and fees, which are
FUND VS. INDEXES determined by the variable product
issuers, will vary and will lower the
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. total return.
If variable product issuer charges were included, returns would be lower.
Per NASD requirements, the most recent
Series I Shares 6.04% month-end performance data at the Fund
Series II Shares 5.94 level, excluding variable product charges,
MSCI World Index(1) (Broad Market Index) 9.17 is available on the AIM automated
MSCI World Health Care Index(1) (Style-Specific Index) 3.61 information line, 866-702-4402. As
Lipper VUF Health/Biotechnology Funds Category Average(1) (Peer Group Index) 5.91 mentioned above, for the most recent
Lipper Health/Biotechnology Funds Index(1) (Former Peer Group Index) 5.77 month-end performance including variable
product charges, please contact your
Source: (1) Lipper Inc. variable product issuer or financial
advisor.
The unmanaged MSCI World Index -- SERVICE MARK -- is a group of global securities
tracked by Morgan Stanley Capital International.
The MSCI World Health Care Index is a free float-adjusted market capitalization
index that represents the health care segment in global developed market equity
performance.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF)
Health/Biotechnology Funds Category Average as its peer group instead of the Lipper
Health/Biotechnology Funds Index. In 2006, Lipper began publishing VUF indexes,
allowing the Fund to be compared with the Lipper VUF Health/Biotechnology Funds
Category Average. The unmanaged Lipper VUF Health/Biotechnology Funds Category Average
represents the average of all the variable insurance underlying Health/Biotechnology
Funds tracked by Lipper Inc. Lipper Inc. is an independent mutual fund performance
monitor.
The unmanaged Lipper Health/Biotechnology Funds Index represents an average of the
largest health and biotechnology funds tracked by Lipper Inc., an independent mutual
fund performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== The performance data quoted represent
FUND PERFORMANCE past performance and cannot guarantee
As of 6/30/07 comparable future results; current
SERIES I SHARES performance may be lower or higher. Please
Inception (5/21/97) 8.89% contact your variable product issuer or
10 Years 8.99 financial advisor for the most recent
5 Years 8.05 month-end variable product performance.
1 Year 13.60 Performance figures reflect Fund expenses,
reinvested distributions and changes in
SERIES II SHARES net asset value. Investment return and
10 Years 8.72 principal value will fluctuate so that you
5 Years 7.78 may have a gain or loss when you sell
1 Year 13.32 shares.
==========================================
The total annual Fund operating expense
Series II shares' inception date is April ratio set forth in the most recent Fund
30, 2004. Returns since that date are prospectus as of the date of this report
historical. All other returns are the for Series I and Series II shares was
blended returns of the historical 1.11% and 1.36%, respectively. The expense
performance of Series II shares since ratios presented above may vary from the
their inception and the restated expense ratios presented in other sections
historical performance of Series I shares of this report that are based on expenses
(for periods prior to inception of Series incurred during the period covered by this
II shares) adjusted to reflect the Rule report.
12b-1 fees applicable to Series II shares.
The inception date of Series I shares is AIM V.I. Global Health Care Fund, a
May 21, 1997. series portfolio of AIM Variable Insurance
Funds, is currently offered through
The performance of the Fund's Series I insurance companies issuing variable
and Series II share classes will differ products. You cannot purchase shares of
primarily due to different class expenses. the Fund directly. Performance figures
given represent the Fund and are not
intended to reflect actual variable
AIM V.I. Global Health Care Fund
PORTFOLIO COMPOSITION
By country, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
U.S.A. 74.9%
- ----------------------------------------------------------
Switzerland 8.6
- ----------------------------------------------------------
France 4.0
- ----------------------------------------------------------
United Kingdom 3.3
- ----------------------------------------------------------
Germany 3.1
- ----------------------------------------------------------
Countries each less than 2.0% of portfolio 4.1
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 2.0
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-74.90%
BIOTECHNOLOGY-22.88%
Acadia Pharmaceuticals Inc.(a)(b) 117,413 $ 1,605,036
- ------------------------------------------------------------------------
Affymax Inc.(b) 13,195 355,737
- ------------------------------------------------------------------------
Altus Pharmaceuticals Inc.(b) 62,744 724,066
- ------------------------------------------------------------------------
Amgen Inc.(b) 190,253 10,519,088
- ------------------------------------------------------------------------
Arena Pharmaceuticals, Inc.(b) 71,229 782,807
- ------------------------------------------------------------------------
Array BioPharma Inc.(b) 69,439 810,353
- ------------------------------------------------------------------------
Avigen, Inc.(b) 109,331 672,386
- ------------------------------------------------------------------------
Biogen Idec Inc.(b) 84,873 4,540,705
- ------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(b) 173,606 3,114,492
- ------------------------------------------------------------------------
Celgene Corp.(b) 108,800 6,237,504
- ------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(b) 83,803 1,651,757
- ------------------------------------------------------------------------
Encysive Pharmaceuticals Inc.(a)(b) 114,372 203,582
- ------------------------------------------------------------------------
Genentech, Inc.(b) 45,635 3,452,744
- ------------------------------------------------------------------------
Genzyme Corp.(b) 172,520 11,110,288
- ------------------------------------------------------------------------
Gilead Sciences, Inc.(b) 266,486 10,331,662
- ------------------------------------------------------------------------
Human Genome Sciences, Inc.(b) 161,000 1,436,120
- ------------------------------------------------------------------------
ImClone Systems Inc.(b) 53,393 1,887,976
- ------------------------------------------------------------------------
Incyte Corp.(b) 171,570 1,029,420
- ------------------------------------------------------------------------
InterMune, Inc.(a)(b) 33,006 856,176
- ------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc.(b) 92,964 908,258
- ------------------------------------------------------------------------
MannKind Corp.(b) 65,148 803,275
- ------------------------------------------------------------------------
Medarex, Inc.(b) 198,092 2,830,735
- ------------------------------------------------------------------------
Myriad Genetics, Inc.(b) 42,621 1,585,075
- ------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc.(a)(b) 99,898 2,687,256
- ------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(b) 25,669 929,474
- ------------------------------------------------------------------------
Panacos Pharmaceuticals Inc.(a)(b) 249,150 804,755
- ------------------------------------------------------------------------
PDL BioPharma Inc.(b) 79,634 1,855,472
- ------------------------------------------------------------------------
Theravance, Inc.(b) 28,850 923,200
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
BIOTECHNOLOGY-(CONTINUED)
United Therapeutics Corp.(b) 82,993 $ 5,291,634
- ------------------------------------------------------------------------
Vanda Pharmaceuticals Inc.(a)(b) 49,677 1,006,456
- ------------------------------------------------------------------------
Vertex Pharmaceuticals Inc.(b) 73,676 2,104,187
- ------------------------------------------------------------------------
ZymoGenetics, Inc.(a)(b) 226,336 3,306,769
========================================================================
86,358,445
========================================================================
HEALTH CARE DISTRIBUTORS-0.53%
Animal Health International, Inc.(b) 136,768 1,981,768
========================================================================
HEALTH CARE EQUIPMENT-10.55%
Baxter International Inc. 69,944 3,940,645
- ------------------------------------------------------------------------
Cytyc Corp.(b) 93,729 4,040,657
- ------------------------------------------------------------------------
Dexcom Inc.(a)(b) 215,839 1,767,721
- ------------------------------------------------------------------------
Foxhollow Technologies Inc.(b) 92,951 1,974,279
- ------------------------------------------------------------------------
Hospira, Inc.(b) 99,469 3,883,270
- ------------------------------------------------------------------------
Medtronic, Inc. 75,175 3,898,576
- ------------------------------------------------------------------------
NxStage Medical, Inc.(a)(b) 146,284 1,891,452
- ------------------------------------------------------------------------
Respironics, Inc.(b) 167,133 7,118,195
- ------------------------------------------------------------------------
St. Jude Medical, Inc.(b) 101,269 4,201,651
- ------------------------------------------------------------------------
Symmetry Medical Inc.(b) 115,084 1,842,495
- ------------------------------------------------------------------------
Thoratec Corp.(b) 135,677 2,495,100
- ------------------------------------------------------------------------
Varian Medical Systems, Inc.(b) 65,014 2,763,745
========================================================================
39,817,786
========================================================================
HEALTH CARE FACILITIES-0.90%
Assisted Living Concepts Inc.-Class A(b) 188,519 2,007,727
- ------------------------------------------------------------------------
Skilled Healthcare Group Inc.-Class A(b) 90,401 1,402,120
========================================================================
3,409,847
========================================================================
HEALTH CARE SERVICES-4.94%
DaVita, Inc.(b) 106,772 5,752,875
- ------------------------------------------------------------------------
Express Scripts, Inc.(b) 147,267 7,364,823
- ------------------------------------------------------------------------
</Table>
AIM V.I. Global Health Care Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
HEALTH CARE SERVICES-(CONTINUED)
HMS Holdings Corp.(b) 128,416 $ 2,457,882
- ------------------------------------------------------------------------
Laboratory Corp. of America Holdings(b) 39,119 3,061,453
========================================================================
18,637,033
========================================================================
HEALTH CARE SUPPLIES-1.54%
Cooper Cos., Inc. (The) 63,168 3,368,118
- ------------------------------------------------------------------------
DJO Inc.(b) 58,972 2,433,774
========================================================================
5,801,892
========================================================================
HEALTH CARE TECHNOLOGY-1.83%
Eclipsys Corp.(b) 141,026 2,792,315
- ------------------------------------------------------------------------
TriZetto Group, Inc. (The)(b) 83,871 1,623,742
- ------------------------------------------------------------------------
Vital Images, Inc.(b) 92,254 2,505,619
========================================================================
6,921,676
========================================================================
INDUSTRIAL CONGLOMERATES-1.00%
Tyco International Ltd.(b) 112,164 3,790,022
========================================================================
LIFE SCIENCES TOOLS & SERVICES-9.89%
Applera Corp.-Applied Biosystems Group 129,031 3,940,607
- ------------------------------------------------------------------------
Charles River Laboratories International,
Inc.(b) 95,354 4,922,173
- ------------------------------------------------------------------------
Invitrogen Corp.(b) 89,871 6,627,986
- ------------------------------------------------------------------------
Millipore Corp.(b) 59,443 4,463,575
- ------------------------------------------------------------------------
PAREXEL International Corp.(b) 44,981 1,891,901
- ------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 205,792 7,875,660
- ------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(b) 113,937 5,892,822
- ------------------------------------------------------------------------
Varian Inc.(b) 31,345 1,718,646
========================================================================
37,333,370
========================================================================
MANAGED HEALTH CARE-5.96%
Aetna Inc. 65,371 3,229,327
- ------------------------------------------------------------------------
Aveta, Inc. (Acquired 12/21/05; Cost
$1,655,802)(b)(c)(d) 122,652 981,216
- ------------------------------------------------------------------------
Coventry Health Care, Inc.(b) 47,573 2,742,584
- ------------------------------------------------------------------------
Health Net Inc.(b) 67,739 3,576,619
- ------------------------------------------------------------------------
UnitedHealth Group Inc. 167,410 8,561,347
- ------------------------------------------------------------------------
WellPoint Inc.(b) 42,583 3,399,401
========================================================================
22,490,494
========================================================================
PERSONAL PRODUCTS-0.75%
Herbalife Ltd. 71,111 2,819,551
========================================================================
PHARMACEUTICALS-14.13%
Adams Respiratory Therapeutics, Inc.(a)(b) 122,026 4,806,604
- ------------------------------------------------------------------------
Allergan, Inc. 63,986 3,688,153
- ------------------------------------------------------------------------
Biodel Inc.(a)(b) 55,524 1,099,375
- ------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc.(b) 102,992 1,249,293
- ------------------------------------------------------------------------
Endo Pharmaceuticals Holdings Inc.(b) 65,514 2,242,544
- ------------------------------------------------------------------------
Inspire Pharmaceuticals, Inc.(a)(b) 150,974 954,156
- ------------------------------------------------------------------------
Johnson & Johnson 157,808 9,724,129
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
PHARMACEUTICALS-(CONTINUED)
Lilly (Eli) and Co. 70,115 $ 3,918,026
- ------------------------------------------------------------------------
Matrixx Initiatives, Inc.(a)(b) 77,432 1,620,652
- ------------------------------------------------------------------------
Medicines Co. (The)(b) 33,135 583,839
- ------------------------------------------------------------------------
Pfizer Inc. 420,901 10,762,438
- ------------------------------------------------------------------------
POZEN Inc.(a)(b) 58,041 1,048,801
- ------------------------------------------------------------------------
Sepracor Inc.(b) 32,631 1,338,524
- ------------------------------------------------------------------------
Wyeth 179,148 10,272,346
========================================================================
53,308,880
========================================================================
Total Domestic Common Stocks (Cost
$260,149,203) 282,670,764
========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-23.12%
CANADA-1.78%
Cardiome Pharma Corp. (Pharmaceuticals)(b) 147,388 1,357,444
- ------------------------------------------------------------------------
MDS Inc. (Life Sciences Tools & Services)(a) 262,680 5,352,259
========================================================================
6,709,703
========================================================================
FRANCE-3.97%
Ipsen S.A. (Pharmaceuticals)(a)(e) 92,812 4,767,418
- ------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(e) 63,698 5,143,531
- ------------------------------------------------------------------------
Sanofi-Aventis-ADR (Pharmaceuticals) 126,132 5,079,336
========================================================================
14,990,285
========================================================================
GERMANY-3.08%
Gerresheimer A.G. (Life Sciences Tools &
Services) (Acquired 06/08/07; Cost
$3,215,279)(b)(c) 59,857 3,098,765
- ------------------------------------------------------------------------
Merck KgaA (Pharmaceuticals)(a)(e) 37,655 5,179,548
- ------------------------------------------------------------------------
Rhoen-Klinikum A.G. (Health Care
Facilities)(e) 55,601 3,350,275
========================================================================
11,628,588
========================================================================
JAPAN-1.28%
Eisai Co., Ltd. (Pharmaceuticals)(a) 53,778 2,349,376
- ------------------------------------------------------------------------
Shionogi & Co., Ltd. (Pharmaceuticals)(e) 151,507 2,468,241
========================================================================
4,817,617
========================================================================
RUSSIA-0.21%
Pharmstandard-GDR (Pharmaceuticals) (Acquired
05/04/07; Cost $672,938)(b)(c)(f) 46,250 776,075
========================================================================
SPAIN-0.89%
Laboratorios Almirall S.A.
(Pharmaceuticals)(b) 170,383 3,378,361
========================================================================
SWITZERLAND-8.65%
Novartis A.G.-ADR (Pharmaceuticals) 272,953 15,304,475
- ------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(e) 97,741 17,336,339
========================================================================
32,640,814
========================================================================
UNITED KINGDOM-3.26%
AstraZeneca PLC-ADR (Pharmaceuticals) 53,915 2,883,374
- ------------------------------------------------------------------------
Hikma Pharmaceuticals PLC
(Pharmaceuticals)(e) 40,540 309,387
- ------------------------------------------------------------------------
</Table>
AIM V.I. Global Health Care Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Shire PLC-ADR (Pharmaceuticals) 70,175 $ 5,202,073
- ------------------------------------------------------------------------
Smith & Nephew PLC (Health Care Equipment)(e) 317,540 3,929,905
========================================================================
12,324,739
========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $74,853,833) 87,266,182
========================================================================
MONEY MARKET FUNDS-1.03%
Liquid Assets Portfolio-Institutional
Class(g) 1,945,151 1,945,151
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 1,945,152 1,945,152
========================================================================
Total Money Market Funds (Cost
$3,890,303) 3,890,303
========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.05% (Cost
$338,893,339) 373,827,249
========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN MONEY MARKET
FUNDS-5.57%
Premier Portfolio-Institutional class(g)(h) 21,040,844 $ 21,040,844
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities on
loan) (Cost $21,040,844) 21,040,844
========================================================================
TOTAL INVESTMENTS-104.62% (Cost $359,934,183) 394,868,093
========================================================================
OTHER ASSETS LESS LIABILITIES-(4.62)% (17,451,815)
========================================================================
NET ASSETS-100.00% $377,416,278
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
</Table>
Notes to Schedule of Investments:
(*) Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) All or a portion of this security was out on loan at June 30, 2007.
(b) Non-income producing security.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $4,856,056,
which represented 1.29% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(d) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The value of this
security considered illiquid at June 30, 2007 represented 0.26% of the
Fund's Net Assets.
(e) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $42,484,644, which
represented 11.26% of the Fund's Net Assets. See Note 1A.
(f) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June 30,
2007 represented 0.21% of the Fund's Net Assets. See Note 1A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(h) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Global Health Care Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (cost $335,003,036)* $369,936,946
- -------------------------------------------------------------
Investments in affiliated money market funds
(cost $24,931,147) 24,931,147
- -------------------------------------------------------------
Total Investments (Cost $359,934,183) 394,868,093
- -------------------------------------------------------------
Foreign currencies, at value (cost $15,432) 13,014
- -------------------------------------------------------------
Cash 237,089
- -------------------------------------------------------------
Receivables for:
Investments sold 3,959,294
- -------------------------------------------------------------
Fund shares sold 254,013
- -------------------------------------------------------------
Dividends 338,891
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 23,384
- -------------------------------------------------------------
Other assets 1,028
=============================================================
Total assets 399,694,806
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 729,978
- -------------------------------------------------------------
Fund shares reacquired 80,026
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 41,409
- -------------------------------------------------------------
Collateral upon return of securities loaned 21,040,844
- -------------------------------------------------------------
Accrued administrative services fees 242,344
- -------------------------------------------------------------
Accrued distribution fees-Series II 89,167
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,626
- -------------------------------------------------------------
Accrued transfer agent fees 5,092
- -------------------------------------------------------------
Accrued operating expenses 46,042
=============================================================
Total liabilities 22,278,528
=============================================================
Net assets applicable to shares outstanding $377,416,278
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $337,151,526
- -------------------------------------------------------------
Undistributed net investment income 132,917
- -------------------------------------------------------------
Undistributed net realized gain 5,201,727
- -------------------------------------------------------------
Unrealized appreciation 34,930,108
=============================================================
$377,416,278
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $231,017,969
_____________________________________________________________
=============================================================
Series II $146,398,309
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 10,126,758
_____________________________________________________________
=============================================================
Series II 6,470,788
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 22.81
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 22.62
_____________________________________________________________
=============================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $20,279,502 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$181,117) $ 1,477,819
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$33,133) 750,927
============================================================
Total investment income 2,228,746
============================================================
EXPENSES:
Advisory fees 1,355,791
- ------------------------------------------------------------
Administrative services fees 495,358
- ------------------------------------------------------------
Custodian fees 12,980
- ------------------------------------------------------------
Distribution fees-Series II 158,614
- ------------------------------------------------------------
Transfer agent fees 11,757
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 13,462
- ------------------------------------------------------------
Other 28,883
============================================================
Total expenses 2,076,845
============================================================
Less: Fees waived and expense offset
arrangement (15,039)
============================================================
Net expenses 2,061,806
============================================================
Net investment income 166,940
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
from securities sold to affiliates of
$22,183) 16,019,417
- ------------------------------------------------------------
Foreign currencies 25,173
============================================================
16,044,590
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 4,408,321
- ------------------------------------------------------------
Foreign currencies (4,263)
============================================================
4,404,058
============================================================
Net realized and unrealized gain 20,448,648
============================================================
Net increase in net assets resulting from
operations $20,615,588
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Global Health Care Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 166,940 $ (614,780)
- --------------------------------------------------------------------------------
Net realized gain 16,044,590 9,884,135
- --------------------------------------------------------------------------------
Change in net unrealized appreciation 4,404,058 7,632,407
================================================================================
Net increase in net assets resulting from
operations 20,615,588 16,901,762
================================================================================
Share transactions-net:
Series I (18,404,970) (34,311,775)
- --------------------------------------------------------------------------------
Series II 42,050,201 92,818,635
================================================================================
Net increase in net assets resulting from
share transactions 23,645,231 58,506,860
================================================================================
Net increase in net assets 44,260,819 75,408,622
================================================================================
NET ASSETS:
Beginning of period 333,155,459 257,746,837
================================================================================
End of period (including undistributed net
investment income (loss) of $132,917 and
$(34,023), respectively) $377,416,278 $333,155,459
________________________________________________________________________________
================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Global Health Care Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Global Health Care Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is capital growth.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Global Health Care Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- Single
Sector/Non-Diversified -- The Fund's investments are concentrated in a
comparatively narrow segment of the economy. Consequently, the Fund may
tend to be more volatile than other mutual funds, and the value of the
Fund's investments may tend to rise and fall more rapidly.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. Global Health Care Fund
L. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment agreement with A I M Advisors,
Inc. ("AIM). Under the terms of the investment advisory agreement, the Fund pays
an advisory fee to AIM at the annual rate of 0.75% of the Fund's average daily
net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Next $250 million 0.74%
- -------------------------------------------------------------------
Next $500 million 0.73%
- -------------------------------------------------------------------
Next $1.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.71%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.69%
- -------------------------------------------------------------------
Over $10 billion 0.68%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. In addition, the Fund may also
benefit from a one time credit to be used to offset custodian expenses. These
credits are used to pay certain expenses incurred by the Fund. To the extent
that the annualized expense ratio does not exceed the expense limitation, AIM
will retain its ability to be reimbursed for such fee waivers or reimbursements
prior to the end of each fiscal year. AIM did not waive fees and/or reimburse
expenses during the period under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $9,779.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$46,537 for accounting and fund administrative services and reimbursed $448,821
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. Global Health Care Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $11,818,248 $38,394,298 $(48,267,395) $1,945,151 $359,779
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 11,818,249 38,394,298 (48,267,395) 1,945,152 358,015
=================================================================================================================================
Subtotal $23,636,497 $76,788,596 $(96,534,790) $3,890,303 $717,794
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class $$10,037,792 $104,477,386 $ (93,474,334) $21,040,844 $ 33,133
=================================================================================================================================
Total Investments in Affiliates $33,674,289 $181,265,982 $(190,009,124) $24,931,147 $750,927
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $81,577, which resulted in net realized gains of
$22,183.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $5,260.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,872 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
AIM V.I. Global Health Care Fund
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, securities with an aggregate value of $20,279,502 were on
loan to brokers. The loans were secured by cash collateral of $21,040,844
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2007, the Fund received dividends on cash
collateral investments of $33,133 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2010 $10,698,032
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
AIM V.I. Global Health Care Fund
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $132,056,694 and
$89,364,646, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $46,809,571
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,926,977)
===============================================================================
Net unrealized appreciation of investment securities $34,882,594
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $359,985,499.
</Table>
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 689,342 $ 15,444,684 2,987,617 $ 61,430,551
- ----------------------------------------------------------------------------------------------------------------------
Series II 1,909,745 42,297,720 4,597,663 93,373,802
======================================================================================================================
Reacquired:
Series I (1,512,563) (33,849,654) (4,650,072) (95,742,326)
- ----------------------------------------------------------------------------------------------------------------------
Series II (11,124) (247,519) (26,046) (555,167)
======================================================================================================================
(1,075,400) $ 23,645,231 2,909,162 $ 58,506,860
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 63% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 12--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Global Health Care Fund
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE 30, ---------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 21.51 $ 20.44 $ 18.90 $ 17.57 $ 13.75 $ 18.20
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) (0.04)(a) (0.06) (0.03) (0.03) (0.00)(b)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.28 1.11 1.60 1.36 3.85 (4.45)
=========================================================================================================================
Total from investment
operations 1.30 1.07 1.54 1.33 3.82 (4.45)
=========================================================================================================================
Net asset value, end of period $ 22.81 $ 21.51 $ 20.44 $ 18.90 $ 17.57 $ 13.75
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 6.04% 5.24% 8.15% 7.57% 27.78% (24.45)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $231,018 $235,509 $257,736 $354,889 $340,711 $232,681
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net
assets 1.06%(d) 1.10% 1.08%(e) 1.11% 1.07% 1.07%
=========================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.18%(d) (0.19)% (0.24)% (0.17)% (0.20)% (0.43)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 26% 79% 82% 175% 114% 130%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) The net investment income (loss) per share was calculated after
permanent book tax differences, such as net operating losses, which were
reclassified from accumulated net investment income (loss) to paid in
capital. Had net investment income (loss) per share been calculated
using the current method, which is before reclassification of net
operating losses, net investment income (loss) per share would have been
$(0.07) for the year ended December 31, 2002.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$236,598,038.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.09% for the year ended December 31, 2005.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
----------------------------------------------------------------
APRIL 30, 2004,
(DATE SALES
YEAR ENDED COMMENCED)
SIX MONTHS DECEMBER 31, TO
ENDED JUNE 30, --------------------- DECEMBER 31,
2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.36 $ 20.34 $ 18.86 $ 18.19
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.09)(a) (0.09) (0.05)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.27 1.11 1.57 0.72
==============================================================================================================================
Total from investment operations 1.26 1.02 1.48 0.67
==============================================================================================================================
Net asset value, end of period $ 22.62 $ 21.36 $ 20.34 $ 18.86
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 5.90% 5.01% 7.85% 3.68%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $146,398 $97,646 $ 11 $ 10
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 1.31%(c) 1.35% 1.33%(d) 1.36%(e)
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.07)%(c) (0.44)% (0.49)% (0.42)%(e)
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(f) 26% 79% 82% 175%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$127,942,489.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.34% for the year ended December 31, 2005.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Global Health Care Fund
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Global Health Care Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate
As a shareholder of the Fund, you The table below provides information the actual ending account balance or
incur ongoing costs, including about actual account values and actual expenses you paid for the period. You
management fees; distribution and/or expenses. You may use the information may use this information to compare the
service (12b-1) fees; and other Fund in this table, together with the amount ongoing costs of investing in the Fund
expenses. This example is intended to you invested, to estimate the expenses and other funds. To do so, compare this
help you understand your ongoing costs that you paid over the period. Simply 5% hypothetical example with the 5%
(in dollars) of investing in the Fund divide your account value by $1,000 hypothetical examples that appear in
and to compare these costs with ongoing (for example, an $8,600 account value the shareholder reports of the other
costs of investing in other mutual divided by $1,000 = 8.6), then multiply funds.
funds. The example is based on an the result by the number in the table
investment of $1,000 invested at the under the heading entitled "Actual Please note that the expenses shown
beginning of the period and held for Expenses Paid During Period" to in the table are meant to highlight
the entire period January 1, 2007, estimate the expenses you paid on your your ongoing costs. Therefore, the
through June 30, 2007. account during this period. hypothetical information is useful in
comparing ongoing costs, and will not
The actual and hypothetical expenses HYPOTHETICAL EXAMPLE FOR COMPARISON help you determine the relative total
in the examples below do not represent PURPOSES costs of owning different funds.
the effect of any fees or other
expenses assessed in connection with a The table below also provides
variable product; if they did, the information about hypothetical account
expenses shown would be higher while values and hypothetical expenses based
the ending account values shown would on the Fund's actual expense ratio and
be lower. an assumed rate of return of 5% per
year before expenses, which is not the
Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,060.40 $5.42 $1,019.54 $5.31 1.06%
Series II 1,000.00 1,059.40 6.69 1,018.30 6.56 1.31
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Global Health Care Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF
Variable Insurance Funds is required recommendations regarding the SERVICES PROVIDED BY AIM
under the Investment Company Act of performance, fees and expenses of the
1940 to approve annually the renewal of AIM Funds to the full Board. Moreover, The Board reviewed the advisory
the AIM V.I. Global Health Care Fund the Investments Committee considers services provided to the Fund by AIM
(the Fund) investment advisory each SubCommittee's recommendations in under the Fund's advisory agreement,
agreement with A I M Advisors, Inc. making its annual recommendation to the the performance of AIM in providing
(AIM). During contract renewal meetings Board whether to approve the these services, and the credentials and
held on June 25-27, 2007, the Board as continuance of each AIM Fund's experience of the officers and
a whole and the disinterested or investment advisory agreement and employees of AIM who provide these
"independent" Trustees, voting sub-advisory agreement, if applicable services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another qualifications of AIM to provide these
the Fund's investment advisory year. services included the Board's
agreement for another year, effective consideration of AIM's portfolio and
July 1, 2007. In doing so, the Board The independent Trustees, as product review process, various back
determined that the Fund's advisory mentioned above, are assisted in their office support functions provided by
agreement is in the best interests of annual evaluation of the advisory AIM, and AIM's equity and fixed income
the Fund and its shareholders and that agreements by the independent Senior trading operations. The Board concluded
the compensation to AIM under the Officer. One responsibility of the that the nature, extent and quality of
Fund's advisory agreement is fair and Senior Officer is to manage the process the advisory services provided to the
reasonable. by which the AIM Funds' proposed Fund by AIM were appropriate and that
management fees are negotiated during AIM currently is providing satisfactory
The independent Trustees met the annual contract renewal process to advisory services in accordance with
separately during their evaluation of ensure that they are negotiated in a the terms of the Fund's advisory
the Fund's investment advisory manner which is at arms' length and agreement. In addition, based on their
agreement with independent legal reasonable. Accordingly, the Senior ongoing meetings throughout the year
counsel from whom they received Officer must either supervise a with the Fund's portfolio managers, the
independent legal advice, and the competitive bidding process or prepare Board concluded that these individuals
independent Trustees also received an independent written evaluation. The are competent and able to continue to
assistance during their deliberations Senior Officer has recommended that an carry out their responsibilities under
from the independent Senior Officer, a independent written evaluation be the Fund's advisory agreement.
full-time officer of the AIM Funds who provided and, upon the direction of the
reports directly to the independent Board, has prepared an independent In determining whether to continue
Trustees. The following discussion more written evaluation. the Fund's advisory agreement, the
fully describes the process employed by Board considered the prior relationship
the Board to evaluate the performance During the annual contract renewal between AIM and the Fund, as well as
of the AIM Funds (including the Fund) process, the Board considered the the Board's knowledge of AIM's
throughout the year and, more factors discussed below under the operations, and concluded that it was
specifically, during the annual heading "Factors and Conclusions and beneficial to maintain the current
contract renewal meetings. Summary of Independent Written Fee relationship, in part, because of such
Evaluation" in evaluating the fairness knowledge. The Board also considered
THE BOARD'S FUND EVALUATION PROCESS and reasonableness of the Fund's the steps that AIM and its affiliates
advisory agreement at the contract have taken over the last several years
The Board's Investments Committee renewal meetings and at their meetings to improve the quality and efficiency
has established three Sub-Committees throughout the year as part of their of the services they provide to the
which are responsible for overseeing ongoing oversight of the Fund. The Funds in the areas of investment
the management of a number of the Fund's advisory agreement was performance, product line
series portfolios of the AIM Funds. considered separately, although the diversification, distribution, fund
This Sub-Committee structure permits Board also considered the common operations, shareholder services and
the Trustees to focus on the interests of all of the AIM Funds in compliance. The Board concluded that
performance of the AIM Funds that have their deliberations. The Board the quality and efficiency of the
been assigned to them. The comprehensively considered all of the services AIM and its affiliates provide
Sub-Committees meet throughout the year information provided to them and did to the AIM Funds in each of these areas
to review the performance of their not identify any particular factor that generally have improved, and support
assigned funds, and the Sub-Committees was controlling. Furthermore, each the Board's approval of the continuance
review monthly and quarterly Trustee may have evaluated the of the Fund's advisory agreement.
comparative performance information and information provided differently from
periodic asset flow data for their one another and attributed different B. FUND PERFORMANCE
assigned funds. These materials are weight to the various factors. The
prepared under the direction and Trustees recognized that the advisory The Board compared the Fund's
supervision of the independent Senior arrangements and resulting advisory performance during the past one, three
Officer. Over the course of each year, fees for the Fund and the other AIM and five calendar years to the
the Sub-Committees meet with portfolio Funds are the result of years of review performance of funds in the Fund's
managers for their assigned funds and and negotiation between the Trustees Lipper peer group that are not managed
other members of management and review and AIM, that the Trustees may focus to by AIM, and against the performance of
with these individuals the performance, a greater extent on certain aspects of all funds in the Lipper Variable
investment objective(s), policies, these arrangements in some years than Annuity Underlying Funds -
strategies and limitations of these others, and that the Trustees' Health/Biotechnology Index. The Board
funds. deliberations and conclusions in a also reviewed the methodology used by
particular year may be based in part on Lipper to identify the Fund's peers.
In addition to their meetings their deliberations and conclusions of The Board noted that the Fund's
throughout the year, the Sub-Committees these same arrangements throughout the performance was below the median
meet at designated contract renewal year and in prior years. performance of its peers for the one,
meetings each year to conduct an three and five year periods. The Board
in-depth review of the performance, FACTORS AND CONCLUSIONS AND SUMMARY OF noted that the Fund's performance was
fees and expenses of their assigned INDEPENDENT WRITTEN FEE EVALUATION below the performance of the Index for
funds. During the contract renewal the one and three year periods. The
process, the Trustees receive The discussion below serves as a Board noted that AIM made changes to
comparative performance and fee data summary of the Senior Officer's the Fund's portfolio management team in
regarding all the AIM Funds prepared by independent written evaluation, as well 2005 and 2006, which appear to be
an independent company, Lipper, Inc., as a discussion of the material factors producing encouraging results but need
under the direction and supervision of and related conclusions that formed the more time to be evaluated before a
the independent Senior Officer who also basis for the Board's approval of the conclusion can be reached that the
prepares a separate analysis of this Fund's advisory agreement. Unless changes have adequately addressed the
information for the Trustees. Each otherwise stated, information set forth Fund's underperformance. The Board also
Sub-Committee then makes below is as of June 27, 2007 and does considered the steps AIM has taken over
recommendations to the Investments not reflect any changes that may have the last several years to improve the
Committee regarding the performance, occurred since that date, including but quality and efficiency of the services
fees and expenses of their assigned not limited to changes to the Fund's that AIM provides to the AIM Funds. The
funds. The Investments Committee performance, advisory fees, expense Board concluded
considers each Sub-Committee's limitations and/or fee waivers.
recom-
(continued)
AIM V.I. Global Health Care Fund
that AIM continues to be responsive to independent Senior Officer that AIM AIM and AIM's affiliates, had prepared an
the Board's focus on fund performance. consider whether the advisory fee waivers independent written evaluation to assist
However, due to the Fund's for certain equity AIM Funds, including the Board in determining the
underperformance, the Board also concluded the Fund, should be simplified. The Board reasonableness of the proposed management
that it would be appropriate for the Board concluded that it would be appropriate to fees of the AIM Funds, including the Fund.
to continue to closely monitor and review approve the proposed amendment to the The Board noted that they had relied upon
the performance of the AIM Funds. Although Fund's contractual advisory fee schedule the Senior Officer's written evaluation
the independent written evaluation of the and that it was not necessary at this time instead of a competitive bidding process.
Fund's Senior Officer (discussed below) to discuss with AIM whether to implement In determining whether to continue the
only considered Fund performance through any fee waivers for the Fund. Fund's advisory agreement, the Board
the most recent calendar year, the Board considered the Senior Officer's written
also reviewed more recent Fund performance After taking account of the Fund's evaluation.
and this review did not change their contractual advisory fee rate, as well as
conclusions. the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
and the expense limitation discussed AFFILIATES
C. ADVISORY FEES AND FEE WAIVERS above, the Board concluded that the Fund's
advisory fees were fair and reasonable. The Board considered various other
The Board compared the Fund's benefits received by AIM and its
contractual advisory fee rate to the D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
contractual advisory fee rates of funds in relationship with the Fund, including the
the Fund's Lipper peer group that are not The Board considered the extent to fees received by AIM and its affiliates
managed by AIM, at a common asset level which there are economies of scale in for their provision of administrative,
and as of the end of the past calendar AIM's provision of advisory services to transfer agency and distribution services
year. The Board noted that the Fund's the Fund. The Board also considered to the Fund. The Board considered the
advisory fee rate was comparable to the whether the Fund benefits from such performance of AIM and its affiliates in
median advisory fee rate of its peers. The economies of scale through contractual providing these services and the
Board also reviewed the methodology used breakpoints in the Fund's advisory fee organizational structure employed by AIM
by Lipper and noted that the contractual schedule or through advisory fee waivers and its affiliates to provide these
fee rates shown by Lipper include any or expense limitations. The Board noted services. The Board also considered that
applicable long-term contractual fee that the Fund's contractual advisory fee these services are provided to the Fund
waivers. The Board also compared the schedule currently does not include any pursuant to written contracts which are
Fund's contractual advisory fee rate to breakpoints but that the amendment to the reviewed and approved on an annual basis
the contractual advisory fee rates of Fund's contractual advisory fee schedule by the Board. The Board concluded that AIM
other clients of AIM and its affiliates discussed above provides for seven and its affiliates were providing these
with investment strategies comparable to breakpoints. Based on this information, services in a satisfactory manner and in
those of the Fund, including one mutual the Board concluded that the Fund's accordance with the terms of their
fund advised by AIM, two mutual funds advisory fees will appropriately reflect contracts, and were qualified to continue
sub-advised by an AIM affiliate and four economies of scale upon the Board's to provide these services to the Fund.
offshore funds advised and sub-advised by approval of the amendment to the Fund's
AIM affiliates. The Board noted that the contractual advisory fee schedule. The The Board considered the benefits
Fund's rate was: (i) above the rate for Board also noted that the Fund shares realized by AIM as a result of portfolio
the mutual fund; (ii) above the directly in economies of scale through brokerage transactions executed through
sub-advisory fee rates for the two lower fees charged by third party service "soft dollar" arrangements. Under these
sub-advised mutual funds, although the providers based on the combined size of arrangements, portfolio brokerage
advisory fee rates for such sub-advised all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
funds were above the Fund's; (iii) below funds advised by AIM are used to pay for
the advisory fee rates for two of the four E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
offshore funds and above the advisory fee OF AIM noted that soft dollar arrangements shift
rates for the other two such offshore the payment obligation for the research
funds. The Board reviewed information from AIM and executions services from AIM to the
concerning the costs of the advisory and funds and therefore may reduce AIM's
The Board noted that AIM has other services that AIM and its affiliates expenses. The Board also noted that
contractually agreed to waive fees and/or provide to the Fund and the profitability research obtained through soft dollar
limit expenses of the Fund through at of AIM and its affiliates in providing arrangements may be used by AIM in making
least April 30, 2009 in an amount these services. The Board also reviewed investment decisions for the Fund and may
necessary to limit total annual operating information concerning the financial therefore benefit Fund shareholders. The
expenses to a specified percentage of condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
average daily net assets for each class of Board also reviewed with AIM the arrangements were appropriate. The Board
the Fund. The Board considered the methodology used to prepare the also concluded that, based on their review
contractual nature of this fee waiver and profitability information. The Board and representations made by AIM, these
noted that it remains in effect until at considered the overall profitability of arrangements were consistent with
least April 30, 2009. The Board reviewed AIM, as well as the profitability of AIM regulatory requirements.
the Fund's effective advisory fee rate, in connection with managing the Fund. The
after taking account of this expense Board noted that AIM continues to operate The Board considered the fact that the
limitation, and considered the effect this at a net profit, although increased Fund's uninvested cash and cash collateral
expense limitation would have on the expenses in recent years have reduced the from any securities lending arrangements
Fund's estimated total expenses. The Board profitability of AIM and its affiliates. may be invested in money market funds
concluded that the levels of fee The Board concluded that the Fund's advised by AIM pursuant to procedures
waivers/expense limitations for the Fund advisory fees were fair and reasonable, approved by the Board. The Board noted
were fair and reasonable. and that the level of profits realized by that AIM will receive advisory fees from
AIM and its affiliates from providing these affiliated money market funds
The Board noted that AIM has not services to the Fund was not excessive in attributable to such investments, although
proposed any advisory fee waivers for the light of the nature, quality and extent of AIM has contractually agreed to waive the
Fund. However, the Board also noted that the services provided. The Board advisory fees payable by the Fund with
AIM has recommended that the Board approve considered whether AIM is financially respect to its investment of uninvested
an amendment to the Fund's contractual sound and has the resources necessary to cash in these affiliated money market
advisory fee schedule that would implement perform its obligations under the Fund's funds through at least April 30, 2009. The
the contractual advisory fee waiver that advisory agreement, and concluded that AIM Board considered the contractual nature of
had been formerly committed to by AIM, has the financial resources necessary to this fee waiver and noted that it remains
which waiver provided for lower effective fulfill these obligations. in effect until at least April 30, 2009.
fee rates at all asset levels than the The Board concluded that the Fund's
Fund's current contractual advisory fee F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
schedule. The Board noted that AIM's FUND'S SENIOR OFFICER collateral from any securities lending
recommendation was made in response to the arrangements in the affiliated money
recommendation of the The Board noted that, upon their market funds is in the best interests of
direction, the Senior Officer of the Fund, the Fund and its shareholders.
who is independent of
AIM V.I. Global Real Estate Fund
Formerly AIM V.I. Real Estate Fund
Semiannual Report to Shareholders o June 30, 2007
SECTOR EQUITY
Real Estate
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C.You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Global Real Estate Fund
Fund performance class expenses.
=======================================================================================
PERFORMANCE SUMMARY The performance data quoted represent
past performance and cannot guarantee
FUND VS. INDEXES comparable future results; current
performance may be lower or higher. Please
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. contact your variable product issuer or
If variable product issuer charges were included, returns would be lower. financial advisor for the most recent
month-end variable product performance.
Series I Shares -0.97% Performance figures reflect Fund expenses,
Series II Shares -1.12 reinvested distributions and changes in
MSCI World Index(1) (Broad Market Index)* 9.17 net asset value. Investment return and
S&P 500 Index(1) (Former Broad Market Index)* 6.96 principal value will fluctuate so that you
FTSE EPRA/NAREIT Global Real Estate Index(2) (Style-Specific Index)* 0.01 may have a gain or loss when you sell
MSCI U.S. REIT Index(2) (Former Style-Specific Index)* -6.45 shares.
Lipper VUF Real Estate Funds Category Average(1) (Peer Group Index) -5.04
Lipper Real Estate Funds Index(1) (Former Peer Group Index) -3.90 The total annual Fund operating expense
ratio set forth in the most recent Fund
Sources: (1) Lipper Inc.; (2) A I M Management Group Inc., Bloomberg L.P. prospectus as of the date of this report
for Series I and Series II shares was
* As a result of a change in the Fund's investment style from domestic to global the 1.16% and 1.41%, respectively. The expense
Fund has elected to use the MSCI World Index instead of the S&P 500 Index as its ratios presented above may vary from the
broad market index and the FTSE EPRA/NAREIT Global Real Estate Index instead of expense ratios presented in other sections
the MSCI U.S. REIT Index as its style-specific index. of this report that are based on expenses
incurred during the period covered by this
The unmanaged MSCI World Index -- SERVICE MARK -- is a group of global securities report.
tracked by Morgan Stanley Capital International.
AIM V.I. Global Real Estate Fund, a
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks series portfolio of AIM Variable Insurance
frequently used as a general measure of U.S. stock market performance. Funds, is currently offered through
insurance companies issuing variable
The FTSE European Public Real Estate Association/National Association of Real Estate products. You cannot purchase shares of
Investment Trusts Global Real Estate Index (the FTSE EPRA/NAREIT Global Real Estate the Fund directly. Performance figures
Index) is designed to track the performance of listed real estate companies and REITs given represent the Fund and are not
worldwide. It is compiled by FTSE Group (an independent company, originally a joint intended to reflect actual variable
venture of the Financial Times and the London Stock Exchange, whose sole business is product values. They do not reflect sales
the creation and management of indexes and associated data services), NAREIT and EPRA. charges, expenses and fees assessed in
FTSE(TM) is a trade mark of London Stock Exchange Plc and The Financial Times Limited, connection with a variable product. Sales
NAREIT -- REGISTERED TRADEMARK -- is a trademark of the National Association of Real charges, expenses and fees, which are
Estate Investment Trusts -- REGISTERED TRADEMARK -- ("NAREIT") and EPRA -- REGISTERED determined by the variable product
TRADEMARK -- is the trademark of the European Public Real Estate Association. The FTSE issuers, will vary and will lower the
EPRA/NAREIT Global Real Estate Index Series is calculated by FTSE. All rights in the total return.
FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept
any liability for any errors or omissions in the FTSE Indices or underlying data. Per NASD requirements, the most recent
month-end performance data at the Fund
The MSCI U.S. REIT Index is a total-return index composed of the most actively level, excluding variable product charges,
traded real estate investment trusts and is designed to be a measure of real estate is available on this AIM automated
equity performance. The index was developed with a base value of 200 as of December 31, information line, 866-702-4402. As
1994. It is compiled by Morgan Stanley Capital International. mentioned above, for the most recent
month-end performance including variable
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Real Estate product charges, please contact your
Funds Category Average as its peer group instead of the Lipper Real Estate Funds Index. variable product issuer or financial
In 2006, Lipper began publishing VUF indexes, allowing the Fund to be compared with the advisor.
Lipper VUF Real Estate Funds Category Average. The unmanaged Lipper VUF Real Estate
Funds Category Average represents the average of all the variable insurance underlying Had the advisor not waived fees and/or
real estate funds tracked by Lipper Inc. Lipper Inc. is an independent mutual fund reimbursed expenses in the past,
performance monitor. performance would have been lower.
The unmanaged Lipper Real Estate Funds Index represents an average of the
performance of the largest real estate funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index,
including the indexes defined here, and consequently, the performance of the Fund
may deviate significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== Series II shares' inception date is April
FUND PERFORMANCE 30, 2004. Returns since that date are
As of 6/30/07 historical. All other returns are the
SERIES I SHARES blended returns of the historical
Inception (3/31/98) 14.52% performance of Series II shares since
5 Years 23.39 their inception and the restated
1 Year 23.96 historical performance of Series I shares
(for periods prior to inception of Series
SERIES II SHARES II shares) adjusted to reflect the Rule
Inception 14.24% 12b-1 fees applicable to Series II shares.
5 Years 23.09 The inception date of Series I shares is
1 Year 23.57 March 31, 1998. The performance of the
========================================== Fund's Series I and Series II share
classes will differ primarily due to
different
AIM V.I. Global Real Estate Fund
PORTFOLIO COMPOSITION*
By property type, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Diversified 42.3
- ----------------------------------------------------------
Retail 20.6
- ----------------------------------------------------------
Office 13.1
- ----------------------------------------------------------
Residential 9.3
- ----------------------------------------------------------
Lodging - Resorts 3.9
- ----------------------------------------------------------
Industrial 3.6
- ----------------------------------------------------------
Healthcare 2.7
- ----------------------------------------------------------
Self Storage 1.8
- ----------------------------------------------------------
Specialty 1.3
- ----------------------------------------------------------
Other Assets Less Liabilities 1.4
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
FOREIGN REAL ESTATE INVESTMENT TRUSTS, COMMON
STOCKS & OTHER EQUITY INTERESTS-62.23%
AUSTRALIA-13.67%
CFS Retail Property Trust (Retail) 1,530,900 $ 2,790,972
- -----------------------------------------------------------------------
GPT Group (Diversified)(a) 1,463,400 5,741,948
- -----------------------------------------------------------------------
Mirvac Group (Diversified)(a) 738,200 3,546,232
- -----------------------------------------------------------------------
Stockland (Diversified)(a) 811,300 5,579,388
- -----------------------------------------------------------------------
Westfield Group (Retail)(a) 415,500 7,004,706
=======================================================================
24,663,246
=======================================================================
CANADA-3.05%
Boardwalk Real Estate Investment Trust
(Residential) 42,100 1,899,441
- -----------------------------------------------------------------------
Cominar Real Estate Investment Trust
(Diversified) 23,900 483,386
- -----------------------------------------------------------------------
Dundee Real Estate Investment Trust
(Diversified) 28,900 1,223,298
- -----------------------------------------------------------------------
H&R Real Estate Investment Trust
(Diversified) 16,600 357,562
- -----------------------------------------------------------------------
Primaris Retail Real Estate Investment Trust
(Retail) 28,300 516,575
- -----------------------------------------------------------------------
RioCan Real Estate Investment Trust (Retail) 46,400 1,030,385
=======================================================================
5,510,647
=======================================================================
CHINA-0.41%
Agile Property Holdings Ltd. (Diversified) 562,000 736,003
=======================================================================
FINLAND-0.73%
Citycon Oyj (Retail)(a) 103,300 660,497
- -----------------------------------------------------------------------
Sponda Oyj (Diversified)(a) 45,040 653,419
=======================================================================
1,313,916
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
FRANCE-4.38%
Gecina S.A. (Diversified)(a) 6,500 $ 1,086,479
- -----------------------------------------------------------------------
Klepierre (Retail)(a) 9,400 1,586,862
- -----------------------------------------------------------------------
Unibail-Rodamco (Diversified)(a) 20,500 5,235,970
=======================================================================
7,909,311
=======================================================================
HONG KONG-10.75%
China Overseas Land & Investment Ltd.
(Residential) 744,000 1,160,850
- -----------------------------------------------------------------------
China Resources Land Ltd. (Residential) 577,800 873,450
- -----------------------------------------------------------------------
Great Eagle Holdings Ltd. (Diversified) 205,000 718,369
- -----------------------------------------------------------------------
Hang Lung Properties Ltd. (Diversified) 975,000 3,360,521
- -----------------------------------------------------------------------
Hongkong Land Holdings Ltd. (Office) 571,000 2,569,500
- -----------------------------------------------------------------------
Kerry Properties Ltd. (Diversified) 320,900 2,015,090
- -----------------------------------------------------------------------
New World Development Co., Ltd. (Diversified) 829,400 2,074,799
- -----------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Diversified) 551,000 6,631,083
=======================================================================
19,403,662
=======================================================================
ITALY-0.87%
Beni Stabili S.p.A. (Office)(a) 578,100 840,880
- -----------------------------------------------------------------------
Risanamento S.p.A (Diversified)(a)(b) 98,900 726,832
=======================================================================
1,567,712
=======================================================================
JAPAN-13.47%
AEON Mall Co., Ltd. (Retail)(a) 18,300 561,249
- -----------------------------------------------------------------------
Fukuoka REIT Corp. (Diversified) 72 660,658
- -----------------------------------------------------------------------
GOLDCREST Co., Ltd. (Residential) 17,400 891,547
- -----------------------------------------------------------------------
Japan Retail Fund Investment Corp.
(Retail)(a) 88 762,422
- -----------------------------------------------------------------------
JOINT Corp. (Residential)(a) 11,500 359,905
- -----------------------------------------------------------------------
Kenedix Realty Investment Corp.
(Diversified)(a) 67 500,723
- -----------------------------------------------------------------------
Mitsubishi Estate Co. Ltd. (Diversified)(a) 219,000 5,934,719
- -----------------------------------------------------------------------
</Table>
AIM V.I. Global Real Estate Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
JAPAN-(CONTINUED)
Mitsui Fudosan Co., Ltd. (Diversified) 207,000 $ 5,815,834
- -----------------------------------------------------------------------
Nippon Building Fund Inc. (Office)(a) 120 1,660,189
- -----------------------------------------------------------------------
Nippon Commercial Investment Corp.
(Diversified) 111 483,118
- -----------------------------------------------------------------------
NTT Urban Development Corp. (Office)(a) 499 964,226
- -----------------------------------------------------------------------
Sumitomo Realty & Development Co., Ltd.
(Diversified)(a) 93,000 3,021,071
- -----------------------------------------------------------------------
Tokyo Tatemono Co., Ltd. (Office)(a) 134,000 1,662,756
- -----------------------------------------------------------------------
TOKYU REIT, Inc. (Diversified)(a) 106 1,021,357
=======================================================================
24,299,774
=======================================================================
NEW ZEALAND-0.29%
Goodman Property Trust (Diversified)(a) 455,200 523,568
=======================================================================
NORWAY-0.60%
Norwegian Property ASA (Office)(a) 86,300 1,074,750
=======================================================================
SINGAPORE-3.34%
Capitaland Ltd. (Diversified)(a) 411,000 2,171,382
- -----------------------------------------------------------------------
CapitaMall Trust (Retail) 509,000 1,403,221
- -----------------------------------------------------------------------
Keppel Land Ltd. (Diversified) 195,000 1,114,650
- -----------------------------------------------------------------------
Mapletree Logistics Trust (Industrial) 587,000 544,530
- -----------------------------------------------------------------------
Suntec Real Estate Investment Trust
(Diversified) 625,000 792,095
=======================================================================
6,025,878
=======================================================================
SWEDEN-0.78%
Fabege AB (Office)(a) 129,600 1,417,011
=======================================================================
UNITED KINGDOM-9.89%
Big Yellow Group PLC (Self Storage)(a) 52,100 545,793
- -----------------------------------------------------------------------
British Land Co. PLC (Diversified)(a) 153,300 4,102,833
- -----------------------------------------------------------------------
Capital & Regional PLC (Retail)(a) 79,100 1,833,758
- -----------------------------------------------------------------------
Derwent London PLC (Office)(a) 69,300 2,538,284
- -----------------------------------------------------------------------
Land Securities Group PLC (Diversified)(a) 118,200 4,114,543
- -----------------------------------------------------------------------
Quintain Estates & Development PLC
(Diversified)(a) 67,000 1,082,496
- -----------------------------------------------------------------------
Shaftesbury PLC (Diversified)(a) 107,600 1,270,920
- -----------------------------------------------------------------------
Unite Group PLC (Specialty)(a) 185,200 1,489,066
- -----------------------------------------------------------------------
Workspace Group PLC (Office)(a) 109,000 873,925
=======================================================================
17,851,618
=======================================================================
Total Foreign Real Estate Investment
Trusts, Common Stocks & Other Equity
Interests (Cost $93,512,083) 112,297,096
=======================================================================
DOMESTIC REAL ESTATE INVESTMENT TRUSTS,
COMMON STOCKS & OTHER EQUITY
INTERESTS-36.38%
DIVERSIFIED-1.96%
Colonial Properties Trust 10,600 386,370
- -----------------------------------------------------------------------
Vornado Realty Trust 28,700 3,152,408
=======================================================================
3,538,778
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
HEALTHCARE-2.67%
Health Care Property Investors, Inc. 64,200 $ 1,857,306
- -----------------------------------------------------------------------
Health Care REIT, Inc. 12,100 488,356
- -----------------------------------------------------------------------
Ventas, Inc. 68,200 2,472,250
=======================================================================
4,817,912
=======================================================================
INDUSTRIAL-3.28%
AMB Property Corp. 23,700 1,261,314
- -----------------------------------------------------------------------
ProLogis 81,814 4,655,216
=======================================================================
5,916,530
=======================================================================
LODGING-RESORTS-3.95%
Hilton Hotels Corp. 52,200 1,747,134
- -----------------------------------------------------------------------
Host Hotels & Resorts Inc. 165,089 3,816,858
- -----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 23,300 1,562,731
=======================================================================
7,126,723
=======================================================================
OFFICE-5.58%
Alexandria Real Estate Equities, Inc. 18,300 1,771,806
- -----------------------------------------------------------------------
Boston Properties, Inc. 11,400 1,164,282
- -----------------------------------------------------------------------
Brandywine Realty Trust 46,621 1,332,428
- -----------------------------------------------------------------------
Brookfield Properties Corp. 43,450 1,053,408
- -----------------------------------------------------------------------
Douglas Emmett, Inc. 44,000 1,088,560
- -----------------------------------------------------------------------
SL Green Realty Corp. 29,500 3,654,755
=======================================================================
10,065,239
=======================================================================
RESIDENTIAL-6.40%
Archstone-Smith Trust 58,600 3,463,846
- -----------------------------------------------------------------------
AvalonBay Communities, Inc. 9,900 1,176,912
- -----------------------------------------------------------------------
Camden Property Trust 29,000 1,942,130
- -----------------------------------------------------------------------
Equity Residential 59,900 2,733,237
- -----------------------------------------------------------------------
Essex Property Trust, Inc. 19,200 2,232,960
=======================================================================
11,549,085
=======================================================================
RETAIL-10.60%
CBL & Associates Properties, Inc. 18,200 656,110
- -----------------------------------------------------------------------
Developers Diversified Realty Corp. 50,200 2,646,042
- -----------------------------------------------------------------------
Federal Realty Investment Trust 13,000 1,004,380
- -----------------------------------------------------------------------
General Growth Properties, Inc. 70,900 3,754,155
- -----------------------------------------------------------------------
Kimco Realty Corp. 52,000 1,979,640
- -----------------------------------------------------------------------
Macerich Co. (The) 24,500 2,019,290
- -----------------------------------------------------------------------
Regency Centers Corp. 29,900 2,107,950
- -----------------------------------------------------------------------
Simon Property Group, Inc. 53,300 4,959,032
=======================================================================
19,126,599
=======================================================================
SELF STORAGE-1.47%
Public Storage, Inc. 34,600 2,657,972
=======================================================================
</Table>
AIM V.I. Global Real Estate Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
SPECIALTY-0.47%
Digital Realty Trust, Inc. 22,300 $ 840,264
=======================================================================
Total Domestic Real Estate Investment
Trusts, Common Stocks & Other Equity
Interests (Cost $51,741,803) 65,639,102
=======================================================================
TOTAL INVESTMENTS-98.61%
(Cost $145,253,886) 177,936,198
=======================================================================
OTHER ASSETS LESS LIABILITIES-1.39% 2,504,167
=======================================================================
NET ASSETS-100.00% $180,440,365
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
* Property type classifications used in this report are generally according to
FTSE ERPA/NAREIT Global Real Estate Index, which is exclusively owned by the
FTSE Group, the European Public Real Estate Association (ERPA), the National
Association of Real Estate Investment Trusts (NAREIT) and Euronext Indices
BV.
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $72,150,159, which
represented 39.99% of the Fund's Net Assets. See Note 1A.
(b) Non-income producing security.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Global Real Estate Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $145,253,886) $177,936,198
- -------------------------------------------------------------
Foreign currencies, at value (Cost $42,904) 42,242
- -------------------------------------------------------------
Receivables for:
Investments sold 2,613,740
- -------------------------------------------------------------
Fund shares sold 296,179
- -------------------------------------------------------------
Dividends 641,476
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 11,853
=============================================================
Total assets 181,541,688
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 358,648
- -------------------------------------------------------------
Fund shares reacquired 150,594
- -------------------------------------------------------------
Amount due custodian 409,429
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 16,654
- -------------------------------------------------------------
Accrued administrative services fees 124,386
- -------------------------------------------------------------
Accrued distribution fees -- Series II 388
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,969
- -------------------------------------------------------------
Accrued transfer agent fees 1,002
- -------------------------------------------------------------
Accrued operating expenses 36,253
=============================================================
Total liabilities 1,101,323
=============================================================
Net assets applicable to shares outstanding $180,440,365
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $112,671,424
- -------------------------------------------------------------
Undistributed net investment income 3,605,833
- -------------------------------------------------------------
Undistributed net realized gain 31,474,939
- -------------------------------------------------------------
Unrealized appreciation 32,688,169
=============================================================
$180,440,365
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $179,653,490
_____________________________________________________________
=============================================================
Series II $ 786,875
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,313,592
_____________________________________________________________
=============================================================
Series II 27,851
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 28.46
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 28.25
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$223,975) $ 2,322,671
- -------------------------------------------------------------
Dividends from affiliated money market funds 101,241
=============================================================
Total investment income 2,423,912
=============================================================
EXPENSES:
Advisory fees 933,428
- -------------------------------------------------------------
Administrative services fees 269,857
- -------------------------------------------------------------
Custodian fees 47,721
- -------------------------------------------------------------
Distribution fees -- Series II 644
- -------------------------------------------------------------
Transfer agent fees 6,449
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 11,549
- -------------------------------------------------------------
Other 22,602
=============================================================
Total expenses 1,292,250
=============================================================
Less: Fees waived and expense offset
arrangement (156,532)
=============================================================
Net expenses 1,135,718
=============================================================
Net investment income 1,288,194
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from: Investment
securities 9,553,226
- -------------------------------------------------------------
Foreign currencies (80,878)
=============================================================
9,472,348
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (12,445,554)
- -------------------------------------------------------------
Foreign currencies (1,531)
=============================================================
(12,447,085)
=============================================================
Net realized and unrealized gain (loss) (2,974,737)
=============================================================
Net increase (decrease) in net assets resulting
from operations $ (1,686,543)
_____________________________________________________________
=============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Global Real Estate Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,288,194 $ 1,746,818
- ------------------------------------------------------------------------------
Net realized gain 9,472,348 22,784,354
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) (12,447,085) 24,881,911
==============================================================================
Net increase (decrease) in net assets
resulting from operations (1,686,543) 49,413,083
==============================================================================
Distributions to shareholders from net
investment income:
Series I -- (1,802,157)
- ------------------------------------------------------------------------------
Series ll -- (2,803)
==============================================================================
Total distributions from net investment
income -- (1,804,960)
==============================================================================
Distributions to shareholders from net
realized gains:
Series l -- (6,223,841)
- ------------------------------------------------------------------------------
Series ll -- (9,875)
==============================================================================
Total distributions from net realized
gains -- (6,233,716)
==============================================================================
Decrease in net assets resulting from
distributions -- (8,038,676)
==============================================================================
Share transactions-net:
Series l (11,303,377) 51,326,244
- ------------------------------------------------------------------------------
Series ll 502,075 188,721
==============================================================================
Net increase (decrease) in net assets
resulting from share transactions (10,801,302) 51,514,965
==============================================================================
Net increase (decrease) in net assets (12,487,845) 92,889,372
==============================================================================
NET ASSETS:
Beginning of period 192,928,210 100,038,838
==============================================================================
End of period (including undistributed net
investment income of $3,605,833 and
$2,317,639, respectively) $180,440,365 $192,928,210
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Global Real Estate Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Global Real Estate Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is high total return through growth of
capital and current income.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Global Real Estate Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
The Fund recharacterizes distributions received from REIT investments
based on information provided by the REIT into the following categories:
ordinary income, long-term and short-term capital gains, and return of
capital. If information is not available on a timely basis from the REIT,
the recharacterization will be based on available information which may
include the previous year's allocation. If new or additional information
becomes available from the REIT at a later date, a recharacterization will
be made in the following year. The Fund records as dividend income the
amount recharacterized as ordinary income and as realized gain the amount
recharacterized as capital gain in the Statement of Operations, and the
amount recharacterized as return of capital as a reduction to the cost of
investments in the Statement of Assets and Liabilities. These
recharacterizations are reflected in the accompanying financial statements.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders.
Therefore, no provision for federal income taxes is recorded in the
financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- Single
Sector/Non-Diversified -- The Fund's investments are concentrated in a
comparatively narrow segment of the economy. Consequently, the Fund may
tend to be more volatile than other mutual funds, and the value of the
Fund's investments may tend to rise and fall more rapidly.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
AIM V.I. Global Real Estate Fund
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
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 FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of 0.90% of the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007, AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Next $250 million 0.74%
- -------------------------------------------------------------------
Next $500 million 0.73%
- -------------------------------------------------------------------
Next $1.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.71%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.69%
- -------------------------------------------------------------------
Over $10 billion 0.68%
__________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Institutional (N.A.), Inc. ("INVESCO Institutional"), AIM pays INVESCO
Institutional 40% of the amount of AIM's compensation on the sub advised assets.
AIM has also contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. AIM did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, Effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$156,289.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,794 for accounting and fund administrative services and reimbursed $245,063
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of
AIM V.I. Global Real Estate Fund
providing such services. For the six months ended June 30, 2007, expenses
incurred under the agreement are shown in the Statement of Operations as
transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $1,658,878 $19,872,396 $(21,531,274) $ -- $ 50,750
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 1,658,879 19,872,396 (21,531,275) -- 50,491
=================================================================================================================================
Total Investments in Affiliates $3,317,757 $39,744,792 $(43,062,549) $ -- $101,241
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $243.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,589 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources exceed
10% of the Fund's total assets. To the extent that the loan is required to be
secured by collateral, the collateral is marked to market daily to ensure that
the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
AIM V.I. Global Real Estate Fund
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $69,213,502 and
$76,169,523, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $28,247,561
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,179,068)
===============================================================================
Net unrealized appreciation of investment securities $27,068,493
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $150,867,705.
</Table>
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,775,569 $ 53,893,727 3,140,879 $79,652,136
- ----------------------------------------------------------------------------------------------------------------------
Series II 18,826 557,413 9,339 226,643
======================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 286,030 8,025,998
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- 454 12,678
======================================================================================================================
Reacquired:
Series I (2,165,116) (65,197,104) (1,471,561) (36,351,890)
- ----------------------------------------------------------------------------------------------------------------------
Series II (1,855) (55,338) (1,862) (50,600)
======================================================================================================================
(372,576) $(10,801,302) 1,963,279 $51,514,965
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are six entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 73% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 10--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Global Real Estate Fund
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.74 $ 21.06 $ 19.13 $ 14.34 $ 10.49 $ 9.97
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.19(a) 0.33(a) 0.38(a) 0.32(a) 0.20 0.14
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.47) 8.61 2.34 4.92 3.87 0.50
=================================================================================================================================
Total from investment operations (0.28) 8.94 2.72 5.24 4.07 0.64
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.28) (0.22) (0.14) (0.22) (0.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.98) (0.57) (0.31) -- --
=================================================================================================================================
Total distributions -- (1.26) (0.79) (0.45) (0.22) (0.12)
=================================================================================================================================
Net asset value, end of period $ 28.46 $ 28.74 $ 21.06 $ 19.13 $ 14.34 $ 10.49
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.97)% 42.60% 14.24% 36.58% 38.82% 6.37%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $179,653 $192,617 $99,977 $79,391 $26,087 $12,869
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.10%(c) 1.15% 1.21% 1.31% 1.35% 1.36%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.25%(c) 1.30% 1.36% 1.42% 1.62% 1.89%
=================================================================================================================================
Ratio of net investment income to average net assets 1.24%(c) 1.32% 1.91% 1.96% 3.02% 4.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 34% 84% 51% 34% 126% 191%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$208,628,353.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Global Real Estate Fund
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
{SERIES II
---------------------------------------------------
APRIL 30, 2004
SIX MONTHS {YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.57 $20.98 $19.12 $ 13.96
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.15 0.27 0.34 0.20
- -----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.47) 8.58 2.31 5.41
=================================================================================================================
Total from investment operations (0.32) 8.85 2.65 5.61
=================================================================================================================
Less distributions:
Dividends from net investment income -- (0.28) (0.22) (0.14)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.98) (0.57) (0.31)
=================================================================================================================
Total distributions -- (1.26) (0.79) (0.45)
=================================================================================================================
Net asset value, end of period $ 28.25 $28.57 $20.98 $ 19.12
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) (1.12)% 42.30% 13.85% 40.23%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 787 $ 311 $ 62 $ 14
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.35%(c) 1.40% 1.45% 1.45%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.50%(c) 1.55% 1.61% 1.66%(d)
=================================================================================================================
Ratio of net investment income to average net assets 0.99%(c) 1.07% 1.67% 1.82%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 34% 84% 51% 34%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of $519,051.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
AIM V.I. Global Real Estate Fund
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Global Real Estate Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service fees (12b-1); You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $990.30 $5.43 $1,019.34 $5.51 1.10%
Series II 1,000.00 988.80 6.66 1,018.10 6.76 1.35
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Global Real Estate Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
supervise a competitive bidding process or they provide to the Funds in the areas of
The Board of Trustees (the Board) of AIM prepare an independent written evaluation. investment performance, product line
Variable Insurance Funds is required under The Senior Officer has recommended that an diversification, distribution, fund
the Investment Company Act of 1940 to independent written evaluation be provided operations, shareholder services and
approve annually the renewal of the AIM and, upon the direction of the Board, has compliance. The Board concluded that the
V.I. Global Real Estate Funds (the Fund) prepared an independent written quality and efficiency of the services AIM
investment advisory agreement with A I M evaluation. and its affiliates provide to the AIM
Advisors, Inc. (AIM). During contract Funds in each of these areas have
renewal meetings held on June 25-27, 2007, During the annual contract renewal generally improved, and support the
the Board as a whole and the disinterested process, the Board considered the factors Board's approval of the continuance of the
or "independent" Trustees, voting discussed below under the heading "Factors Fund's advisory agreement.
separately, approved the continuance of and Conclusions and Summary of Independent
the Fund's investment advisory agreement Written Fee Evaluation" in evaluating the B. FUND PERFORMANCE
for another year, effective July 1, 2007. fairness and reasonableness of the Fund's
In doing so, the Board determined that the advisory agreement at the contract renewal The Board compared the Fund's performance
Fund's advisory agreement is in the best meetings and at their meetings throughout during the past one, three and five
interests of the Fund and its shareholders the year as part of their ongoing calendar years to the performance of funds
and that the compensation to AIM under the oversight of the Fund. The Fund's advisory in the Fund's Lipper peer group that are
Fund's advisory agreement is fair and agreement was considered separately, not managed by AIM, and against the
reasonable. although the Board also considered the performance of all funds in the Lipper
common interests of all of the AIM Funds Variable Annuity Underlying Funds - Real
The independent Trustees met separately in their deliberations. The Board Estate Index. The Board also reviewed the
during their evaluation of the Fund's comprehensively considered all of the methodology used by Lipper to identify the
investment advisory agreement with information provided to them and did not Fund's peers. The Board noted that the
independent legal counsel from whom they identify any particular factor that was Fund's performance was above the median
received independent legal advice, and the controlling. Furthermore, each Trustee may performance of its peers for the one year
independent Trustees also received have evaluated the information provided period, and comparable to such performance
assistance during their deliberations from differently from one another and for the three and five year periods. The
the independent Senior Officer, a attributed different weight to the various Board noted that the Fund's performance
full-time officer of the AIM Funds who factors. The Trustees recognized that the was above the performance of the Index for
reports directly to the independent advisory arrangements and resulting the one, three and five year periods. The
Trustees. The following discussion more advisory fees for the Fund and the other Board also considered the steps AIM has
fully describes the process employed by AIM Funds are the result of years of taken over the last several years to
the Board to evaluate the performance of review and negotiation between the improve the quality and efficiency of the
the AIM Funds (including the Fund) Trustees and AIM, that the Trustees may services that AIM provides to the AIM
throughout the year and, more focus to a greater extent on certain Funds. The Board concluded that AIM
specifically, during the annual contract aspects of these arrangements in some continues to be responsive to the Board's
renewal meetings. years than others, and that the Trustees' focus on fund performance. Although the
deliberations and conclusions in a independent written evaluation of the
THE BOARD'S FUND EVALUATION PROCESS particular year may be based in part on Fund's Senior Officer (discussed below)
their deliberations and conclusions of only considered Fund performance through
The Board's Investments Committee has these same arrangements throughout the the most recent calendar year, the Board
established three Sub-Committees which are year and in prior years. also reviewed more recent Fund performance
responsible for overseeing the management and this review did not change their
of a number of the series portfolios of FACTORS AND CONCLUSIONS AND SUMMARY OF conclusions.
the AIM Funds. This Sub-Committee INDEPENDENT WRITTEN FEE EVALUATION
structure permits the Trustees to focus on C. ADVISORY FEES AND FEE WAIVERS
the performance of the AIM Funds that have The discussion below serves as a summary
been assigned to them. The Sub-Committees of the Senior Officer's independent The Board compared the Fund's contractual
meet throughout the year to review the written evaluation, as well as a advisory fee rate to the contractual
performance of their assigned funds, and discussion of the material factors and advisory fee rates of funds in the Fund's
the Sub-Committees review monthly and related conclusions that formed the basis Lipper peer group that are not managed by
quarterly comparative performance for the Board's approval of the Fund's AIM, at a common asset level and as of the
information and periodic asset flow data advisory agreement and sub-advisory end of the past calendar year. The Board
for their assigned funds. These materials agreement. Unless otherwise stated, noted that the Fund's advisory fee rate
are prepared under the direction and information set forth below is as of June was comparable to the median advisory fee
supervision of the independent Senior 27, 2007 and does not reflect any changes rate of its peers. The Board also reviewed
Officer. Over the course of each year, the that may have occurred since that date, the methodology used by Lipper and noted
Sub-Committees meet with portfolio including but not limited to changes to that the contractual fee rates shown by
managers for their assigned funds and the Fund's performance, advisory fees, Lipper include any applicable long-term
other members of management and review expense limitations and/or fee waivers. contractual fee waivers. The Board also
with these individuals the performance, compared the Fund's contractual advisory
investment objective(s), policies, I. INVESTMENT ADVISORY AGREEMENT fee rate to the contractual advisory fee
strategies and limitations of these funds. rates of other clients of AIM and its
A. NATURE, EXTENT AND QUALITY OF affiliates with investment strategies
In addition to their meetings SERVICES PROVIDED BY AIM comparable to those of the Fund, including
throughout the year, the Sub-Committees three mutual funds advised by AIM, one
meet at designated contract renewal The Board reviewed the advisory services mutual fund sub-advised by an AIM
meetings each year to conduct an in-depth provided to the Fund by AIM under the affiliate, and three offshore funds
review of the performance, fees and Fund's advisory agreement, the performance advised and sub-advised by AIM affiliates.
expenses of their assigned funds. During of AIM in providing these services, and The Board noted that the Fund's rate was:
the contract renewal process, the Trustees the credentials and experience of the (i) above the rates for two of the mutual
receive comparative performance and fee officers and employees of AIM who provide funds and the same as the rate for the
data regarding all the AIM Funds prepared these services. The Board's review of the third mutual fund; (ii) above the
by an independent company, Lipper, Inc., qualifications of AIM to provide these sub-advisory fee rate for the sub-advised
under the direction and supervision of the services included the Board's mutual fund; and (iii) below the advisory
independent Senior Officer who also consideration of AIM's portfolio and fee rates for two of the three offshore
prepares a separate analysis of this product review process, various back funds and above the advisory fee rate for
information for the Trustees. Each office support functions provided by AIM, the third such offshore fund.
Sub-Committee then makes recommendations and AIM's equity and fixed income trading
to the Investments Committee regarding the operations. The Board concluded that the Additionally, the Board compared the
performance, fees and expenses of their nature, extent and quality of the advisory Fund's contractual advisory fee rate to
assigned funds. The Investments Committee services provided to the Fund by AIM were the total advisory fees paid by numerous
considers each Sub-Committee's appropriate and that AIM currently is separately managed accounts/wrap accounts
recommendations and makes its own providing satisfactory advisory services advised by an AIM affiliate. The Board
recommendations regarding the performance, in accordance with the terms of the Fund's noted that the Fund's rate was above the
fees and expenses of the AIM Funds to the advisory agreement. In addition, based on rates for the separately managed
full Board. Moreover, the Investments their ongoing meetings throughout the year accounts/wrap accounts. The Board
Committee considers each Sub-Committee's with the Fund's portfolio managers, the considered that management of the
recommendations in making its annual Board concluded that these individuals are separately managed accounts/wrap accounts
recommendation to the Board whether to competent and able to continue to carry by the AIM affiliate involves different
approve the continuance of each AIM Fund's out their responsibilities under the levels of services and different
investment advisory agreement and Fund's advisory agreement. operational and regulatory requirements
sub-advisory agreement, if applicable than AIM's management of the Fund. The
(advisory agreements), for another year. In determining whether to continue the Board concluded that these differences are
Fund's advisory agreement, the Board appropriately reflected in the fee
The independent Trustees, as mentioned considered the prior relationship between structure for the Fund and the separately
above, are assisted in their annual AIM and the Fund, as well as the Board's managed accounts/wrap accounts.
evaluation of the advisory agreements by knowledge of AIM's operations, and
the independent Senior Officer. One concluded that it was beneficial to The Board noted that AIM has
responsibility of the Senior Officer is to maintain the current relationship, in contractually agreed to waive fees and/or
manage the process by which the AIM Funds' part, because of such knowledge. The Board limit expenses of the Fund through at
proposed management fees are negotiated also considered the steps that AIM and its least April 30, 2009 in an amount
during the annual contract renewal process affiliates have taken over the last necessary to limit total annual operating
to ensure that they are negotiated in a several years to improve the quality and expenses to a specified percentage of
manner which is at arms' length and efficiency of the services
reasonable. Accordingly, the Senior
Officer must either
(continued)
AIM V.I. Global Real Estate Fund
average daily net assets for each class of F. INDEPENDENT WRITTEN EVALUATION OF Sub-Advisor currently is providing
the Fund. The Board considered the THE FUND'S SENIOR OFFICER satisfactory services in accordance with
contractual nature of this fee waiver and the terms of the Fund's sub-advisory
noted that it remains in effect until at The Board noted that, upon their agreement. In addition, based on their
least April 30, 2009. The Board reviewed direction, the Senior Officer of the Fund, ongoing meetings throughout the year with
the Fund's effective advisory fee rate, who is independent of AIM and AIM's the Fund's portfolio managers, the Board
after taking account of this expense affiliates, had prepared an independent concluded that these individuals are
limitation, and considered the effect this written evaluation to assist the Board in competent and able to continue to carry
expense limitation would have on the determining the reasonableness of the out their responsibilities under the
Fund's estimated total expenses. The Board proposed management fees of the AIM Funds, Fund's sub-advisory agreement.
concluded that the levels of fee including the Fund. The Board noted that
waivers/expense limitations for the Fund they had relied upon the Senior Officer's B. FUND PERFORMANCE
were fair and reasonable. written evaluation instead of a
competitive bidding process. In The Board compared the Fund's performance
The Board noted that AIM has not determining whether to continue the Fund's during the past one, three and five
proposed any advisory fee waivers for the advisory agreement, the Board considered calendar years to the performance of funds
Fund. However, the Board also noted that the Senior Officer's written evaluation. in the Fund's Lipper peer group that are
AIM has recommended that the Board approve not managed by AIM, and against the
an amendment to the Fund's contractual G. COLLATERAL BENEFITS TO AIM AND ITS performance of all funds in the Lipper
advisory fee schedule that would implement AFFILIATES Variable Annuity Underlying Funds - Real
the contractual advisory fee waiver that Estate Index. The Board also reviewed the
had been formerly committed to by AIM, The Board considered various other methodology used by Lipper to identify the
which waiver provided for lower effective benefits received by AIM and its Fund's peers. The Board noted that the
fee rates at all asset levels than the affiliates resulting from AIM's Fund's performance was above the median
Fund's current contractual advisory fee relationship with the Fund, including the performance of its peers for the one year
schedule. The Board noted that AIM's fees received by AIM and its affiliates period, and comparable to such performance
recommendation was made in response to the for their provision of administrative, for the three and five year periods. The
recommendation of the independent Senior transfer agency and distribution services Board noted that the Fund's performance
Officer that AIM consider whether the to the Fund. The Board considered the was above the performance of the Index for
advisory fee waivers for certain equity performance of AIM and its affiliates in the one, three and five year periods. The
AIM Funds, including the Fund, should be providing these services and the Board also considered the steps AIM has
simplified. The Board concluded that it organizational structure employed by AIM taken over the last several years to
would be appropriate to approve the and its affiliates to provide these improve the quality and efficiency of the
proposed amendment to the Fund's services. The Board also considered that services that AIM provides to the AIM
contractual advisory fee schedule and that these services are provided to the Fund Funds. The Board concluded that AIM
it was not necessary at this time to pursuant to written contracts which are continues to be responsive to the Board's
discuss with AIM whether to implement any reviewed and approved on an annual basis focus on fund performance. Although the
fee waivers for the Fund. by the Board. The Board concluded that AIM independent written evaluation of the
and its affiliates were providing these Fund's Senior Officer (discussed below)
After taking account of the Fund's services in a satisfactory manner and in only considered Fund performance through
contractual advisory fee rate, as well as accordance with the terms of their the most recent calendar year, the Board
the comparative advisory fee information contracts, and were qualified to continue also reviewed more recent Fund performance
and the expense limitation discussed to provide these services to the Fund. and this review did not change their
above, the Board concluded that the Fund's conclusions.
advisory fees were fair and reasonable. The Board considered the benefits
realized by AIM as a result of portfolio C. SUB-ADVISORY FEES
D. ECONOMIES OF SCALE AND BREAKPOINTS brokerage transactions executed through
"soft dollar" arrangements. Under these The Board compared the Fund's contractual
The Board considered the extent to which arrangements, portfolio brokerage sub-advisory fee rate to the sub-advisory
there are economies of scale in AIM's commissions paid by the Fund and/or other fees paid by other sub-advisory clients of
provision of advisory services to the funds advised by AIM are used to pay for the Sub-Advisor with investment strategies
Fund. The Board also considered whether research and execution services. The Board comparable to those of the Fund, including
the Fund benefits from such economies of noted that soft dollar arrangements shift three mutual funds sub-advised by the
scale through contractual breakpoints in the payment obligation for the research Sub-Advisor and three offshore funds
the Fund's advisory fee schedule or and executions services from AIM to the sub-advised by the Sub-Advisor. The Board
through advisory fee waivers or expense funds and therefore may reduce AIM's noted that the Fund's sub-advisory fee
limitations. The Board noted that the expenses. The Board also noted that rate was: (i) the same as or comparable to
Fund's contractual advisory fee schedule research obtained through soft dollar the sub-advisory fee rates for two of the
currently does not include any breakpoints arrangements may be used by AIM in making mutual funds and below the sub-advisory
but that the amendment to the Fund's investment decisions for the Fund and may fee rate for the third mutual fund; (ii)
contractual advisory fee schedule therefore benefit Fund shareholders. The below the sub-advisory fee rates for two
discussed above provides for seven Board concluded that AIM's soft dollar of the offshore funds and the same as the
breakpoints. Based on this information, arrangements were appropriate. The Board sub-advisory fee rate for the third
the Board concluded that the Fund's also concluded that, based on their review offshore fund. Additionally, the Board
advisory fees will appropriately reflect and representations made by AIM, these compared the Fund's contractual
economies of scale upon the Board's arrangements were consistent with sub-advisory fee rate to the total
approval of the amendment to the Fund's regulatory requirements. advisory fees paid by numerous separately
contractual advisory fee schedule. The managed accounts/wrap accounts sub-advised
Board also noted that the Fund shares The Board considered the fact that the by the Sub-Advisor with investment
directly in economies of scale through Fund's uninvested cash and cash collateral strategies comparable to those of the
lower fees charged by third party service from any securities lending arrangements Fund. The Board noted that the Fund's
providers based on the combined size of may be invested in money market funds sub-advisory fee rate was generally
all of the AIM Funds and affiliates. advised by AIM pursuant to procedures comparable to the rates for the separately
approved by the Board. The Board noted managed accounts/wrap accounts. The Board
E. PROFITABILITY AND FINANCIAL that AIM will receive advisory fees from considered the services to be provided by
RESOURCES OF AIM these affiliated money market funds the Sub-Advisor pursuant to the Fund's
attributable to such investments, although sub-advisory agreement and the services to
The Board reviewed information from AIM AIM has contractually agreed to waive the be provided by AIM pursuant to the Fund's
concerning the costs of the advisory and advisory fees payable by the Fund with advisory agreement, as well as the
other services that AIM and its affiliates respect to its investment of uninvested allocation of fees between AIM and the
provide to the Fund and the profitability cash in these affiliated money market Sub-Advisor pursuant to the sub-advisory
of AIM and its affiliates in providing funds through at least April 30, 2009. The agreement. The Board noted that the
these services. The Board also reviewed Board considered the contractual nature of sub-advisory fees have no direct effect on
information concerning the financial this fee waiver and noted that it remains the Fund or its shareholders, as they are
condition of AIM and its affiliates. The in effect until at least April 30, 2009. paid by AIM to the Sub-Advisor, and that
Board also reviewed with AIM the The Board concluded that the Fund's AIM and the Sub-Advisor are affiliates.
methodology used to prepare the investment of uninvested cash and cash After taking account of the Fund's
profitability information. The Board collateral from any securities lending contractual sub-advisory fee rate, as well
considered the overall profitability of arrangements in the affiliated money as the comparative sub-advisory fee
AIM, as well as the profitability of AIM market funds is in the best interests of information and the expense limitation
in connection with managing the Fund. The the Fund and its shareholders. discussed above, the Board concluded that
Board noted that AIM continues to operate the Fund's sub-advisory fees were fair and
at a net profit, although increased II. SUB-ADVISORY AGREEMENT reasonable.
expenses in recent years have reduced the
profitability of AIM and its affiliates. A. NATURE, EXTENT AND QUALITY OF D. FINANCIAL RESOURCES OF THE
The Board concluded that the Fund's SERVICES PROVIDED BY THE SUB-ADVISOR SUB-ADVISOR
advisory fees were fair and reasonable,
and that the level of profits realized by The Board reviewed the services provided The Board considered whether the
AIM and its affiliates from providing by INVESCO Institutional (N.A.), Inc. (the Sub-Advisor is financially sound and has
services to the Fund was not excessive in Sub-Advisor) under the Fund's sub-advisory the resources necessary to perform its
light of the nature, quality and extent of agreement, the performance of the obligations under the Fund's sub-advisory
the services provided. The Board Sub-Advisor in providing these services, agreement, and concluded that the
considered whether AIM is financially and the credentials and experience of the Sub-Advisor has the financial resources
sound and has the resources necessary to officers and employees of the Sub-Advisor necessary to fulfill these obligations.
perform its obligations under the Fund's who provide these services. The Board
advisory agreement, and concluded that AIM concluded that the nature, extent and
has the financial resources necessary to quality of the services provided by the
fulfill these obligations. Sub-Advisor were appropriate and that the
AIM V.I. Government Securities Fund
Semiannual Report to Shareholders o June 30, 2007
FIXED INCOME
Intermediate-Term Taxable
Investment Grade
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Government Securities Fund
Fund performance The performance data quoted represent
======================================================================================= past performance and cannot guarantee
PERFORMANCE SUMMARY comparable future results; current
performance may be lower or higher. Please
FUND VS. INDEXES contact your variable product issuer or
financial advisor for the most recent
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. month-end variable product performance.
If variable product issuer charges were included, returns would be lower. Performance figures reflect Fund expenses,
reinvested distributions and changes in
Series I Shares 1.19% net asset value. Investment return and
Series II Shares 1.11 principal value will fluctuate so that you
Lehman Brothers U.S. Aggregate Bond Index(1) (Broad Market Index) 0.98 may have a gain or loss when you sell
Lehman Brothers U.S. Government Index(1) (Style-Specific Index)* 1.10 shares.
Lehman Brothers Intermediate U.S. Government and Mortgage Index(2)
(Former Style-Specific Index)* 1.26 The net annual Fund operating expense
Lipper VUF General U.S. Government Funds Index(1) (Peer Group Index) 0.59 ratio set forth in the most recent Fund
Lipper Intermediate U.S. Government Funds Index(1) (Former Peer Group Index) 0.85 prospectus as of the date of this report
for Series I and Series II shares was
Sources: (1) Lipper Inc.; (2) A I M Management Group Inc., Lehman Brothers Inc. 0.73% and 0.98%, respectively.(1) The
total annual Fund operating expense ratio
* The Fund also included the Lehman Brothers U.S. Government Index, which the Fund set forth in the most recent Fund
has elected as its style-specific index rather than the Lehman Brothers prospectus as of the date of this report
Intermediate U.S. Government and Mortgage Index because the Fund believes the for Series I and Series II shares was
Lehman Brothers U.S. Government Index is better aligned with the Government Funds' 0.77% and 1.02%, respectively. The expense
Morningstar category classification in terms of its duration profile. ratios presented above may vary from the
expense ratios presented in other sections
The unmanaged Lehman Brothers U.S. Aggregate Bond Index (the Lehman Aggregate), which of this report that are based on expenses
represents the U.S. investment-grade fixed-rate bond market (including government and incurred during the period covered by this
corporate securities, mortgage pass-through securities and asset-backed securities), is report.
compiled by Lehman Brothers, a global investment bank.
AIM V.I. Government Securities Fund, a
The unmanaged Lehman Brothers U.S. Government Index consists of securities issued by series portfolio of AIM Variable Insurance
the U.S. Government including public obligations of the U.S. Treasury with a remaining Funds, is currently offered through
maturity of one year or more or publicly issued debt of U.S. government agencies, insurance companies issuing variable
quasi-federal corporations and corporate or foreign debt guaranteed by the U.S. products. You cannot purchase shares of
government. the Fund directly. Performance figures
given represent the Fund and are not
The Lehman Brothers Intermediate U.S. Government and Mortgage Index includes intended to reflect actual variable
securities in the intermediate maturity range of the U.S. Government Index that must product values. They do not reflect sales
have between 1 year and 10 years to final maturity regardless of call features, and charges, expenses and fees assessed in
fixed-rate mortgage securities with a weighted average of at least 1 year and issued by connection with a variable product. Sales
Government National Mortgage Association, Federal Home Loan Mortgage Corporation, or charges, expenses and fees, which are
Federal National Mortgage Association. determined by the variable product
issuers, will vary and will lower the
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) General U.S. total return.
Government Funds Index as its peer group instead of the Lipper Intermediate U.S.
Government Funds Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund Per NASD requirements, the most recent
to be compared with the Lipper VUF General U.S. Government Funds Index. The unmanaged month-end performance data at the Fund
Lipper VUF General U.S. Government Funds Index is an unmanaged index of the largest level, excluding variable product charges,
variable insurance underlying funds, based on total year-end net asset value, in the is available on this AIM automated
Lipper General U.S. Government Funds category. Lipper Inc. is an independent mutual information line, 866-702-4402. As
fund performance monitor. mentioned above, for the most recent
month-end performance including variable
The Lipper Intermediate U.S. Government Funds Index represents an average of the product charges, please contact your
largest intermediate-term U.S. government bond funds tracked by Lipper Inc. variable product issuer or financial
advisor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate (1) Total annual operating expenses less
significantly from the performance of the indexes. any contractual fee waivers and/or
expense reimbursements by the advisor
A direct investment cannot be made in an index. Unless otherwise indicated, index in effect through at least April 30,
results include reinvested dividends, and they do not reflect sales charges. 2009. See current prospectus for more
Performance of an index of funds reflects fund expenses; performance of a market index information.
does not.
=======================================================================================
========================================== Series II shares' inception date is
FUND PERFORMANCE September 19, 2001. Returns since that
As of 6/30/07 date are historical. All other returns are
SERIES I SHARES the blended returns of the historical
Inception (5/5/93) 4.72% performance of Series II shares since
10 Years 4.74 their inception and the restated
5 Years 3.18 historical performance of Series I shares
1 Year 4.87 (for periods prior to inception of Series
II shares) adjusted to reflect the Rule
SERIES II SHARES 12b-1 fees applicable to Series II shares.
10 Years 4.48% The inception date of Series I shares is
5 Years 2.92 May 5, 1993.
1 Year 4.60
========================================== The performance of the Fund's Series I
and Series II share classes will differ
primarily due to different class expenses.
AIM V.I. Government Securities Fund
PORTFOLIO COMPOSITION
By security type, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
U.S. Mortgage-Backed Securities 53.2%
- ----------------------------------------------------------
U.S. Government Agency Securities 41.4
- ----------------------------------------------------------
Repurchase Agreements 4.4
- ----------------------------------------------------------
U.S. Treasury Securities 0.7
- ----------------------------------------------------------
Foreign Sovereign Debt 0.3
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS
June 30, 2007
(Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
U.S. MORTGAGE-BACKED SECURITIES-55.68%(A)
COLLATERALIZED MORTGAGE OBLIGATIONS-2.15%
Fannie Mae REMICS,
3.50%, 04/25/11 $ 58,438 $ 58,276
- ---------------------------------------------------------------------------
6.50%, 06/25/20 681,176 684,978
- ---------------------------------------------------------------------------
6.00%, 08/25/30 2,258,827 2,264,699
- ---------------------------------------------------------------------------
5.50%, 07/25/34 4,878,018 4,853,920
- ---------------------------------------------------------------------------
Freddie Mac REMICS,
5.50%, 01/15/11 to 07/15/22 10,590,558 10,590,631
- ---------------------------------------------------------------------------
4.50%, 11/15/16 288,463 284,745
- ---------------------------------------------------------------------------
6.00%, 03/15/27 3,228,945 3,253,762
===========================================================================
21,991,011
===========================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-13.54%
Pass Through Ctfs.,
8.00%, 05/01/08 to 09/01/36 24,809,960 26,320,915
- ---------------------------------------------------------------------------
6.00%, 11/01/08 to 02/01/34 21,381,949 21,488,636
- ---------------------------------------------------------------------------
6.50%, 12/01/08 to 12/01/35 47,133,838 48,061,320
- ---------------------------------------------------------------------------
7.00%, 11/01/10 to 09/01/36 31,192,440 32,338,794
- ---------------------------------------------------------------------------
7.50%, 03/01/16 to 08/01/36 5,971,085 6,212,742
- ---------------------------------------------------------------------------
10.50%, 08/01/19 10,203 11,128
- ---------------------------------------------------------------------------
8.50%, 09/01/20 to 08/01/31 1,943,156 2,081,512
- ---------------------------------------------------------------------------
10.00%, 03/01/21 173,924 190,534
- ---------------------------------------------------------------------------
9.00%, 06/01/21 to 06/01/22 1,233,941 1,320,341
- ---------------------------------------------------------------------------
7.05%, 05/20/27 463,998 476,702
===========================================================================
138,502,624
===========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-29.45%
Pass Through Ctfs.,
6.00%, 05/01/09 to 03/01/37 11,882,355 11,931,994
- ---------------------------------------------------------------------------
7.50%, 11/01/09 to 10/01/36 28,383,679 29,573,789
- ---------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<Caption>
FEDERAL NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)
6.50%, 10/01/10 to 04/01/37 $66,458,515 $ 67,695,440
- ---------------------------------------------------------------------------
7.00%, 12/01/10 to 08/01/36 86,001,033 88,973,235
- ---------------------------------------------------------------------------
8.00%, 06/01/12 to 12/01/36 25,440,880 26,851,085
- ---------------------------------------------------------------------------
8.50%, 06/01/12 to 12/01/36 10,458,847 11,179,195
- ---------------------------------------------------------------------------
10.00%, 09/01/13 to 03/01/16 136,086 145,197
- ---------------------------------------------------------------------------
5.00%, 11/01/17 to 12/01/33 2,417,720 2,335,629
- ---------------------------------------------------------------------------
5.50%, 03/01/21 1,213 1,196
- ---------------------------------------------------------------------------
6.75%, 07/01/24 1,995,308 2,051,855
- ---------------------------------------------------------------------------
6.95%, 10/01/25 to 09/01/26 241,027 249,789
- ---------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 07/01/22(b)(c) 21,703,000 21,380,851
- ---------------------------------------------------------------------------
6.00%, 07/01/22(c) 17,618,000 17,697,836
- ---------------------------------------------------------------------------
6.50%, 07/01/37(b)(c) 20,980,000 21,179,971
===========================================================================
301,247,062
===========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-10.54%
Pass Through Ctfs.,
7.50%, 03/15/08 to 05/15/37 26,242,301 27,396,639
- ---------------------------------------------------------------------------
9.00%, 09/15/08 to 12/20/16 185,152 197,585
- ---------------------------------------------------------------------------
6.50%, 09/20/08 to 01/15/37 39,760,919 40,783,068
- ---------------------------------------------------------------------------
9.38%, 06/15/09 to 12/15/09 519,104 538,625
- ---------------------------------------------------------------------------
8.00%, 07/15/12 to 01/15/37 10,469,690 11,108,683
- ---------------------------------------------------------------------------
6.75%, 08/15/13 192,260 197,520
- ---------------------------------------------------------------------------
11.00%, 10/15/15 2,722 3,021
- ---------------------------------------------------------------------------
9.50%, 09/15/16 3,879 4,198
- ---------------------------------------------------------------------------
7.00%, 04/15/17 to 03/15/37 16,044,252 16,721,386
- ---------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 5,044 5,636
- ---------------------------------------------------------------------------
8.50%, 12/15/17 to 01/15/37 3,233,408 3,459,823
- ---------------------------------------------------------------------------
10.00%, 06/15/19 69,764 77,140
- ---------------------------------------------------------------------------
</Table>
AIM V.I. Government Securities Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)
6.00%, 06/20/20 to 08/15/33 $5,378,892 $ 5,386,035
- ---------------------------------------------------------------------------
6.95%, 08/20/25 to 08/20/27 1,855,042 1,927,302
===========================================================================
107,806,661
===========================================================================
Total U.S. Mortgage-Backed Securities
(Cost $576,273,307) 569,547,358
===========================================================================
U.S. GOVERNMENT AGENCY SECURITIES-43.35%(A)
FEDERAL AGRICULTURAL MORTGAGE CORP.-2.04%
Medium Term Notes,
5.40%, 12/14/11 10,000,000 9,936,000
- ---------------------------------------------------------------------------
5.60%, 01/10/17 11,000,000 10,879,330
===========================================================================
20,815,330
===========================================================================
FEDERAL FARM CREDIT BANK (FFCB)-10.54%
Bonds,
5.75%, 01/18/11 2,000,000 2,030,020
- ---------------------------------------------------------------------------
5.90%, 04/10/15 8,615,000 8,561,845
- ---------------------------------------------------------------------------
5.70%, 06/08/15 42,500,000 42,061,400
- ---------------------------------------------------------------------------
5.92%, 11/07/17 9,350,000 9,232,845
- ---------------------------------------------------------------------------
5.99%, 08/14/18 14,845,000 14,643,108
- ---------------------------------------------------------------------------
6.10%, 02/07/19 9,835,000 9,718,947
- ---------------------------------------------------------------------------
6.15%, 10/05/20 6,000,000 5,920,860
- ---------------------------------------------------------------------------
5.59%, 10/04/21 10,075,000 9,804,486
- ---------------------------------------------------------------------------
5.75%, 01/18/22 2,775,000 2,703,738
- ---------------------------------------------------------------------------
Medium Term Notes, 5.75%, 12/07/28 3,100,000 3,153,413
===========================================================================
107,830,662
===========================================================================
FEDERAL HOME LOAN BANK (FHLB)-8.06%
Unsec. Bonds,
5.60%, 06/09/20 2,150,000 2,070,945
- ---------------------------------------------------------------------------
6.35%, 10/04/21 5,705,000 5,668,830
- ---------------------------------------------------------------------------
6.15%, 01/03/22 32,000,000 31,331,520
- ---------------------------------------------------------------------------
6.15%, 12/08/26 43,000,000 41,663,990
- ---------------------------------------------------------------------------
Unsec. Disc. Bonds, 6.00%, 11/16/15(d) 1,705,000 1,705,631
===========================================================================
82,440,916
===========================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-9.48%
Unsec. Global Notes, 5.50%, 08/20/19 9,000,000 8,899,560
- ---------------------------------------------------------------------------
Unsec. Medium Term Notes, 5.25%, 12/05/11 88,600,000 88,019,670
===========================================================================
96,919,230
===========================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<Caption>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-11.53%
Unsec. Global Bonds, 6.63%, 11/15/30 $ 700,000(e) $ 793,506
- ---------------------------------------------------------------------------
Unsec. Notes,
6.00%, 04/19/13 7,303,000 7,290,147
- ---------------------------------------------------------------------------
6.00%, 11/17/15 8,565,000 8,516,180
- ---------------------------------------------------------------------------
6.13%, 03/21/16 22,695,000 22,602,631
- ---------------------------------------------------------------------------
6.50%, 07/26/16 30,000,000 30,054,000
- ---------------------------------------------------------------------------
6.38%, 12/28/20 29,466,000 29,432,998
- ---------------------------------------------------------------------------
6.25%, 03/29/22 13,830,000 13,617,571
- ---------------------------------------------------------------------------
6.50%, 11/25/25 4,762,000 4,714,570
- ---------------------------------------------------------------------------
Unsec. Sub. Disc. Deb.,
6.74%, 10/09/19(f) 1,000,000 507,010
- ---------------------------------------------------------------------------
7.37%, 10/09/19(f) 800,000 405,608
===========================================================================
117,934,221
===========================================================================
PRIVATE EXPORT FUNDING CORP.-0.66%
Series G, Sec. Gtd. Notes, 6.67%, 09/15/09 6,601,000 6,789,195
===========================================================================
TENNESSEE VALLEY AUTHORITY-1.04%
Series A, Bonds, 6.79%, 05/23/12 5,000,000 5,327,300
- ---------------------------------------------------------------------------
Series G, Global Bonds, 5.38%, 11/13/08 5,347,000 5,359,886
===========================================================================
10,687,186
===========================================================================
Total U.S. Government Agency Securities
(Cost $447,721,630) 443,416,740
===========================================================================
U.S. TREASURY SECURITIES-0.71%(A)
U.S. TREASURY BONDS-0.47%
7.50%, 11/15/24 2,815,000(e) 3,542,509
- ---------------------------------------------------------------------------
7.63%, 02/15/25 550,000 700,733
- ---------------------------------------------------------------------------
6.88%, 08/15/25 500,000 595,940
===========================================================================
4,839,182
===========================================================================
U.S. TREASURY STRIPS-0.24%
4.78%, 11/15/18(f) 1,400,000 778,974
- ---------------------------------------------------------------------------
4.94%, 11/15/18(f) 2,100,000 1,168,461
- ---------------------------------------------------------------------------
6.37%, 11/15/18(f) 405,000 225,346
- ---------------------------------------------------------------------------
6.79%, 11/15/18(f) 250,000 139,103
- ---------------------------------------------------------------------------
6.85%, 11/15/18(f) 250,000 139,102
===========================================================================
2,450,986
===========================================================================
Total U.S. Treasury Securities (Cost
$7,024,300) 7,290,168
===========================================================================
BONDS & NOTES-0.37%
FOREIGN SOVEREIGN DEBT-0.37%(A)
Israel Government AID Bond (Israel), U.S.
Gtd. Global Bonds, 5.13%, 11/01/24 (Cost
$3,834,761) 3,800,000 3,722,936
===========================================================================
TOTAL INVESTMENTS (excluding Repurchase
Agreements)-100.11% (Cost $1,034,853,998) 1,023,977,202
===========================================================================
</Table>
AIM V.I. Government Securities Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<Caption>
REPURCHASE
AMOUNT VALUE
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENTS-4.56%
Barclays Capital Inc., Joint agreement dated
06/29/07 aggregate maturing value
$390,053,883 (collateralized by U.S.
Government obligations valued at
$397,679,489; 0.00%-5.25%,
07/06/07-06/22/10) 5.32%, 07/02/07 (Cost
$46,661,032)(g)(h) $46,681,718 $ 46,661,032
===========================================================================
TOTAL INVESTMENTS-104.67% (Cost
$1,081,515,030) 1,070,638,234
===========================================================================
OTHER ASSETS LESS LIABILITIES-(4.67)% (47,764,135)
===========================================================================
NET ASSETS-100.00% $1,022,874,099
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
REMIC - Real Estate Mortgage Investment Conduit
Sec. - Secured
STRIPS - Separately Traded Registered Interest and Principal Security
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate value of these securities at June 30, 2007
was $1,023,977,202, which represented 100.11% of the Fund's Net Assets. See
Note 1A.
(b) This security is subject to dollar roll transactions. See Note 1K.
(c) Security purchased on forward commitment basis.
(d) Step coupon bond. The interest rate represents the coupon rate at which the
bond will accrue at a specified future date.
(e) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 1O and Note 7.
(f) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(g) Security is considered a cash equivalent for the purpose of the Statement of
Cash Flows. See Note 1J.
(h) Principal amount equals value at period end. See Note 1L.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Government Securities Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
Investments, at value (Cost $1,081,515,030) $1,070,638,234
============================================================
Receivables for:
Investments sold 32,799,780
- ------------------------------------------------------------
Variation margin 1,805,692
- ------------------------------------------------------------
Fund shares sold 3,853,176
- ------------------------------------------------------------
Interest 8,303,108
- ------------------------------------------------------------
Fund expenses absorbed 8,544
- ------------------------------------------------------------
Principal paydowns 43,357
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 52,251
- ------------------------------------------------------------
Other assets 2,046
============================================================
Total assets 1,117,506,188
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 93,788,787
- ------------------------------------------------------------
Fund shares reacquired 52,332
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 98,837
- ------------------------------------------------------------
Accrued administrative services fees 624,149
- ------------------------------------------------------------
Accrued distribution fees -- Series II 9,795
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 5,823
- ------------------------------------------------------------
Accrued transfer agent fees 1,471
- ------------------------------------------------------------
Accrued operating expenses 50,895
============================================================
Total liabilities 94,632,089
============================================================
Net assets applicable to shares outstanding $1,022,874,099
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,024,834,678
- ------------------------------------------------------------
Undistributed net investment income 70,752,333
- ------------------------------------------------------------
Undistributed net realized gain (loss) (61,817,342)
- ------------------------------------------------------------
Unrealized appreciation (depreciation) (10,895,570)
============================================================
$1,022,874,099
____________________________________________________________
============================================================
NET ASSETS:
Series I $1,007,377,945
____________________________________________________________
============================================================
Series II $ 15,496,154
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 84,343,484
____________________________________________________________
============================================================
Series II 1,305,555
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 11.94
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 11.87
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 27,948,687
- -----------------------------------------------------------
Dividends from affiliated money market funds 28,871
===========================================================
Total investment income 27,977,558
===========================================================
EXPENSES:
Advisory fees 2,258,368
- -----------------------------------------------------------
Administrative services fees 1,324,981
- -----------------------------------------------------------
Custodian fees 38,417
- -----------------------------------------------------------
Distribution fees -- Series II 19,756
- -----------------------------------------------------------
Transfer agent fees 8,334
- -----------------------------------------------------------
Trustees' and officer's fees and benefits 22,688
- -----------------------------------------------------------
Other 62,836
===========================================================
Total expenses 3,735,380
===========================================================
Less: Fees waived and expense offset
arrangement (158,970)
===========================================================
Net expenses 3,576,410
===========================================================
Net investment income 24,401,148
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (739,895)
- -----------------------------------------------------------
Futures contracts (6,838,280)
===========================================================
(7,578,175)
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (4,266,701)
- -----------------------------------------------------------
Futures contracts (1,025,827)
===========================================================
(5,292,528)
===========================================================
Net realized and unrealized gain (loss) (12,870,703)
===========================================================
Net increase in net assets resulting from
operations $ 11,530,445
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Government Securities Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 24,401,148 $ 40,090,918
- -------------------------------------------------------------------------------
Net realized gain (loss) (7,578,175) (10,189,741)
- -------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) (5,292,528) 412,143
===============================================================================
Net increase in net assets resulting from
operations 11,530,445 30,313,320
===============================================================================
Distributions to shareholders from net
investment income:
Series I -- (35,873,306)
- -------------------------------------------------------------------------------
Series II -- (608,462)
===============================================================================
Decrease in net assets resulting from
distributions -- (36,481,768)
===============================================================================
Share transactions-net:
Series I 88,623,717 100,669,509
- -------------------------------------------------------------------------------
Series II (901,407) (2,567,156)
===============================================================================
Net increase in net assets resulting from
share transactions 87,722,310 98,102,353
===============================================================================
Net increase in net assets 99,252,755 91,933,905
===============================================================================
NET ASSETS:
Beginning of period 923,621,344 831,687,439
===============================================================================
End of period (including undistributed net
investment income of $70,752,333 and
$46,351,185, respectively) $1,022,874,099 $923,621,344
_______________________________________________________________________________
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Government Securities Fund
STATEMENT OF CASH FLOWS
For the six months ended June 30, 2007
(Unaudited)
<Table>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 11,530,445
============================================================================
ADJUSTMENTS TO RECONCILE NET INCREASE (DECREASE) IN NET
ASSETS TO NET CASH PROVIDED BY (USED IN) OPERATIONS:
Purchases of investment securities (500,119,579)
- ----------------------------------------------------------------------------
Amortization of premium and accretion of discount on
investment securities 346,079
- ----------------------------------------------------------------------------
Proceeds from disposition of investment securities and
principal payments 354,216,084
- ----------------------------------------------------------------------------
Realized gain (loss) on investment securities 739,895
- ----------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on
investment securities 4,266,701
- ----------------------------------------------------------------------------
Increase in variation margin receivable (1,694,067)
- ----------------------------------------------------------------------------
Increase in receivables and other assets (891,043)
- ----------------------------------------------------------------------------
Increase in accrued expenses and other payables 73,222
============================================================================
Net cash provided by (used in) operating activities (131,532,263)
============================================================================
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from shares of beneficial interest sold 112,239,591
- ----------------------------------------------------------------------------
Disbursements from shares of beneficial interest
reacquired (27,779,660)
- ----------------------------------------------------------------------------
Decrease in amount due to custodian (2,617,382)
============================================================================
Net cash provided by financing activities 81,842,549
============================================================================
Net increase (decrease) in cash and cash equivalents (49,689,714)
============================================================================
Cash and cash equivalents at beginning of period 96,350,746
============================================================================
Cash and cash equivalents at end of period $ 46,661,032
____________________________________________________________________________
============================================================================
</Table>
See accompany Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Government Securities Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is a high level of current income consistent
with reasonable concern for safety of principal.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated
AIM V.I. Government Securities Fund
for making this determination are the country in which the issuer maintains
50% or more of its assets, the type of security, financial guarantees and
enhancements, the nature of the collateral and the sponsor organization.
Country of issuer and/or credit risk exposure has been determined to be the
United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- U.S. Government Funds -- The
Fund may invest in obligations issued by agencies and instrumentalities of
the U.S. government that may vary in the level of support they receive from
the government. The government may choose not to provide financial support
to government sponsored agencies or instrumentalities if it is not legally
obligated to do so. In this case, if the issuer defaulted, the underlying
fund holding securities of such issuer might not be able to recover its
investment from the U.S. Government. Many securities purchased by the Fund
are not guaranteed by the U.S. Government.
J. CASH AND CASH EQUIVALENTS -- For the purposes of the Statement of Cash
Flows the Fund defines Cash and Cash Equivalents as cash (including foreign
currency), money market funds and other investments held in lieu of cash
and excludes investments made with cash collateral received.
K. DOLLAR ROLL TRANSACTIONS -- 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 purchase a substantially
similar security (same type, coupon and maturity) from the institution at
an agreed upon price and future date. The mortgage-backed securities to be
purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories. Based on the typical structure of dollar roll
transactions by the Fund, the dollar roll transactions are accounted for as
financing transactions in which the Fund receives compensation as either a
"fee" or a "drop". "Fee" income which is agreed upon amongst the parties at
the commencement of the dollar roll and the "drop" which is the difference
between the selling price and the repurchase price of the mortgage-backed
securities are amortized to income. During the period between the sale and
purchase settlement dates, the Fund will not be entitled to receive
interest and principal payments on securities purchased and not yet
settled. Proceeds of the sale may 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 are considered
borrowings under the 1940 Act. At the time the Fund enters into the dollar
roll, it will segregate liquid assets having a dollar value equal to the
purchase price.
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 purchase under the
agreement. In the event that 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 purchase the securities. The return earned
by the Fund with the proceeds of the dollar roll transaction may not exceed
the return on the securities sold.
L. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements.
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. Eligible securities for collateral
are securities consistent with the Fund's investment objectives and may
consist of U.S. Government Securities, U.S. Government Agency Securities
and/or, Investment Grade Debt Securities. Collateral consisting of U.S.
Government Securities and U.S. Government Agency Securities is marked to
market daily to ensure its market value is at least 102% of the sales price
of the repurchase agreement. Collateral consisting of Investment Grade Debt
Securities is marked to market daily to ensure its market value is at least
105% of the sales price of the repurchase agreement. The investments in
some repurchase agreements, pursuant to procedures approved by the Board of
Trustees, are through participation with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates ("Joint repurchase agreements"). The
principal amount of the repurchase agreement is equal to the value at
period-end. If the seller of a repurchase agreement fails to repurchase the
security in accordance with the terms of the agreement, the Fund might
incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the collateral and loss of income.
M. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are
AIM V.I. Government Securities Fund
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the 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. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments (net of estimated
foreign tax withholding) are included with the net realized and unrealized
gain or loss from investments in the Statement of Operations. Reported net
realized foreign currency gains or losses arise from (i) sales of foreign
currencies, (ii) currency gains or losses realized between the trade and
settlement dates on securities transactions, and (iii) the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign currency gains and losses
arise from changes in the fair values of assets and liabilities, other than
investments in securities at fiscal period end, resulting from changes in
exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
N. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
O. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
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 received or
made 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. If the Fund were unable
to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to
maintain the margin deposits on the futures contracts. Risks may exceed
amounts recognized in the Statement of Assets and Liabilities.
P. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.50%
- -------------------------------------------------------------------
Over $250 million 0.45%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 0.73% and Series
II shares to 0.98% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$156,733.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
AIM V.I. Government Securities Fund
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$117,218 for accounting and fund administrative services and reimbursed
$1,207,763 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market fund below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in the affiliated money market
fund for the six months ended June 30, 2007. During the period, each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Government & Agency Portfolio -- Institutional
Class $96,350,746 $ -- $(96,350,746) $ -- $28,871
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $2,237.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$4,068 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
AIM V.I. Government Securities Fund
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 7--FUTURES CONTRACTS
On June 30, 2007, $9,775,826 principal amount of U.S. Treasury and U.S.
Government obligations were pledged as collateral to cover margin requirements
for open futures contracts.
<Table>
<Caption>
OPEN FUTURES CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ VALUE APPRECIATION
CONTRACT CONTRACTS COMMITMENT 06/30/07 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 708 Sept.-07/Long $144,277,125 $529,407
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 1,642 Sept.-07/Long 170,896,281 (85,640)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 1,957 Sept.-07/Long 206,861,016 (808,919)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bonds 221 Sept.-07/Long 23,812,750 346,378
===========================================================================================================================
Total $545,847,172 $(18,774)
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2011 $11,708,442
- -----------------------------------------------------------------------------
December 31, 2012 7,926,972
- -----------------------------------------------------------------------------
December 31, 2013 12,902,211
- -----------------------------------------------------------------------------
December 31, 2014 17,860,899
=============================================================================
Total capital loss carryforward $50,398,524
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $269,109,136 and
$54,098,563, respectively. During the same period, purchases and sales of U.S.
Treasury obligations were $0 and $50,000,000, respectively. For interim
reporting periods, the cost of investments for tax purposes includes reversals
of certain tax items, such as, wash sales that have occurred since the prior
fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,192,384
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,920,845)
==============================================================================
Net unrealized appreciation (depreciation) of investment
securities $(10,728,461)
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,081,366,695.
</Table>
AIM V.I. Government Securities Fund
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 9,604,995 $114,482,676 14,050,842 $167,801,734
- ----------------------------------------------------------------------------------------------------------------------
Series II 81,966 972,488 165,527 1,967,287
======================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 3,040,111 35,873,306
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- 51,828 608,462
======================================================================================================================
Reacquired:
Series I (2,165,894) (25,858,959) (8,636,109) (103,005,531)
- ----------------------------------------------------------------------------------------------------------------------
Series II (157,877) (1,873,895) (432,546) (5,142,905)
======================================================================================================================
7,363,190 $ 87,722,310 8,239,653 $ 98,102,353
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 91% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Government Securities Fund
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.80 $ 11.87 $ 12.07 $ 12.23 $ 12.40 $ 11.53
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.30 0.55 0.45 0.40 0.36 0.49
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.16) (0.13) (0.25) (0.09) (0.23) 0.61
=================================================================================================================================
Total from investment operations 0.14 0.42 0.20 0.31 0.13 1.10
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.49) (0.40) (0.47) (0.30) (0.23)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.00) --
=================================================================================================================================
Total distributions -- (0.49) (0.40) (0.47) (0.30) (0.23)
=================================================================================================================================
Net asset value, end of period $ 11.94 $ 11.80 $ 11.87 $ 12.07 $ 12.23 $ 12.40
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.19% 3.55% 1.66% 2.56% 1.07% 9.59%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,007,378 $907,403 $812,824 $652,226 $526,482 $428,322
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.73%(c) 0.71% 0.85% 0.87% 0.76% 0.81%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.76%(c) 0.77% 0.88% 0.87% 0.76% 0.81%
=================================================================================================================================
Ratio of net investment income to average net
assets 5.00%(c) 4.62% 3.68% 3.20% 2.93% 4.01%
=================================================================================================================================
Ratio of interest expense to average net assets --% --% 0.11% 0.09% 0.01% 0.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 11% 89% 174% 95% 265% 170%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$968,323,814.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.74 $ 11.81 $ 12.01 $ 12.17 $ 12.35 $ 11.52
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.28 0.52 0.41 0.36 0.33 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.15) (0.13) (0.24) (0.08) (0.22) 0.60
=================================================================================================================================
Total from investment operations 0.13 0.39 0.17 0.28 0.11 1.06
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.46) (0.37) (0.44) (0.29) (0.23)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.00) --
=================================================================================================================================
Total distributions -- (0.46) (0.37) (0.44) (0.29) (0.23)
=================================================================================================================================
Net asset value, end of period $ 11.87 $ 11.74 $ 11.81 $ 12.01 $ 12.17 $ 12.35
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.11% 3.28% 1.41% 2.27% 0.93% 9.25%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,496 $16,218 $18,863 $17,728 $22,325 $14,926
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.98%(c) 0.96% 1.10% 1.12% 1.01% 1.06%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.01%(c) 1.02% 1.13% 1.12% 1.01% 1.06%
=================================================================================================================================
Ratio of net investment income to average net assets 4.75%(c) 4.37% 3.43% 2.95% 2.68% 3.76%
=================================================================================================================================
Ratio of interest expense to average net assets --% --% 0.11% 0.09% 0.01% 0.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 11% 89% 174% 95% 265% 170%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$15,935,486.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Government Securities Fund
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Government Securities Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,011.90 $3.64 $1,021.17 $3.66 0.73%
Series II 1,000.00 1,011.10 4.89 1,019.93 4.91 0.98
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Government Securities Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Government Securities Fund (the Fund) Committee considers each Sub-Committee's provided to the Fund by AIM under the
investment advisory agreement with A I M recommendations in making its annual Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendation to the Board whether to of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, approve the continuance of each AIM Fund's the credentials and experience of the
the Board as a whole and the disinterested investment advisory agreement and officers and employees of AIM who provide
or "independent" Trustees, voting sub-advisory agreement, if applicable these services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another year. qualifications of AIM to provide these
the Fund's investment advisory agreement services included the Board's
for another year, effective July 1, 2007. The independent Trustees, as mentioned consideration of AIM's portfolio and
In doing so, the Board determined that the above, are assisted in their annual product review process, various back
Fund's advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio review and negotiation between the calendar years to the performance of funds
managers for their assigned funds and Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
other members of management and review focus to a greater extent on certain not managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds -
strategies and limitations of these funds. deliberations and conclusions in a General U.S. Government Index. The Board
particular year may be based in part on also reviewed the methodology used by
In addition to their meetings their deliberations and conclusions of Lipper to identify the Fund's peers. The
throughout the year, the Sub-Committees these same arrangements throughout the Board noted that the Fund's performance
meet at designated contract renewal year and in prior years. was comparable to the median performance
meetings each year to conduct an in-depth of its peers for the one year period, and
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF below such performance for the three and
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION five year periods. The Board noted that
the contract renewal process, the Trustees the Fund's performance was above the
receive comparative performance and fee The discussion below serves as a summary performance of the Index for the one year
data regarding all the AIM Funds prepared of the Senior Officer's independent period, and below such Index for the three
by an independent company, Lipper, Inc., written evaluation, as well as a and five year periods. The Board noted
under the direction and supervision of the discussion of the material factors and that AIM made changes to the Fund's
independent Senior Officer who also related conclusions that formed the basis portfolio management team in 2007, which
prepares a separate analysis of this for the Board's approval of the Fund's need more time to be evaluated before a
information for the Trustees. Each advisory agreement. Unless otherwise conclusion can be reached that the changes
Sub-Committee then makes recommendations stated, information set forth below is as have adequately addressed the Fund's
to the Investments Committee regarding the of June 27, 2007 and does not reflect any underperformance. The Board also
performance, fees and expenses of their changes that may have occurred since that considered the steps AIM has taken over
assigned funds. The Investments Committee date, including but not limited to changes the last several years to improve the
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, quality and efficiency of the services
expense limitations and/or fee waivers. that AIM provides to
(continued)
AIM V.I. Government Securities Fund
the AIM Funds. The Board concluded that E. PROFITABILITY AND FINANCIAL RESOURCES by the Fund and/or other funds advised by
AIM continues to be responsive to the OF AIM AIM are used to pay for research and
Board's focus on fund performance. execution services. The Board noted that
Although the independent written The Board reviewed information from AIM soft dollar arrangements shift the payment
evaluation of the Fund's Senior Officer concerning the costs of the advisory and obligation for the research and executions
(discussed below) only considered Fund other services that AIM and its affiliates services from AIM to the funds and
performance through the most recent provide to the Fund and the profitability therefore may reduce AIM's expenses. The
calendar year, the Board also reviewed of AIM and its affiliates in providing Board also noted that research obtained
more recent Fund performance and this these services. The Board also reviewed through soft dollar arrangements may be
review did not change their conclusions. information concerning the financial used by AIM in making investment decisions
condition of AIM and its affiliates. The for the Fund and may therefore benefit
C. ADVISORY FEES AND FEE WAIVERS Board also reviewed with AIM the Fund shareholders. The Board concluded
methodology used to prepare the that AIM's soft dollar arrangements were
The Board compared the Fund's profitability information. The Board appropriate. The Board also concluded
contractual advisory fee rate to the considered the overall profitability of that, based on their review and
contractual advisory fee rates of funds in AIM, as well as the profitability of AIM representations made by AIM, these
the Fund's Lipper peer group that are not in connection with managing the Fund. The arrangements were consistent with
managed by AIM, at a common asset level Board noted that AIM continues to operate regulatory requirements.
and as of the end of the past calendar at a net profit, although increased
year. The Board noted that the Fund's expenses in recent years have reduced the
advisory fee rate was below the median profitability of AIM and its affiliates.
advisory fee rate of its peers. The Board The Board concluded that the Fund's
also reviewed the methodology used by advisory fees were fair and reasonable,
Lipper and noted that the contractual fee and that the level of profits realized by
rates shown by Lipper include any AIM and its affiliates from providing
applicable long-term contractual fee services to the Fund was not excessive in
waivers. The Board noted that AIM does not light of the nature, quality and extent of
serve as an advisor to other mutual funds the services provided. The Board
or other clients with investment considered whether AIM is financially
strategies comparable to those of the sound and has the resources necessary to
Fund. perform its obligations under the Fund's
advisory agreement, and concluded that AIM
The Board noted that AIM has has the financial resources necessary to
contractually agreed to waive fees and/or fulfill these obligations.
limit expenses of the Fund through at
least April 30, 2009 in an amount F. INDEPENDENT WRITTEN EVALUATION OF THE
necessary to limit total annual operating FUND'S SENIOR OFFICER
expenses to a specified percentage of
average daily net assets for each class of The Board noted that, upon their
the Fund. The Board considered the direction, the Senior Officer of the Fund,
contractual nature of this fee waiver and who is independent of AIM and AIM's
noted that it remains in effect until at affiliates, had prepared an independent
least April 30, 2009. The Board reviewed written evaluation to assist the Board in
the Fund's effective advisory fee rate, determining the reasonableness of the
after taking account of this expense proposed management fees of the AIM Funds,
limitation, and considered the effect this including the Fund. The Board noted that
expense limitation would have on the they had relied upon the Senior Officer's
Fund's estimated total expenses. The Board written evaluation instead of a
concluded that the levels of fee competitive bidding process. In
waivers/expense limitations for the Fund determining whether to continue the Fund's
were fair and reasonable. advisory agreement, the Board considered
the Senior Officer's written evaluation.
After taking account of the Fund's
contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
the comparative advisory fee information AFFILIATES
and the expense limitation discussed
above, the Board concluded that the Fund's The Board considered various other
advisory fees were fair and reasonable. benefits received by AIM and its
affiliates resulting from AIM's
D. ECONOMIES OF SCALE AND BREAKPOINTS relationship with the Fund, including the
fees received by AIM and its affiliates
The Board considered the extent to which for their provision of administrative,
there are economies of scale in AIM's transfer agency and distribution services
provision of advisory services to the to the Fund. The Board considered the
Fund. The Board also considered whether performance of AIM and its affiliates in
the Fund benefits from such economies of providing these services and the
scale through contractual breakpoints in organizational structure employed by AIM
the Fund's advisory fee schedule or and its affiliates to provide these
through advisory fee waivers or expense services. The Board also considered that
limitations. The Board noted that the these services are provided to the Fund
Fund's contractual advisory fee schedule pursuant to written contracts which are
includes one breakpoint and that the level reviewed and approved on an annual basis
of the Fund's advisory fees, as a by the Board. The Board concluded that AIM
percentage of the Fund's net assets, has and its affiliates were providing these
decreased as net assets increased because services in a satisfactory manner and in
of the breakpoint. Based on this accordance with the terms of their
information, the Board concluded that the contracts, and were qualified to continue
Fund's advisory fees appropriately reflect to provide these services to the Fund.
economies of scale at current asset
levels. The Board also noted that the Fund The Board considered the benefits
shares directly in economies of scale realized by AIM as a result of portfolio
through lower fees charged by third party brokerage transactions executed through
service providers based on the combined "soft dollar" arrangements. Under these
size of all of the AIM Funds and arrangements, portfolio brokerage
affiliates. commissions paid
AIM V.I. High Yield Fund
Semiannual Report to Shareholders o June 30, 2007
FIXED INCOME
Taxable Noninvestment Grade
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. High Yield Fund
Fund performance AIM V.I. High Yield Fund portfolio of
======================================================================================= AIM Variable Insurance Funds, is currently
PERFORMANCE SUMMARY offered through insurance companies
issuing variable products. You cannot
FUND VS. INDEXES purchase shares of the Fund directly.
Performance figures given represent the
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. Fund and are not intended to reflect
If variable product issuer charges were included, returns would be lower. actual variable product values. They do
not reflect sales charges, expenses and
Series I Shares 3.27% fees assessed in connection with a
Series II Shares 3.12 variable product. Sales charges, expenses
Lehman Brothers U.S. Aggregate Bond Index(1) (Broad Market Index) 0.98 and fees, which are determined by the
Lehman Brothers High Yield Index(1) (Style-Specific Index) 2.87 variable product issuers, will vary and
Lipper VUF High Current Yield Bond Funds Category Average(1) (Peer Group will lower the total return.
Index) 3.06
Lipper High Current Yield Bond Funds Index(1) (Former Peer Group Index) 3.31 Per NASD requirements, the most recent
month-end performance data at the Fund
Source: (1) Lipper Inc. level, excluding variable product charges,
is available on this AIM automated
The unmanaged Lehman Brothers U.S. Aggregate Bond Index (the Lehman Aggregate), which information line, 866-702-4402. As
represents the U.S. investment-grade fixed-rate bond market (including government and mentioned above, for the most recent
corporate securities, mortgage pass-through securities and asset-backed securities), is month-end performance including variable
compiled by Lehman Brothers, a global investment bank. product charges, please contact your
variable product issuer or financial
The unmanaged Lehman Brothers High Yield Index, which represents the performance of advisor.
high-yield debt securities, is compiled by Lehman Brothers, a global investment bank.
(1) Total annual operating expenses less
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) High Current contractual advisory fees by the
Yield Bond Funds Category Average as its peer group instead of the Lipper High Current advisor in effect through at least
Yield Bond Funds Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund April 30, 2009. See current
to be compared with the Lipper VUF High Current Yield Bond Funds Category Average. The prospectus for more information.
unmanaged Lipper VUF High Current Yield Bond Funds Category Average represents the
average of all the variable insurance underlying High Yield Current Bond Funds tracked
by Lipper Inc. Lipper Inc. is an independent mutual fund performance monitor.
The unmanaged Lipper High Current Yield Bond Funds Index represents an average of
the largest high-yield bond funds tracked by Lipper Inc. an independent mutual fund
performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== The performance data quoted represent
FUND PERFORMANCE past performance and cannot guarantee
As of 6/30/07 comparable future results; current
SERIES I SHARES performance may be lower or higher. Please
Inception (5/1/98) 2.36% contact your variable product issuer or
5 Years 11.11 financial advisor for the most recent
1 Year 11.58 month-end variable product performance.
Performance figures reflect Fund expenses,
SERIES II SHARES reinvested distributions and changes in
Inception 2.12% net asset value.
5 Years 10.90 Investment return and principal value will
1 Year 11.26 fluctuate so that you may have a gain or
========================================== loss when you sell shares.
Series II shares' inception date is March The net annual Fund operating expense
26, 2002. Returns since that date are ratio set forth in the most recent Fund
historical. All other returns are the prospectus as of the date of this report
blended returns of the historical for Series I and Series II shares was
performance of Series II shares since 0.97% and 1.22%, respectively.(1) The total
their inception and the restated annual Fund operating expense ratio set
historical performance of Series I shares forth in the most recent Fund prospectus
(for periods prior to inception of Series as of the date of this report for Series I
II shares) adjusted to reflect the Rule and Series II shares was 1.19% and 1.44%,
12b-1 fees applicable to Series II shares. respectively. The expense ratios presented
The inception date of Series I shares is above may vary from the expense ratios
May 1, 1998. presented in other sections of this report
that are based on expenses incurred during
The performance of the Fund's Series I the period covered by this report.
and Series II share classes will differ
primarily due to different class expenses.
AIM V.I. High Yield Fund
PORTFOLIO COMPOSITION
By credit rating quality
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
BBB 1.2%
- ----------------------------------------------------------
BB 30.3
- ----------------------------------------------------------
B 55.1
- ----------------------------------------------------------
CCC 9.8
- ----------------------------------------------------------
CC 0.2
- ----------------------------------------------------------
NR 0.2
- ----------------------------------------------------------
Convertible 0.8
- ----------------------------------------------------------
Equity 1.9
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 0.5
__________________________________________________________
==========================================================
Source: Credit quality ratings by Moody's and
Standard & Poor's.
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
BONDS & NOTES-94.88%
AEROSPACE & DEFENSE-1.88%
DRS Technologies, Inc.,
Sr. Unsec. Conv. Putable Notes,
2.00%, 02/01/11 (Acquired 01/30/06; Cost
$110,000)(a)(b) $ 110,000 $ 121,000
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Notes,
6.63%, 02/01/16(a) 165,000 160,875
- -----------------------------------------------------------------------
Hawker Beechcraft Acquisition Co., LLC/Hawker
Beechcraft Notes Co.,
Sr. Notes,
8.50%, 04/01/15 (Acquired
03/16/07-04/11/07; Cost $92,700)(a)(b) 90,000 93,150
- -----------------------------------------------------------------------
Sr. Sub. Notes,
9.75%, 04/01/17 (Acquired
03/16/07-04/11/07; Cost $157,350)(a)(b)(c) 150,000 156,937
- -----------------------------------------------------------------------
Hexcel Corp., Sr. Unsec. Sub. Global Notes,
6.75%, 02/01/15(a) 567,000 549,990
=======================================================================
1,081,952
=======================================================================
AIRLINES-0.65%
Continental Airlines Inc., Unsec. Unsub.
Notes, 8.75%, 12/01/11(a) 185,000 181,069
- -----------------------------------------------------------------------
Delta Air Lines Inc.-Series 2002-1, Class C,
Pass Through Ctfs., 7.78%, 01/02/12(a) 134,274 134,609
- -----------------------------------------------------------------------
United AirLines, Inc.-Class B, Gtd. Pass
Through Ctfs., 7.34%, 07/02/19 (Acquired
06/19/07; Cost $60,000)(a)(b) 60,000 60,000
=======================================================================
375,678
=======================================================================
ALTERNATIVE CARRIERS-0.65%
Level 3 Financing Inc.,
Sr. Floating Rate Notes,
9.15%, 02/15/15 (Acquired 02/09/07; Cost
$65,000)(a)(b)(d) 65,000 65,488
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Global Notes,
9.25%, 11/01/14(a) 305,000 308,812
=======================================================================
374,300
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
ALUMINUM-2.05%
Aleris International, Inc., Sr. PIK Notes,
9.00%, 12/15/14 (Acquired
01/17/07-01/26/07; Cost $258,281)(a)(b) $ 250,000 $ 252,500
- -----------------------------------------------------------------------
Century Aluminum Co., Sr. Unsec. Gtd. Global
Notes, 7.50%, 08/15/14(a) 228,000 229,140
- -----------------------------------------------------------------------
Novelis Inc. (Canada), Sr. Unsec. Gtd. Global
Notes, 7.25%, 02/15/15(a)(c) 674,800 695,044
=======================================================================
1,176,684
=======================================================================
APPAREL RETAIL-0.69%
Payless ShoeSource, Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 8.25%, 08/01/13(a) 390,000 398,775
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-2.37%
American Achievement Corp., Sr. Unsec. Gtd.
Sub. Global Notes, 8.25%, 04/01/12(a) 205,000 209,613
- -----------------------------------------------------------------------
Broder Brothers Co.-Series B, Sr. Unsec. Gtd.
Global Notes, 11.25%, 10/15/10(a) 426,000 424,935
- -----------------------------------------------------------------------
Levi Strauss & Co., Sr. Unsec. Unsub. Global
Notes, 8.88%, 04/01/16(a)(c) 300,000 307,875
- -----------------------------------------------------------------------
Perry Ellis International, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Global Notes, 8.88%,
09/15/13(a) 212,000 217,300
- -----------------------------------------------------------------------
Warnaco Inc., Sr. Unsec. Global Notes, 8.88%,
06/15/13(a) 187,000 198,921
=======================================================================
1,358,644
=======================================================================
AUTO PARTS & EQUIPMENT-2.75%
American Axle & Manufacturing Inc., Sr.
Unsec. Gtd. Notes, 7.88%, 03/01/17(a) 65,000 64,431
- -----------------------------------------------------------------------
Cooper-Standard Automotive Inc., Sr. Unsec.
Gtd. Global Notes, 7.00%, 12/15/12(a) 240,000 226,200
- -----------------------------------------------------------------------
Lear Corp.,
-Series B,
Sr. Unsec. Gtd. Global Notes,
8.50%, 12/01/13(a) 185,000 178,988
- -----------------------------------------------------------------------
8.75%, 12/01/16(a) 240,000 230,400
- -----------------------------------------------------------------------
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
AUTO PARTS & EQUIPMENT-(CONTINUED)
Tenneco Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 8.63%, 11/15/14(a) $ 160,000 $ 164,200
- -----------------------------------------------------------------------
TRW Automotive Inc., Sr. Unsec. Gtd. Notes,
7.25%, 03/15/17 (Acquired 03/14/07; Cost
$245,675)(a)(b) 250,000 241,562
- -----------------------------------------------------------------------
Visteon Corp.,
Sr. Unsec. Global Notes,
8.25%, 08/01/10(a)(c) 160,000 160,000
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
7.00%, 03/10/14(a) 360,000 313,650
=======================================================================
1,579,431
=======================================================================
AUTOMOBILE MANUFACTURERS-1.54%
Ford Motor Co., Unsec. Global Notes, 7.45%,
07/16/31(a)(c) 250,000 200,000
- -----------------------------------------------------------------------
General Motors Corp.,
Global Notes,
7.20%, 01/15/11(a) 400,000 385,500
- -----------------------------------------------------------------------
Sr. Unsec. Unsub. Global Deb.,
8.38%, 07/15/33(a)(c) 325,000 296,562
=======================================================================
882,062
=======================================================================
BROADCASTING & CABLE TV-6.23%
CCH I Holdings LLC,
Sr. Unsec. Gtd. Unsub. Global Notes,
11.13%, 01/15/14(a) 310,000 299,150
- -----------------------------------------------------------------------
12.13%, 01/15/15(a) 125,000 126,719
- -----------------------------------------------------------------------
CCH I Holdings LLC/CCH I Holdings Capital
Corp., Sr. Sec. Gtd. Global Notes, 11.00%,
10/01/15(a) 250,000 261,563
- -----------------------------------------------------------------------
Clear Channel Communications Inc., Sr. Notes,
5.50%, 09/15/14(a)(c) 390,000 334,499
- -----------------------------------------------------------------------
CSC Holdings Inc.-Series B, Sr. Unsec. Notes,
7.63%, 04/01/11(a) 467,000 465,832
- -----------------------------------------------------------------------
Echostar DBS Corp.,
Sr. Unsec. Gtd. Global Notes,
7.00%, 10/01/13(a) 120,000 118,350
- -----------------------------------------------------------------------
6.63%, 10/01/14(a) 260,000 250,575
- -----------------------------------------------------------------------
7.13%, 02/01/16(a) 185,000 181,994
- -----------------------------------------------------------------------
Hughes Network Systems LLC/HNS Finance Corp.,
Sr. Gtd. Global Notes, 9.50%, 04/15/14(a) 105,000 110,775
- -----------------------------------------------------------------------
Intelsat Subsidiary Holding Co. Ltd.
(Bermuda), Sr. Gtd. Global Notes, 8.25%,
01/15/13(a) 257,000 263,425
- -----------------------------------------------------------------------
Mediacom Broadband LLC/Corp.,
Sr. Notes,
8.50%, 10/15/15 (Acquired 09/28/06; Cost
$119,100)(a)(b) 120,000 122,100
- -----------------------------------------------------------------------
Sr. Unsec. Global Notes,
8.50%, 10/15/15(a) 155,000 158,100
- -----------------------------------------------------------------------
Rainbow National Services LLC, Sr. Notes,
8.75%, 09/01/12 (Acquired
08/13/04-09/22/06; Cost $556,527)(a)(b) 538,000 565,572
- -----------------------------------------------------------------------
Sinclair Broadcast Group, Inc., Sr. Unsec.
Gtd. Sub. Global Notes, 8.00%, 03/15/12(a) 928 960
- -----------------------------------------------------------------------
Videotron Ltee (Canada), Sr. Unsec. Gtd.
Global Notes, 6.88%, 01/15/14(a) 212,000 209,350
- -----------------------------------------------------------------------
Virgin Media Finance PLC, Sr. Unsec. Gtd.
Global Notes, 8.75%, 04/15/14(a) 105,000 109,200
=======================================================================
3,578,164
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
BUILDING PRODUCTS-1.20%
Associated Materials Inc., Sr. Unsec. Disc.
Global Notes, 11.25%, 03/01/14(a)(c)(e) $ 585,000 $ 438,750
- -----------------------------------------------------------------------
Building Materials Corp. of America, Sr. Sec.
Gtd. Global Notes, 7.75%, 08/01/14(a) 260,000 252,200
=======================================================================
690,950
=======================================================================
CASINOS & GAMING-3.94%
Great Canadian Gaming Corp. (Canada), Sr.
Unsec. Gtd. Sub. Notes, 7.25%, 02/15/15
(Acquired 02/07/07-03/21/07; Cost
$190,675)(a)(b) 190,000 189,525
- -----------------------------------------------------------------------
Harrah's Operating Co., Inc., Sr. Unsec. Gtd.
Notes, 6.50%, 06/01/16(a) 125,000 104,600
- -----------------------------------------------------------------------
Isle of Capri Casinos, Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 7.00%, 03/01/14(a) 535,000 508,250
- -----------------------------------------------------------------------
MGM Mirage,
Sr. Gtd. Notes,
7.50%, 06/01/16(a) 190,000 181,212
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
6.63%, 07/15/15(a) 273,000 250,136
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Notes,
7.63%, 01/15/17(a) 305,000 293,181
- -----------------------------------------------------------------------
Station Casinos, Inc.,
Sr. Unsec. Global Notes,
6.00%, 04/01/12(a) 475,000 449,469
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
7.75%, 08/15/16(a) 120,000 119,550
- -----------------------------------------------------------------------
Sr. Unsec. Sub. Global Notes,
6.63%, 03/15/18(a) 190,000 165,063
=======================================================================
2,260,986
=======================================================================
COAL & CONSUMABLE FUELS-0.96%
James River Coal Co., Sr. Unsec. Gtd. Notes,
9.38%, 06/01/12(a)(c) 130,000 127,237
- -----------------------------------------------------------------------
Massey Energy Co., Sr. Unsec. Gtd. Global
Notes, 6.63%, 11/15/10(a) 430,000 421,400
=======================================================================
548,637
=======================================================================
COMMERCIAL PRINTING-0.77%
Quebecor World Capital Corp. (Canada), Sr.
Notes, 8.75%, 03/15/16 (Acquired
12/06/06-04/05/07; Cost $279,475)(a)(b) 290,000 286,375
- -----------------------------------------------------------------------
Quebecor World Inc. (Canada), Sr. Notes,
9.75%, 01/15/15 (Acquired 06/29/07; Cost
$153,000)(a)(b) 150,000 155,625
=======================================================================
442,000
=======================================================================
COMMODITY CHEMICALS-0.97%
Equistar Chemicals L.P./Equistar Funding
Corp., Sr. Unsec. Gtd. Global Notes,
10.13%, 09/01/08(a) 9,956 10,379
- -----------------------------------------------------------------------
Koppers Holdings Inc., Sr. Unsec. Sub. Disc.
Global Notes, 9.88%, 11/15/14(a)(e) 260,000 223,600
- -----------------------------------------------------------------------
Lyondell Chemical Co., Sr. Unsec. Gtd. Global
Notes, 8.25%, 09/15/16(a) 310,000 324,338
=======================================================================
558,317
=======================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.22%
MasTec, Inc., Sr. Notes, 7.63%, 02/01/17
(Acquired 01/24/07; Cost $65,000)(a)(b) $ 65,000 $ 65,488
- -----------------------------------------------------------------------
Superior Essex Communications LLC/Essex Group
Inc., Sr. Global Notes, 9.00%, 04/15/12(a) 60,000 61,800
=======================================================================
127,288
=======================================================================
CONSTRUCTION & ENGINEERING-0.57%
Great Lakes Dredge & Dock Corp., Sr. Unsec.
Gtd. Sub. Global Notes, 7.75%, 12/15/13(a) 331,000 326,863
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.99%
Esco Corp., Sr. Notes, 8.63%, 12/15/13
(Acquired 12/12/06; Cost $55,000)(a)(b) 55,000 57,475
- -----------------------------------------------------------------------
Titan International, Inc., Sr. Unsec. Gtd.
Global Notes, 8.00%, 01/15/12(a) 310,000 319,300
- -----------------------------------------------------------------------
Wabtec Corp., Sr. Unsec. Gtd. Global Notes,
6.88%, 07/31/13(a) 190,000 188,575
=======================================================================
565,350
=======================================================================
CONSTRUCTION MATERIALS-0.64%
U.S. Concrete, Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 8.38%, 04/01/14(a) 365,000 365,912
=======================================================================
CONSUMER ELECTRONICS-0.52%
NXP BV/NXP Funding LLC (Netherlands), Sr.
Unsec. Gtd. Unsub. Global Notes, 9.50%,
10/15/15(a) 300,000 298,125
=======================================================================
CONSUMER FINANCE-4.55%
Ford Motor Credit Co. LLC,
Sr. Notes,
9.88%, 08/10/11(a) 120,000 126,653
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
8.63%, 11/01/10(a) 490,000 498,727
- -----------------------------------------------------------------------
8.00%, 12/15/16(a) 125,000 120,020
- -----------------------------------------------------------------------
Unsub. Global Notes,
7.00%, 10/01/13(a) 770,000 719,365
- -----------------------------------------------------------------------
General Motors Acceptance Corp. LLC,
Global Bonds,
8.00%, 11/01/31(a)(c) 835,000 854,831
- -----------------------------------------------------------------------
Global Notes,
6.75%, 12/01/14(a) 180,000 173,270
- -----------------------------------------------------------------------
KAR Holdings Inc., Sr. Notes, 8.75%, 05/01/14
(Acquired 04/13/07; Cost $120,000)(a)(b) 120,000 117,300
=======================================================================
2,610,166
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.04%
Sungard Data Systems Inc., Sr. Unsec. Gtd.
Global Notes, 9.13%, 08/15/13(a) 21,000 21,578
=======================================================================
DISTILLERS & VINTNERS-0.22%
Constellation Brands, Inc., Sr. Notes, 7.25%,
05/15/17 (Acquired 05/09/07; Cost
$130,000)(a)(b) 130,000 127,563
=======================================================================
DIVERSIFIED CHEMICALS-0.21%
Innophos Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 8.88%, 08/15/14(a) 115,000 119,888
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-1.77%
Aramark Corp., Sr. Notes, 8.50%, 02/01/15
(Acquired 01/17/07; Cost $125,000)(a)(b) $ 125,000 $ 127,110
- -----------------------------------------------------------------------
GEO Group, Inc. (The), Sr. Unsec. Global
Notes, 8.25%, 07/15/13(a) 268,000 277,715
- -----------------------------------------------------------------------
Mobile Services Group Inc., Sr. Notes, 9.75%,
08/01/14 (Acquired 07/20/06; Cost
$60,000)(a)(b) 60,000 65,025
- -----------------------------------------------------------------------
Travelport LLC,
Sr. Unsec. Gtd. Global Notes,
9.88%, 09/01/14(a) 380,000 404,225
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes,
11.88%, 09/01/16(a)(c) 125,000 138,594
=======================================================================
1,012,669
=======================================================================
DIVERSIFIED METALS & MINING-0.46%
Freeport-McMoRan Copper & Gold Inc.,
Sr. Unsec. Notes,
8.25%, 04/01/15(a) 95,000 100,463
- -----------------------------------------------------------------------
8.38%, 04/01/17(a) 155,000 165,850
=======================================================================
266,313
=======================================================================
DRUG RETAIL-0.11%
Rite Aid Corp., Sr. Sec. Gtd. Unsub. Notes,
7.50%, 03/01/17(a) 65,000 63,294
=======================================================================
ELECTRIC UTILITIES-2.31%
Edison Mission Energy, Sr. Unsec. Global
Notes, 7.75%, 06/15/16(a) 155,000 155,388
- -----------------------------------------------------------------------
LSP Energy L.P./LSP Batesville Funding Corp.-
Series C, Sr. Sec. Bonds, 7.16%,
01/15/14(a) 167,418 168,631
- -----------------------------------------------------------------------
Mirant North America, LLC, Sr. Unsec. Gtd.
Global Notes, 7.38%, 12/31/13(a) 185,000 189,973
- -----------------------------------------------------------------------
NSG Holdings LLC/ NSG Holdings Inc., Sr. Sec.
Notes, 7.75%, 12/15/25 (Acquired 03/06/07;
Cost $60,000)(a)(b) 60,000 61,500
- -----------------------------------------------------------------------
Reliant Energy, Inc.,
Sr. Sec. Global Notes,
9.25%, 07/15/10(a) 1,750 1,835
- -----------------------------------------------------------------------
Sr. Sec. Gtd. Notes,
6.75%, 12/15/14(a) 460,000 472,650
- -----------------------------------------------------------------------
Tenaska Alabama Partners L.P., Sr. Sec.
Notes, 7.00%, 06/30/21 (Acquired
12/12/06-05/21/07; Cost $274,411)(a)(b) 271,305 278,766
=======================================================================
1,328,743
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.49%
Sanmina-SCI Corp., Unsec. Gtd. Sub. Global
Notes, 6.75%, 03/01/13(a) 310,000 283,650
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.42%
Allied Waste North America, Inc.-Series B,
Sr. Sec. Gtd. Global Notes, 7.13%,
05/15/16(a) 245,000 241,325
=======================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
FERTILIZERS & AGRICULTURAL CHEMICALS-0.32%
Mosaic Co. (The),
Sr. Notes,
7.38%, 12/01/14 (Acquired 11/16/06; Cost
$120,000)(a)(b) $ 120,000 $ 121,650
- -----------------------------------------------------------------------
7.63%, 12/01/16 (Acquired 11/16/06; Cost
$60,000)(a)(b) 60,000 62,025
=======================================================================
183,675
=======================================================================
FOOD RETAIL-0.00%
Delhaize America, Inc., Sr. Unsec. Gtd.
Global Deb., 8.13%, 04/15/11(a) 800 872
=======================================================================
FOREST PRODUCTS-0.59%
Millar Western Forest Products Ltd. (Canada),
Sr. Unsec. Global Notes, 7.75%, 11/15/13(a) 387,000 335,723
=======================================================================
GAS UTILITIES-0.30%
SEMCO Energy, Inc., Sr. Global Notes, 7.75%,
05/15/13(a) 168,000 170,520
=======================================================================
GENERAL MERCHANDISE STORES-0.23%
Pantry, Inc. (The), Sr. Gtd. Sub. Global
Notes, 7.75%, 02/15/14(a) 135,000 132,300
=======================================================================
HEALTH CARE EQUIPMENT-0.15%
Viant Holdings Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.13%, 07/15/17 (Acquired 06/25/07;
Cost $87,870)(a)(b)(f) 87,000 87,870
=======================================================================
HEALTH CARE FACILITIES-2.41%
HCA, Inc.,
Sr. Sec. Notes,
9.13%, 11/15/14 (Acquired
11/09/06-01/05/07; Cost $147,425)(a)(b) 140,000 148,225
- -----------------------------------------------------------------------
9.25%, 11/15/16 (Acquired
11/09/06-01/05/07; Cost $251,713)(a)(b) 240,000 255,900
- -----------------------------------------------------------------------
Sr. Unsec. Bonds,
7.50%, 11/06/33(a) 165,000 140,662
- -----------------------------------------------------------------------
Sr. Unsec. Global Notes,
6.38%, 01/15/15(a) 110,000 93,913
- -----------------------------------------------------------------------
6.50%, 02/15/16(a) 165,000 140,663
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
6.25%, 02/15/13(a) 21,000 19,110
- -----------------------------------------------------------------------
Tenet Healthcare Corp.,
Sr. Unsec. Notes,
6.38%, 12/01/11(a) 419,000 384,432
- -----------------------------------------------------------------------
7.38%, 02/01/13(a) 21,000 19,084
- -----------------------------------------------------------------------
Triad Hospitals, Inc., Sr. Unsec. Sub. Notes,
7.00%, 11/15/13(a)(c) 170,750 179,509
=======================================================================
1,381,498
=======================================================================
HEALTH CARE SERVICES-0.93%
Omnicare, Inc., Sr. Unsec. Gtd. Sub. Notes,
6.88%, 12/15/15(a) 110,000 105,050
- -----------------------------------------------------------------------
Rural/Metro Corp., Sr. Gtd. Sub. Global
Notes, 9.88%, 03/15/15(a) 56,000 59,080
- -----------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
HEALTH CARE SERVICES-(CONTINUED)
Universal Hospital Services Inc., Sr. Sec.
PIK Bonds, 8.50%, 06/01/15 (Acquired
05/22/07; Cost $65,000)(a)(b) $ 65,000 $ 65,000
- -----------------------------------------------------------------------
US Oncology, Inc., Sr. Unsec. Gtd. Global
Notes, 9.00%, 08/15/12(a) 295,000 305,325
=======================================================================
534,455
=======================================================================
HOMEBUILDING-0.37%
TOUSA, Inc., Sr. Unsec. Gtd. Global Notes,
9.00%, 07/01/10(a)(c) 223,000 214,788
=======================================================================
HOMEFURNISHING RETAIL-0.42%
Rent-A-Center Inc.-Series B, Sr. Unsec. Gtd.
Sub. Global Notes, 7.50%, 05/01/10(a) 240,000 243,300
=======================================================================
HOTELS, RESORTS & CRUISE LINES-1.13%
Grupo Posadas S.A. de C.V. (Mexico), Sr.
Unsec. Notes, 8.75%, 10/04/11 (Acquired
09/27/04; Cost $183,000)(a)(b) 183,000 191,464
- -----------------------------------------------------------------------
NCL Corp., Sr. Unsec. Unsub. Global Notes,
10.63%, 07/15/14(a) 476,000 456,960
=======================================================================
648,424
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-3.70%
AES Corp. (The), Sr. Unsec. Unsub. Notes,
7.75%, 03/01/14(a)(c) 191,000 192,433
- -----------------------------------------------------------------------
AES Red Oak LLC-Series A, Sr. Sec. Bonds,
8.54%, 11/30/19(a) 415,990 459,149
- -----------------------------------------------------------------------
Dynegy Holdings Inc., Sr. Unsec. Notes,
7.75%, 06/01/19 (Acquired
05/17/07-06/21/07; Cost $362,350)(a)(b) 370,000 346,875
- -----------------------------------------------------------------------
Mirant Americas Generation LLC,
Sr. Unsec. Notes,
8.30%, 05/01/11(a) 120,000 124,350
- -----------------------------------------------------------------------
8.50%, 10/01/21(a) 185,000 194,712
- -----------------------------------------------------------------------
NRG Energy, Inc.,
Sr. Unsec. Gtd. Notes,
7.38%, 02/01/16(a) 160,000 160,800
- -----------------------------------------------------------------------
7.38%, 01/15/17(a) 640,000 643,200
=======================================================================
2,121,519
=======================================================================
INDUSTRIAL CONGLOMERATES-0.60%
Indalex Holding Corp.-Series B, Sr. Sec. Gtd.
Global Notes, 11.50%, 02/01/14(a) 130,000 135,850
- -----------------------------------------------------------------------
TransDigm Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 7.75%, 07/15/14(a) 205,000 207,562
=======================================================================
343,412
=======================================================================
INDUSTRIAL MACHINERY-0.82%
Columbus McKinnon Corp., Sr. Sub. Global
Notes, 8.88%, 11/01/13(a) 318,000 337,875
- -----------------------------------------------------------------------
Stewart & Stevenson LLC, Sr. Notes, 10.00%,
07/15/14 (Acquired 12/06/06; Cost
$132,031)(a)(b) 125,000 131,562
=======================================================================
469,437
=======================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-2.42%
Digicel Group Ltd. (Bermuda), Sr. Notes,
8.88%, 01/15/15 (Acquired
05/31/07-06/01/07; Cost $330,163)(a)(b)(c) $ 330,000 $ 331,650
- -----------------------------------------------------------------------
Empresa Brasileira de Telecom S.A.
(Brazil)-Series B, Gtd. Global Notes,
11.00%, 12/15/08(a) 216,000 231,390
- -----------------------------------------------------------------------
Intelsat Intermediate Holding Co. Ltd.
(Bermuda), Sr. Unsec. Gtd. Disc. Global
Notes, 9.25%, 02/01/15(a)(e) 420,000 348,075
- -----------------------------------------------------------------------
Qwest Communications International Inc., Sr.
Unsec. Gtd. Global Notes, 7.25%,
02/15/11(a) 345,000 352,331
- -----------------------------------------------------------------------
Qwest Corp., Sr. Notes, 6.50%, 06/01/17
(Acquired 05/02/07; Cost $130,000)(a)(b) 130,000 124,410
=======================================================================
1,387,856
=======================================================================
METAL & GLASS CONTAINERS-0.35%
Owens-Brockway Glass Container Inc., Sr.
Unsec. Gtd. Global Notes, 8.25%,
05/15/13(a) 56,000 58,100
- -----------------------------------------------------------------------
Pliant Corp., Sr. Sec. Global PIK Notes,
11.63%, 06/15/09(a) 134,614 144,710
=======================================================================
202,810
=======================================================================
MORTGAGE REIT'S-1.03%
Thornburg Mortgage Inc., Sr. Unsec. Global
Notes, 8.00%, 05/15/13(a) 590,000 593,687
=======================================================================
MOVIES & ENTERTAINMENT-1.43%
AMC Entertainment Inc., Sr. Unsec. Sub.
Global Notes, 8.00%, 03/01/14(a) 180,000 177,075
- -----------------------------------------------------------------------
Cinemark Inc., Sr. Unsec. Disc. Global Notes,
9.75%, 03/15/14(a)(e) 345,000 317,400
- -----------------------------------------------------------------------
Marquee Holdings Inc., Sr. Unsec. Disc.
Global Notes, 12.00%, 08/15/14(a)(e) 375,000 329,062
=======================================================================
823,537
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.72%
Allis-Chalmers Energy Inc.,
Sr. Unsec. Gtd. Global Notes,
9.00%, 01/15/14(a) 60,000 61,275
- -----------------------------------------------------------------------
8.50%, 03/01/17(a) 380,000 381,425
- -----------------------------------------------------------------------
Basic Energy Services Inc., Sr. Unsec. Gtd.
Global Notes, 7.13%, 04/15/16(a) 130,000 125,450
- -----------------------------------------------------------------------
Calfrac Holdings L.P., Sr. Notes, 7.75%,
02/15/15 (Acquired 02/07/07; Cost
$620,000)(a)(b) 620,000 599,850
- -----------------------------------------------------------------------
CHC Helicopter Corp. (Canada), Sr. Unsec.
Gtd. Sub. Global Notes, 7.38%, 05/01/14(a) 310,000 297,600
- -----------------------------------------------------------------------
Compagnie Generale de Geophysique-Veritas
(France),
Sr. Unsec. Gtd. Global Notes,
7.50%, 05/15/15(a) 65,000 65,569
- -----------------------------------------------------------------------
7.75%, 05/15/17(a) 245,000 249,900
- -----------------------------------------------------------------------
Complete Production Services Inc., Sr. Notes,
8.00%, 12/15/16 (Acquired 11/29/06; Cost
$60,000)(a)(b) 60,000 60,900
- -----------------------------------------------------------------------
Hanover Compressor Co., Sr. Unsec. Gtd.
Notes, 9.00%, 06/01/14(a) 106,000 112,890
- -----------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
OIL & GAS EQUIPMENT & SERVICES-(CONTINUED)
PHI Inc., Sr. Unsec. Gtd. Global Notes,
7.13%, 04/15/13(a) $ 380,000 $ 366,700
- -----------------------------------------------------------------------
Universal Compression Inc., Sr. Unsec. Gtd.
Global Notes, 7.25%, 05/15/10(a) 385,000 385,962
=======================================================================
2,707,521
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-5.00%
Chaparral Energy Inc.,
Sr. Notes,
8.88%, 02/01/17 (Acquired 02/06/07; Cost
$257,550)(a)(b) 255,000 253,087
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
8.50%, 12/01/15(a) 130,000 127,562
- -----------------------------------------------------------------------
Cimarex Energy Co., Sr. Unsec. Gtd. Notes,
7.13%, 05/01/17(a) 315,000 309,094
- -----------------------------------------------------------------------
Clayton Williams Energy, Inc., Sr. Unsec.
Gtd. Global Notes, 7.75%, 08/01/13(a) 130,000 119,925
- -----------------------------------------------------------------------
Delta Petroleum Corp., Sr. Unsec. Gtd. Global
Notes, 7.00%, 04/01/15(a) 445,000 387,706
- -----------------------------------------------------------------------
Encore Acquisition Co., Sr. Unsec. Gtd. Sub.
Global Notes, 6.00%, 07/15/15(a) 375,000 332,344
- -----------------------------------------------------------------------
Forest Oil Corp., Sr. Notes, 7.25%, 06/15/19
(Acquired 06/01/07; Cost $130,000)(a)(b) 130,000 126,263
- -----------------------------------------------------------------------
Mariner Energy Inc., Sr. Unsec. Gtd. Notes,
8.00%, 05/15/17(a) 65,000 64,756
- -----------------------------------------------------------------------
OPTI Canada Inc. (Canada), Sr. Sec. Gtd.
Notes, 8.25%, 12/15/14 (Acquired 02/14/07;
Cost $396,625)(a)(b) 380,000 387,125
- -----------------------------------------------------------------------
Paramount Resources Ltd. (Canada), Sr. Unsec.
Unsub. Yankee Notes, 8.50%, 01/31/13(a) 380,000 391,875
- -----------------------------------------------------------------------
Quicksilver Resources Inc., Sr. Unsec. Gtd.
Sub. Notes, 7.13%, 04/01/16(a) 105,000 102,113
- -----------------------------------------------------------------------
Whiting Petroleum Corp., Sr. Unsec. Gtd. Sub.
Global Notes, 7.00%, 02/01/14(a) 280,000 268,100
=======================================================================
2,869,950
=======================================================================
OIL & GAS REFINING & MARKETING-0.54%
United Refining Co.-Series 2, Sr. Unsec. Gtd.
Global Notes, 10.50%, 08/15/12(a) 300,000 312,000
=======================================================================
OIL & GAS STORAGE & TRANSPORTATION-2.62%
Copano Energy LLC, Sr. Unsec. Gtd. Global
Notes, 8.13%, 03/01/16(a) 410,000 420,250
- -----------------------------------------------------------------------
El Paso Production Holding Co., Sr. Unsec.
Gtd. Global Notes, 7.75%, 06/01/13(a) 800 845
- -----------------------------------------------------------------------
MarkWest Energy Partners L.P./MarkWest Energy
Finance Corp.,
-Series B,
Sr. Unsec. Gtd. Global Notes,
6.88%, 11/01/14(a) 304,000 287,280
- -----------------------------------------------------------------------
8.50%, 07/15/16(a) 195,000 198,413
- -----------------------------------------------------------------------
Sabine Pass LNG L.P., Sr. Sec. Notes, 7.25%,
11/30/13 (Acquired 11/01/06; Cost
$425,000)(a)(b) 425,000 421,812
- -----------------------------------------------------------------------
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
OIL & GAS STORAGE & TRANSPORTATION-(CONTINUED)
Tennessee Gas Pipeline Co., Unsub. Deb.,
7.50%, 04/01/17(a) $ 105,000 $ 113,039
- -----------------------------------------------------------------------
Williams Partners L.P./Williams Partners
Finance Corp., Sr. Unsec. Gtd. Global
Notes, 7.25%, 02/01/17(a) 60,000 61,050
=======================================================================
1,502,689
=======================================================================
PACKAGED FOODS & MEATS-0.88%
Dole Foods Co. Inc., Sr. Unsec. Gtd. Global
Notes, 7.25%, 06/15/10(a) 332,000 319,965
- -----------------------------------------------------------------------
Nutro Products Inc.,
Sr. Floating Rate Notes,
9.37%, 10/15/13 (Acquired 04/13/06; Cost
$25,000)(a)(b)(d) 25,000 26,456
- -----------------------------------------------------------------------
Sr. Sub. Notes,
10.75%, 04/15/14 (Acquired
04/13/06-06/16/06; Cost $138,106)(a)(b) 135,000 156,937
=======================================================================
503,358
=======================================================================
PAPER PACKAGING-1.58%
Caraustar Industries, Inc., Unsec. Unsub.
Notes, 7.38%, 06/01/09(a) 665,000 638,400
- -----------------------------------------------------------------------
Jefferson Smurfit Corp., Sr. Unsec. Gtd.
Unsub. Global Notes, 7.50%, 06/01/13(a)(c) 274,000 268,520
=======================================================================
906,920
=======================================================================
PAPER PRODUCTS-3.17%
Abitibi-Consolidated Finance L.P., Unsec.
Gtd. Notes, 7.88%, 08/01/09(a) 155,000 150,350
- -----------------------------------------------------------------------
Abitibi-Consolidated Inc. (Canada), Unsec.
Unsub. Yankee Bonds, 8.55%, 08/01/10(a) 135,000 129,600
- -----------------------------------------------------------------------
Boise Cascade LLC, Sr. Unsec. Gtd. Sub.
Global Notes, 7.13%, 10/15/14(a) 142,000 135,610
- -----------------------------------------------------------------------
Cellu Tissue Holdings, Inc., Sec. Gtd. Global
Notes, 9.75%, 03/15/10(a) 182,000 182,000
- -----------------------------------------------------------------------
Domtar Inc. (Canada),
Unsec. Unsub. Yankee Notes,
7.13%, 08/15/15(a) 118,000 115,935
- -----------------------------------------------------------------------
Yankee Notes,
5.38%, 12/01/13(a) 50,000 45,250
- -----------------------------------------------------------------------
Exopack Holding Corp., Sr. Unsec. Gtd. Global
Notes, 11.25%, 02/01/14(a) 145,000 156,600
- -----------------------------------------------------------------------
Georgia-Pacific Corp.,
Sr. Gtd. Notes,
7.00%, 01/15/15 (Acquired
12/13/06-01/10/07; Cost $245,313)(a)(b) 245,000 240,100
- -----------------------------------------------------------------------
7.13%, 01/15/17 (Acquired
12/13/06-02/21/07; Cost $141,000)(a)(b) 140,000 134,925
- -----------------------------------------------------------------------
Mercer International Inc., Sr. Unsec. Global
Notes, 9.25%, 02/15/13(a) 362,000 355,212
- -----------------------------------------------------------------------
Neenah Paper, Inc., Sr. Unsec. Gtd. Global
Notes, 7.38%, 11/15/14(a) 179,000 174,973
=======================================================================
1,820,555
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
PERSONAL PRODUCTS-0.87%
DEL Laboratories Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 8.00%, 02/01/12(a) $ 235,000 $ 229,125
- -----------------------------------------------------------------------
NBTY, Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 7.13%, 10/01/15(a) 269,000 273,035
=======================================================================
502,160
=======================================================================
PHARMACEUTICALS-1.64%
Elan Finance PLC/Elan Finance Corp.
(Ireland),
Sr. Unsec. Gtd. Global Notes,
7.75%, 11/15/11(a) 166,000 167,038
- -----------------------------------------------------------------------
8.88%, 12/01/13(a) 280,000 293,650
- -----------------------------------------------------------------------
Leiner Health Products Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 11.00%, 06/01/12(a)(c) 195,000 185,006
- -----------------------------------------------------------------------
Valeant Pharmaceuticals International, Sr.
Unsec. Global Notes, 7.00%, 12/15/11(a) 300,000 294,000
=======================================================================
939,694
=======================================================================
PROPERTY & CASUALTY INSURANCE-0.44%
Crum & Forster Holdings Corp., Sr. Notes,
7.75%, 05/01/17 (Acquired 04/23/07; Cost
$255,000)(a)(b) 255,000 255,000
=======================================================================
PUBLISHING-2.11%
Dex Media Inc., Sr. Unsec. Disc. Global
Notes, 9.00%, 11/15/13(a)(e) 449,000 425,428
- -----------------------------------------------------------------------
Idearc Inc., Sr. Unsec. Gtd. Global Notes,
8.00%, 11/15/16(a) 235,000 239,406
- -----------------------------------------------------------------------
MediMedia USA Inc., Sr. Sub. Notes, 11.38%,
11/15/14 (Acquired 11/01/06; Cost
$30,000)(a)(b) 30,000 31,800
- -----------------------------------------------------------------------
Nielsen Finance LLC/Nielsen Finance Co., Sr.
Notes, 10.00%, 08/01/14 (Acquired 11/30/06;
Cost $324,063)(a)(b) 305,000 324,825
- -----------------------------------------------------------------------
Valassis Communications Inc., Sr. Notes,
8.25%, 03/01/15 (Acquired
02/27/07-04/05/07; Cost $191,563)(a)(b) 195,000 189,150
=======================================================================
1,210,609
=======================================================================
RAILROADS-1.07%
Kansas City Southern de Mexico, S.A. de C.V.
(Mexico),
Sr. Global Notes,
9.38%, 05/01/12(a) 507,000 545,659
- -----------------------------------------------------------------------
Sr. Notes,
7.38%, 06/01/14 (Acquired 05/14/07; Cost
$65,000)(a)(b) 65,000 65,731
=======================================================================
611,390
=======================================================================
SEMICONDUCTOR EQUIPMENT-0.52%
Amkor Technology Inc., Sr. Unsec. Global
Notes, 7.13%, 03/15/11(a) 305,000 296,994
=======================================================================
SEMICONDUCTORS-4.02%
Advanced Micro Devices Inc., Sr. Conv. Notes,
6.00%, 05/01/15 (Acquired 04/24/07; Cost
$320,000)(a)(b) 320,000 309,600
- -----------------------------------------------------------------------
Avago Technologies Finance Pte/Avago
Technologies U.S./Avago Technologies
Wireless (Singapore), Sr. Unsec. Gtd.
Global Notes, 10.13%, 12/01/13(a) 260,000 278,200
- -----------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes, 11.88%,
12/01/15(a) 120,000 137,700
- -----------------------------------------------------------------------
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
SEMICONDUCTORS-(CONTINUED)
Freescale Semiconductor Inc.,
Sr. Notes,
8.88%, 12/15/14 (Acquired
11/16/06-04/11/07; Cost $184,844)(a)(b)(c) $ 185,000 $ 177,600
- -----------------------------------------------------------------------
Sr. Sub. Notes,
10.13%, 12/15/16 (Acquired
11/16/06-06/29/07; Cost $950,044)(a)(b)(c) 975,000 921,375
- -----------------------------------------------------------------------
MagnaChip Semiconductor S.A./MagnaChip
Semiconductor Finance Co. (South Korea),
Sr. Sec. Global Notes, 6.88%,
12/15/11(a)(c) 360,000 311,400
- -----------------------------------------------------------------------
Viasystems Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 10.50%, 01/15/11(a) 165,000 169,950
=======================================================================
2,305,825
=======================================================================
SPECIALTY CHEMICALS-1.87%
Huntsman International LLC, Sr. Unsec. Gtd.
Sub. Global Notes, 7.88%, 11/15/14(a) 260,000 277,875
- -----------------------------------------------------------------------
Johnsondiversey Holdings Inc., Sr. Unsec.
Global Notes, 10.67%, 05/15/13(a) 190,000 198,075
- -----------------------------------------------------------------------
NewMarket Corp., Sr. Gtd. Global Notes,
7.13%, 12/15/16(a) 150,000 147,937
- -----------------------------------------------------------------------
Polypore Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 8.75%, 05/15/12(a) 380,000 385,700
- -----------------------------------------------------------------------
Polypore International Inc., Sr. Unsec. Disc.
Global Notes, 10.50%, 10/01/12(a)(e) 65,000 63,622
=======================================================================
1,073,209
=======================================================================
SPECIALTY STORES-0.99%
Linens 'n Things Inc., Sr. Sec. Gtd. Floating
Rate Global Notes, 10.98%,
01/15/14(a)(c)(d) 765,000 570,881
=======================================================================
STEEL-0.75%
AK Steel Corp., Sr. Unsec. Gtd. Global Notes,
7.75%, 06/15/12(a) 165,000 166,237
- -----------------------------------------------------------------------
Metals USA, Inc., Sr. Sec. Gtd. Global Notes,
11.13%, 12/01/15(a) 155,000 169,337
- -----------------------------------------------------------------------
Steel Dynamics Inc., Sr. Notes, 6.75%,
04/01/15 (Acquired 03/28/07; Cost
$95,000)(a)(b) 95,000 92,863
=======================================================================
428,437
=======================================================================
TIRES & RUBBER-0.86%
Goodyear Tire & Rubber Co. (The),
Sr. Notes,
8.63%, 12/01/11 (Acquired
03/22/07-03/23/07; Cost $83,430)(a)(b) 78,000 83,363
- -----------------------------------------------------------------------
Sr. Unsec. Global Notes,
9.00%, 07/01/15(a) 380,764 410,273
=======================================================================
493,636
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-1.93%
H&E Equipment Services Inc., Sr. Unsec. Gtd.
Global Notes, 8.38%, 07/15/16(a) 120,000 126,600
- -----------------------------------------------------------------------
United Rentals North America, Inc., Sr.
Unsec. Gtd. Global Notes, 6.50%,
02/15/12(a) 625,000 614,844
- -----------------------------------------------------------------------
Wesco Distribution Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 7.50%, 10/15/17(a) 360,000 369,000
=======================================================================
1,110,444
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
TRUCKING-0.22%
Saint Acquisition Corp., Sr. Sec. Notes,
12.50%, 05/15/17 (Acquired 06/04/07; Cost
$128,700)(a)(b) $ 130,000 $ 124,150
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.71%
Centennial Cellular Operating Co./Centennial
Communications Corp., Sr. Unsec. Gtd.
Global Notes, 10.13%, 06/15/13(a) 213,000 228,975
- -----------------------------------------------------------------------
Dobson Cellular Systems, Inc.-Series B, Sr.
Sec. Gtd. Global Notes, 8.38%, 11/01/11(a) 310,000 325,500
- -----------------------------------------------------------------------
Dobson Communications Corp., Sr. Global
Notes, 8.88%, 10/01/13(a) 120,000 125,700
- -----------------------------------------------------------------------
iPCS Inc., Sr. Sec. Gtd. Floating Rate First
Lien Notes, 7.48%, 05/01/13 (Acquired
04/11/07; Cost $90,000)(a)(b)(d) 90,000 90,450
- -----------------------------------------------------------------------
Rural Cellular Corp.,
Sr. Sec. Gtd. Global Notes,
8.25%, 03/15/12(a) 80,000 82,200
- -----------------------------------------------------------------------
Sr. Sub. Floating Rate Notes,
8.36%, 06/01/13 (Acquired 05/24/07; Cost
$130,000)(a)(b)(d) 130,000 130,000
=======================================================================
982,825
=======================================================================
Total Bonds & Notes (Cost $54,422,718) 54,469,237
=======================================================================
BUNDLED SECURITIES-2.29%
INVESTMENT BANKING & BROKERAGE-2.29%
Targeted Return Index Securities Trust-Series
HY 2006-1, Sec. Bonds, 7.55%, 05/01/16
(Acquired 06/27/06-05/11/07; Cost
$1,320,077) (Cost $1,321,805)(a)(b)(c) 1,338,750 1,317,714
=======================================================================
<Caption>
SHARES
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-1.27%
BROADCASTING & CABLE TV-1.05%
Adelphia Business Solutions(g) 3,280 102,500
- -----------------------------------------------------------------------
Adelphia Recovery Trust-Series ACC-1(c)(g) 318,570 27,078
- -----------------------------------------------------------------------
Adelphia Recovery Trust-Series ARAHOVA(g) 109,170 51,310
- -----------------------------------------------------------------------
Time Warner Cable, Inc.-Class A(c)(h) 8,180 320,411
- -----------------------------------------------------------------------
Virgin Media Inc. 4,129 100,624
- -----------------------------------------------------------------------
XM Satellite Radio Holdings Inc.-Wts.,
expiring 03/15/10(i) 182 191
=======================================================================
602,114
=======================================================================
CONSTRUCTION MATERIALS-0.00%
Dayton Superior Corp.-Wts., expiring 06/15/09
(Acquired 08/07/00; Cost $0)(b)(f)(i)(j) 175 0
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.01%
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
07/21/00-11/15/00; Cost $7,710)(b)(f)(i)(j) 832 0
- -----------------------------------------------------------------------
XO Holdings Inc.(k) 33 147
- -----------------------------------------------------------------------
XO Holdings Inc.-Class A-Wts., expiring
01/16/10(k) 1,533 1,134
- -----------------------------------------------------------------------
XO Holdings Inc.-Class B-Wts., expiring
01/16/10(k) 1,148 448
- -----------------------------------------------------------------------
XO Holdings Inc.-Class C-Wts., expiring
01/16/10(k) 1,148 184
=======================================================================
1,913
=======================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-0.21%
iPCS, Inc.(h) 3,614 $ 122,406
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $619,256) 726,433
=======================================================================
PREFERRED STOCKS-0.65%
MULTI-UTILITIES-0.16%
NRG Energy, Inc. $14.38 Conv. Pfd. 250 92,333
=======================================================================
RETAIL REIT'S-0.49%
Mills Corp. (The),
-Series B,
9.00% Pfd.(a) 730 19,824
- -----------------------------------------------------------------------
-Series C,
9.00% Pfd.(a) 4,555 118,714
- -----------------------------------------------------------------------
-Series E,
8.75% Pfd.(a) 4,555 118,715
- -----------------------------------------------------------------------
-Series G,
7.88% Pfd. 1,000 25,230
=======================================================================
282,483
=======================================================================
Total Preferred Stocks (Cost $351,099) 374,816
=======================================================================
<Caption>
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------
ASSET-BACKED SECURITIES-0.27%
ELECTRIC UTILITIES-0.27%
Reliant Energy Mid-Atlantic Power Holdings,
LLC- Series B, Sr. Unsec. Pass Through
Ctfs., 9.24%, 07/02/17 (Cost $143,382)(a) $ 142,787 157,154
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
SENIOR SECURED FLOATING RATE INTEREST
LOANS-0.18%
AIRLINES-0.18%
Evergreen International Aviation Inc.,
First Lien Term Loan,
8.82%, 10/31/11(a)(d) $ 97,809 $ 98,053
- -----------------------------------------------------------------------
10.75%, 10/31/11(a)(d) 4,575 4,587
=======================================================================
Total Senior Secured Floating Rate
Interest Loans (Cost $101,503) 102,640
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.54% (Cost
$56,959,763) 57,147,994
=======================================================================
<Caption>
SHARES
- -----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN MONEY MARKET
FUNDS-9.41%
Liquid Assets Portfolio-Institutional
Class(l)(m) 2,701,132 2,701,132
- -----------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(l)(m) 2,701,132 2,701,132
=======================================================================
Total Investments Purchased with Cash
Collateral from Securities on Loan
(Cost $5,402,264) 5,402,264
=======================================================================
TOTAL INVESTMENTS-108.95% (Cost $62,362,027) 62,550,258
=======================================================================
OTHER ASSETS LESS LIABILITIES-(8.95)% (5,138,861)
=======================================================================
NET ASSETS-100.00% $57,411,397
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate value of these securities at June 30, 2007
was $56,303,998, which represented 98.07% of the Fund's Net Assets. See Note
1A.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $11,597,768,
which represented 20.20% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) All or a portion of this security was out on loan at June 30, 2007.
(d) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on June 30, 2007.
(e) Step coupon bond issued at discount. The interest rate represents the coupon
rate at which the bond will accrue at a specified future date.
(f) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at June 30, 2007 was $87,870,
which represented 0.15% of the Fund's Net Assets.
(g) Non-income producing security acquired as part of the Adelphia
Communications bankruptcy reorganization.
(h) Non-income producing security.
(i) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(j) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at June 30, 2007 represented less than 0.01% of the Fund's Net
Assets. See Note 1A.
(k) Non-income producing security acquired through a corporate action.
(l) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(m) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. High Yield Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $56,959,763)* $57,147,994
- ------------------------------------------------------------
Investments in affiliated money market funds
(Cost $5,402,264) 5,402,264
============================================================
Total investments (Cost $62,362,027) 62,550,258
============================================================
Receivables for:
Investments sold 1,493,233
- ------------------------------------------------------------
Fund shares sold 10,293
- ------------------------------------------------------------
Dividends and Interest 1,121,648
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 40,611
- ------------------------------------------------------------
Other assets 9,682
============================================================
Total assets 65,225,725
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,454,837
- ------------------------------------------------------------
Fund shares reacquired 75,184
- ------------------------------------------------------------
Amount due custodian 765,262
- ------------------------------------------------------------
Trustee deferred compensation and retirement
plans 44,655
- ------------------------------------------------------------
Collateral upon return of securities loaned 5,402,264
- ------------------------------------------------------------
Accrued administrative services fees 36,719
- ------------------------------------------------------------
Accrued distribution fees -- Series II 454
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,494
- ------------------------------------------------------------
Accrued transfer agent fees 1,115
- ------------------------------------------------------------
Accrued operating expenses 30,344
============================================================
Total liabilities 7,814,328
============================================================
Net assets applicable to shares outstanding $57,411,397
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $61,074,286
- ------------------------------------------------------------
Undistributed net investment income 6,042,059
- ------------------------------------------------------------
Undistributed net realized gain (loss) (9,893,179)
- ------------------------------------------------------------
Unrealized appreciation 188,231
============================================================
$57,411,397
____________________________________________________________
============================================================
NET ASSETS:
Series I $56,698,469
____________________________________________________________
============================================================
Series II $ 712,928
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 8,976,672
____________________________________________________________
============================================================
Series II 113,528
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 6.32
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 6.28
____________________________________________________________
============================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $5,292,739 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 2,350,006
- -------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$60,000) 116,528
- -------------------------------------------------------------
Dividends 9,499
=============================================================
Total investment income 2,476,033
=============================================================
EXPENSES:
Advisory fees 190,583
- -------------------------------------------------------------
Administrative services fees 96,810
- -------------------------------------------------------------
Custodian fees 7,630
- -------------------------------------------------------------
Distribution fees -- Series II 993
- -------------------------------------------------------------
Transfer agent fees 6,140
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 9,314
- -------------------------------------------------------------
Professional services fees 24,792
- -------------------------------------------------------------
Other 10,810
=============================================================
Total expenses 347,072
=============================================================
Less: Fees waived and expense offset arrangement (56,795)
=============================================================
Net expenses 290,277
=============================================================
Net investment income 2,185,756
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from investment securities
(includes net gains from securities sold to
affiliates of $291) 1,413,085
- -------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) (1,609,792)
=============================================================
Net realized and unrealized gain (loss) (196,707)
=============================================================
Net increase in net assets resulting from
operations $ 1,989,049
_____________________________________________________________
=============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. High Yield Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,185,756 $ 3,893,306
- -----------------------------------------------------------------------------------------
Net realized gain 1,413,085 1,321,873
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (1,609,792) 486,551
=========================================================================================
Net increase in net assets resulting from operations 1,989,049 5,701,730
=========================================================================================
Distributions to shareholders from net investment income:
Series I -- (4,779,802)
- -----------------------------------------------------------------------------------------
Series II -- (74,015)
=========================================================================================
Decrease in net assets resulting from distributions -- (4,853,817)
=========================================================================================
Share transactions-net:
Series I (3,599,637) 2,787,332
- -----------------------------------------------------------------------------------------
Series II (232,948) (666,577)
=========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (3,832,585) 2,120,755
=========================================================================================
Net increase (decrease) in net assets (1,843,536) 2,968,668
=========================================================================================
NET ASSETS:
Beginning of period 59,254,933 56,286,265
=========================================================================================
End of period (including undistributed net investment
income of $6,042,059 and $3,856,303, respectively) $57,411,397 $59,254,933
_________________________________________________________________________________________
=========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. High Yield Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. High Yield Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is a high level of current income.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Senior secured floating rate loans and senior secured floating rate debt
securities are fair valued using an evaluated quote provided by an
independent pricing service. Evaluated quotes provided by the pricing
service may reflect appropriate factors such as ratings, tranche type,
industry, company performance, spread, individual trading characteristics,
institution-size trading in similar groups of securities and other market
data.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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. High Yield Fund
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. LOWER-RATED SECURITIES -- The Fund normally invests at least 80% of its net
assets in lower-quality debt securities, i.e., "junk bonds". Investments in
lower-rated securities or unrated securities of comparable quality tend to
be more sensitive to economic conditions than higher rated securities. Junk
bonds involve a greater risk of default by the issuer because such
securities are generally unsecured and are often subordinated to other
creditors' claims.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
AIM V.I. High Yield Fund
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
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 FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $200 million 0.625%
- --------------------------------------------------------------------
Next $300 million 0.55%
- --------------------------------------------------------------------
Next $500 million 0.50%
- --------------------------------------------------------------------
Over $1 billion 0.45%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 0.95% and Series
II shares to 1.20% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $54,403.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $72,015
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. High Yield Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $1,494,785 $ 9,788,641 $(11,283,426) $ -- $ 28,341
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 1,494,785 9,788,641 (11,283,426) -- 28,187
=================================================================================================================================
Subtotal $2,989,570 $19,577,282 $(22,566,852) $ -- $ 56,528
=================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $2,240,339 $ 5,550,190 $ (5,089,397) $2,701,132 $ 29,992
- ---------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class 2,240,340 5,550,189 (5,089,397) 2,701,132 30,008
=================================================================================================================================
Subtotal $4,480,679 $11,100,379 $(10,178,794) $5,402,264 $ 60,000
=================================================================================================================================
Total Investments in Affiliates $7,470,249 $30,677,661 $(32,745,646) $5,402,264 $116,528
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $504,583, which resulted in net realized gains of
$291, and securities purchases of $36,742.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $2,392.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,311 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
AIM V.I. High Yield Fund
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
line of credit.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, securities with an aggregate value of $5,292,739 were on
loan to brokers. The loans were secured by cash collateral of $5,402,264
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2007, the Fund received dividends on cash
collateral investments of $60,000 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of December
31, 2006 to utilizing $4,014,008 of capital loss carryforward in the fiscal year
ended December 31, 2007.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2010 $11,219,561
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $39,085,267 and
$36,999,896, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $1,087,536
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (949,296)
==============================================================================
Net unrealized appreciation of investment securities $ 138,240
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $62,412,018.
</Table>
AIM V.I. High Yield Fund
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,304,114 $ 14,503,565 3,750,321 $ 23,392,683
- ------------------------------------------------------------------------------------------------------------------------
Series II 1,352 8,466 1,887 11,586
========================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 786,151 4,779,801
- ------------------------------------------------------------------------------------------------------------------------
Series II -- -- 12,214 74,015
========================================================================================================================
Reacquired:
Series I (2,861,989) (18,103,202) (4,078,880) (25,385,152)
- ------------------------------------------------------------------------------------------------------------------------
Series II (38,778) (241,414) (122,412) (752,178)
========================================================================================================================
(595,301) $ (3,832,585) 349,281 $ 2,120,755
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are six entities that are each record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 77% of the
outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with these
entities whereby these entities sell units of interest in separate accounts
funding variable products that are invested in the Fund. The Fund, AIM
and/or AIM affiliates may make payments to these entities, which are
considered to be related to the Fund, for providing services to the Fund,
AIM and or AIM affiliates including but not limited to services such as,
securities brokerage, third party record keeping and account servicing and
administrative services. The Trust has no knowledge as to whether all or any
portion of the shares owned of record by these entities are also owned
beneficially.
NOTE 12--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. High Yield Fund
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.12 $ 6.03 $ 6.45 $ 5.97 $ 5.00 $ 5.31
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.22 0.45 0.43 0.42 0.49 0.51
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.02) 0.19 (0.26) 0.23 0.91 (0.82)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.02 -- --
=================================================================================================================================
Total from investment operations 0.20 0.64 0.17 0.67 1.40 (0.31)
=================================================================================================================================
Less dividends from net investment income -- (0.55) (0.59) (0.19) (0.43) --
=================================================================================================================================
Net asset value, end of period $ 6.32 $ 6.12 $ 6.03 $ 6.45 $ 5.97 $ 5.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 3.27% 10.74% 2.72% 11.25%(c) 28.04% (5.84)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $56,698 $58,336 $54,731 $96,602 $37,267 $24,984
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.96%(d) 0.96% 1.01% 1.04% 1.20% 1.30%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.14%(d) 1.18% 1.16% 1.04% 1.20% 1.30%
=================================================================================================================================
Ratio of net investment income to average net assets 7.16%(d) 7.22% 6.58% 6.79% 8.54% 10.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 63% 135% 69% 131% 101% 74%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to a trading error. Total return before reimbursement
by the advisor was 10.90%
(d) Ratios are annualized and based on average daily net assets of
$60,691,090.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------------------
MARCH 26, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------------------------- DECEMBER 31,
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.09 $ 6.00 $ 6.43 $ 5.95 $ 4.99 $ 5.27
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.21 0.43 0.41 0.41 0.49 0.38
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.02) 0.19 (0.26) 0.24 0.90 (0.66)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.01 -- --
=================================================================================================================================
Total from investment operations 0.19 0.62 0.15 0.66 1.39 (0.28)
=================================================================================================================================
Less dividends from net investment income -- (0.53) (0.58) (0.18) (0.43) --
=================================================================================================================================
Net asset value, end of period $ 6.28 $ 6.09 $ 6.00 $ 6.43 $ 5.95 $ 4.99
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 3.12% 10.41% 2.43% 11.14%(c) 27.89% (5.31)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 713 $ 919 $1,556 $1,072 $1,251 $ 142
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.21%(d) 1.21% 1.22% 1.24% 1.45% 1.45%(e)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.39%(d) 1.43% 1.41% 1.29% 1.45% 1.55%(e)
=================================================================================================================================
Ratio of net investment income to average net assets 6.91%(d) 6.97% 6.37% 6.59% 8.29% 10.05%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 63% 135% 69% 131% 101% 74%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to a trading error. Total return before reimbursement
by the advisor was 10.96%
(d) Ratios are annualized and based on average daily net assets of $800,991.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. High Yield Fund
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. High Yield Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service fees (12b-1); You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR relative total costs of owning different
the examples below do not represent the COMPARISON PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,032.70 $4.84 $1,020.03 $4.81 0.96%
Series II 1,000.00 1,031.20 6.09 1,018.79 6.06 1.21
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. High Yield Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. High Yield Fund (the Fund) investment Committee considers each Sub-Committee's provided to the Fund by AIM under the
advisory agreement with A I M Advisors, recommendations in making its annual Fund's advisory agreement, the performance
Inc. (AIM). During contract renewal recommendation to the Board whether to of AIM in providing these services, and
meetings held on June 25-27, 2007, the approve the continuance of each AIM Fund's the credentials and experience of the
Board as a whole and the disinterested or investment advisory agreement and officers and employees of AIM who provide
"independent" Trustees, voting separately, sub-advisory agreement, if applicable these services. The Board's review of the
approved the continuance of the Fund's (advisory agreements), for another year. qualifications of AIM to provide these
investment advisory agreement for another services included the Board's
year, effective July 1, 2007. In doing so, The independent Trustees, as mentioned consideration of AIM's portfolio and
the Board determined that the Fund's above, are assisted in their annual product review process, various back
advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee structure common interests of all of the AIM Funds distribution, fund operations, shareholder
permits the Trustees to focus on the in their deliberations. The Board services and compliance. The Board
performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio managers review and negotiation between the calendar years to the performance of funds
for their assigned funds and other members Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
of management and review with these focus to a greater extent on certain not managed by AIM, and against the
individuals the performance, investment aspects of these arrangements in some performance of all funds in the Lipper
objective(s), policies, strategies and years than others, and that the Trustees' Variable Annuity Underlying Funds - High
limitations of these funds. deliberations and conclusions in a Current Yield Index. The Board also
particular year may be based in part on reviewed the methodology used by Lipper to
In addition to their meetings their deliberations and conclusions of identify the Fund's peers. The Board noted
throughout the year, the Sub-Committees these same arrangements throughout the that the Fund's performance was comparable
meet at designated contract renewal year and in prior years. to the median performance of its peers for
meetings each year to conduct an in-depth the one, three and five year periods. The
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF Board noted that the Fund's performance
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION was comparable to the performance of the
the contract renewal process, the Trustees Index for the one, three and five year
receive comparative performance and fee The discussion below serves as a summary periods. The Board also considered the
data regarding all the AIM Funds prepared of the Senior Officer's independent steps AIM has taken over the last several
by an independent company, Lipper, Inc., written evaluation, as well as a years to improve the quality and
under the direction and supervision of the discussion of the material factors and efficiency of the services that AIM
independent Senior Officer who also related conclusions that formed the basis provides to the AIM Funds. The Board
prepares a separate analysis of this for the Board's approval of the Fund's concluded that AIM continues to be
information for the Trustees. Each advisory agreement. Unless otherwise responsive to the Board's focus on fund
Sub-Committee then makes recommendations stated, information set forth below is as performance. Although the independent
to the Investments Committee regarding the of June 27, 2007 and does not reflect any written evaluation of the Fund's Senior
performance, fees and expenses of their changes that may have occurred since that Officer (discussed below) only considered
assigned funds. The Investments Committee date, including but not limited to changes Fund performance through the most recent
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, calendar year, the Board also reviewed
expense limitations and/or fee waivers. more
(continued)
AIM V.I. HIGH YIELD FUND
recent Fund performance and this review E. PROFITABILITY AND FINANCIAL RESOURCES used to pay for research and execution
did not change their conclusions. OF AIM services. The Board noted that soft dollar
arrangements shift the payment obligation
C. ADVISORY FEES AND FEE WAIVERS The Board reviewed information from AIM for the research and executions services
concerning the costs of the advisory and from AIM to the funds and therefore may
The Board compared the Fund's contractual other services that AIM and its affiliates reduce AIM's expenses. The Board also
advisory fee rate to the contractual provide to the Fund and the profitability noted that research obtained through soft
advisory fee rates of funds in the Fund's of AIM and its affiliates in providing dollar arrangements may be used by AIM in
Lipper peer group that are not managed by these services. The Board also reviewed making investment decisions for the Fund
AIM, at a common asset level and as of the information concerning the financial and may therefore benefit Fund
end of the past calendar year. The condition of AIM and its affiliates. The shareholders. The Board concluded that
Board noted that the Fund's advisory Board also reviewed with AIM the AIM's soft dollar arrangements were
fee rate was comparable to the median methodology used to prepare the appropriate. The Board also concluded
advisory fee rate of its peers. The Board profitability information. that, based on their review and
also reviewed the methodology used by The Board considered the overall representations made by AIM, these
Lipper and noted that the contractual fee profitability of AIM, as well as the arrangements were consistent with
rates shown by Lipper include any profitability of AIM in connection with regulatory requirements.
applicable long-term contractual fee managing the Fund. The Board noted that
waivers. The Board also compared the AIM continues to operate at a net profit, The Board considered the fact that the
Fund's contractual advisory fee rate to although increased expenses in recent Fund's uninvested cash and cash collateral
the contractual advisory fee rates of years have reduced the profitability of from any securities lending arrangements
other clients of AIM and its affiliates AIM and its affiliates. The Board may be invested in money market funds
with investment strategies comparable to concluded that the Fund's advisory fees advised by AIM pursuant to procedures
those of the Fund, including one mutual were fair and reasonable, and that the approved by the Board. The Board noted
fund advised by AIM and one offshore fund level of profits realized by AIM and its that AIM will receive advisory fees from
advised and sub-advised by AIM affiliates. affiliates from providing services to the these affiliated money market funds
The Board noted that the Fund's rate was: Fund was not excessive in light of the attributable to such investments, although
(i) above the rate for the mutual fund; nature, quality and extent of the services AIM has contractually agreed to waive the
and (ii) comparable to the advisory fee provided. The Board considered whether AIM advisory fees payable by the Fund with
rate for the offshore fund. is financially sound and has the resources respect to its investment of uninvested
necessary to perform its obligations under cash in these affiliated money market
The Board noted that AIM has the Fund's advisory agreement, and funds through at least April 30, 2009. The
contractually agreed to waive fees and/or concluded that AIM has the financial Board considered the contractual nature of
limit expenses of the Fund through at resources necessary to fulfill these this fee waiver and noted that it remains
least April 30, 2009 in an amount obligations. in effect until at least April 30, 2009.
necessary to limit total annual operating The Board concluded that the Fund's
expenses to a specified percentage of F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
average daily net assets for each class of FUND'S SENIOR OFFICER collateral from any securities lending
the Fund. The Board considered the arrangements in the affiliated money
contractual nature of this fee waiver and The Board noted that, upon their market funds is in the best interests of
noted that it remains in effect until at direction, the Senior Officer of the Fund, the Fund and its shareholders.
least April 30, 2009. The Board reviewed who is independent of AIM and AIM's
the Fund's effective advisory fee rate, affiliates, had prepared an independent
after taking account of this expense written evaluation to assist the Board in
limitation, and considered the effect this determining the reasonableness of the
expense limitation would have on the proposed management fees of the AIM Funds,
Fund's estimated total expenses. The Board including the Fund. The Board noted that
concluded that the levels of fee they had relied upon the Senior Officer's
waivers/expense limitations for the Fund written evaluation instead of a
were fair and reasonable. competitive bidding process. In
determining whether to continue the Fund's
After taking account of the Fund's advisory agreement, the Board considered
contractual advisory fee rate, as well as the Senior Officer's written evaluation.
the comparative advisory fee information
and the expense limitation discussed G. COLLATERAL BENEFITS TO AIM AND ITS
above, the Board concluded that the Fund's AFFILIATES
advisory fees were fair and reasonable.
The Board considered various other
D. ECONOMIES OF SCALE AND BREAKPOINTS benefits received by AIM and its
affiliates resulting from AIM's
The Board considered the extent to which relationship with the Fund, including the
there are economies of scale in AIM's fees received by AIM and its affiliates
provision of advisory services to the for their provision of administrative,
Fund. The Board also considered whether transfer agency and distribution services
the Fund benefits from such economies of to the Fund. The Board considered the
scale through contractual breakpoints in performance of AIM and its affiliates in
the Fund's advisory fee schedule or providing these services and the
through advisory fee waivers or expense organizational structure employed by AIM
limitations. The Board noted that the and its affiliates to provide these
Fund's contractual advisory fee schedule services. The Board also considered that
includes three breakpoints but that, due these services are provided to the Fund
to the Fund's asset level at the end of pursuant to written contracts which are
the past calendar year and the way in reviewed and approved on an annual basis
which the breakpoints have been by the Board. The Board concluded that AIM
structured, the Fund has yet to benefit and its affiliates were providing these
from the breakpoints. Based on this services in a satisfactory manner and in
information, the Board concluded that the accordance with the terms of their
Fund's advisory fees would reflect contracts, and were qualified to continue
economies of scale at higher asset levels. to provide these services to the Fund.
The Board also noted that the Fund shares
directly in economies of scale through The Board considered the benefits
lower fees charged by third party service realized by AIM as a result of portfolio
providers based on the combined size of brokerage transactions executed through
all of the AIM Funds and affiliates. "soft dollar" arrangements. Under these
arrangements, portfolio brokerage
commissions paid by the Fund and/or other
funds advised by AIM are
AIM V.I. International Growth Fund
Semiannual Report to Shareholders o June 30, 2007
INTERNATIONAL/GLOBAL EQUITY
International/Global Growth
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. International Growth Fund
Fund performance
======================================================================================= The performance data quoted represent
PERFORMANCE SUMMARY past performance and cannot guarantee
comparable future results; current
FUND VS. INDEXES performance may be lower or higher. Please
contact your variable product issuer or
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. financial advisor for the most recent
If variable product issuer charges were included, returns would be lower. month-end variable product performance.
Performance figures reflect Fund expenses,
Series I Shares 12.95% reinvested distributions and changes in
Series II Shares 12.79 net asset value. Investment return and
MSCI EAFE Index(1) (Broad Market Index) 10.74 principal value will fluctuate so that you
MSCI EAFE Growth Index(1) (Style-Specific Index) 11.94 may have a gain or loss when you sell
Lipper VUF International Growth Funds Index(1) (Peer Group Index) 11.35 shares.
Lipper International Multi-Cap Growth Funds Index(1) (Former Peer Group Index) 11.40
The total annual Fund operating expense
Source: (1) Lipper Inc. ratio set forth in the most recent Fund
prospectus as of the date of this report
The unmanaged MSCI Europe, Australasia and the Far East Index (the MSCI EAFE for Series I and Series II shares was
- --REGISTERED TRADEMARK-- Index) is a group of foreign securities tracked by Morgan 1.11% and 1.36%, respectively. The expense
Stanley Capital International. ratios presented above may vary from the
expense ratios presented in other sections
The unmanaged MSCI Europe, Australasia and the Far East Growth Index (the MSCI EAFE of this report that are based on expenses
- --REGISTERED TRADEMARK-- Growth Index) is a subset of the unmanaged MSCI EAFE Index, incurred during the period covered by this
which represents the performance of foreign stocks tracked by Morgan Stanley Capital report.
International. The Growth portion measures performance of companies with higher
price/earnings ratios and higher forecasted growth values. AIM V.I. International Growth Fund, a
series portfolio of AIM Variable Insurance
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) International Funds, is currently offered through
Growth Funds Index as its peer group instead of the Lipper International Multi-Cap insurance companies issuing variable
Growth Funds Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund to products. You cannot purchase shares of
be compared with the Lipper VUF International Growth Funds Index. The unmanaged Lipper the Fund directly. Performance figures
VUF International Growth Funds Index is an equally weighted representation of the given represent the Fund and are not
largest variable insurance underlying funds in the Lipper International Growth Funds intended to reflect actual variable
category. Lipper Inc. is an independent mutual fund monitor. product values. They do not reflect sales
charges, expenses and fees assessed in
The unmanaged Lipper International Multi-Cap Growth Funds Index represents an connection with a variable product. Sales
average of the performance of the largest international multi-capitalization growth charges, expenses and fees, which are
funds tracked by Lipper Inc., an independent mutual fund performance monitor. determined by the variable product
issuers, will vary and will lower the
The Fund is not managed to track the performance of any particular index, including total return.
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes. Per NASD requirements, the most recent
month-end performance data at the Fund
A direct investment cannot be made in an index. Unless otherwise indicated, index level, excluding variable product charges,
results include reinvested dividends, and they do not reflect sales charges. is available on this AIM automated
Performance of an index of funds reflects fund expenses; performance of a market index information line, 866-702-4402. As
does not. mentioned above, for the most recent
======================================================================================= month-end performance including variable
product charges, please contact your
========================================== Series II shares' inception date is variable product issuer or financial
FUND PERFORMANCE September 19, 2001. Returns since that advisor.
As of 6/30/07 date are historical. All other returns are
SERIES I SHARES the blended returns of the historical
Inception (5/5/93) 10.46% performance of Series II shares since
10 Years 8.32 their inception and the restated
5 Years 18.04 historical performance of Series I shares
1 Year 32.96 (for periods prior to inception of Series
II shares) adjusted to reflect the Rule
SERIES II SHARES 12b-1 fees applicable to Series II shares.
10 Years 8.04% The inception date of Series I shares is
5 Years 17.71 May 5, 1993.
1 Year 32.60
========================================== The performance of the Fund's Series I
and Series II share classes will differ
primarily due to different class expenses.
AIM V.I. International Growth Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Financials 20.2%
- ----------------------------------------------------------
Industrials 17.2
- ----------------------------------------------------------
Consumer Discretionary 15.4
- ----------------------------------------------------------
Consumer Staples 11.7
- ----------------------------------------------------------
Information Technology 7.7
- ----------------------------------------------------------
Energy 6.3
- ----------------------------------------------------------
Health Care 6.0
- ----------------------------------------------------------
Materials 5.4
- ----------------------------------------------------------
Telecommunication Services 1.6
- ----------------------------------------------------------
Utilities 1.1
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 7.4
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-88.27%
AUSTRALIA-3.48%
Aristocrat Leisure Ltd. (Casinos &
Gaming)(a)(b) 517,869 $ 6,291,369
- --------------------------------------------------------------------------
Babcock & Brown Ltd. (Other Diversified
Financial Services)(a)(b) 291,839 7,903,100
- --------------------------------------------------------------------------
BHP Billiton Ltd. (Diversified Metals &
Mining)(a) 410,392 12,251,241
- --------------------------------------------------------------------------
Brambles Ltd. (Diversified Commercial &
Professional Services)(a)(c) 648,344 6,679,504
==========================================================================
33,125,214
==========================================================================
BELGIUM-2.29%
InBev N.V. (Brewers)(a) 178,306 14,119,299
- --------------------------------------------------------------------------
KBC Groep N.V. (Diversified Banks)(a) 57,365 7,693,631
==========================================================================
21,812,930
==========================================================================
BRAZIL-0.71%
All America Latina Logistica (Railroads)(d) 492,700 6,742,667
==========================================================================
CANADA-3.21%
Canadian National Railway Co. (Railroads) 137,220 6,989,845
- --------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas
Exploration & Production) 108,153 7,161,455
- --------------------------------------------------------------------------
Manulife Financial Corp. (Life & Health
Insurance) 162,701 6,069,587
- --------------------------------------------------------------------------
Suncor Energy, Inc. (Integrated Oil & Gas) 114,935 10,333,358
==========================================================================
30,554,245
==========================================================================
CHINA-0.97%
Ping An Insurance (Group) Co. of China Ltd.-
Class H (Life & Health Insurance)(a) 1,309,000 9,274,639
==========================================================================
DENMARK-1.03%
Novo Nordisk A.S.-Class B
(Pharmaceuticals)(a) 89,748 9,774,205
==========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
FRANCE-8.59%
Axa (Multi-Line Insurance)(a)(b) 263,454 $ 11,304,998
- --------------------------------------------------------------------------
BNP Paribas (Diversified Banks)(a) 122,510 14,595,034
- --------------------------------------------------------------------------
Cap Gemini S.A. (IT Consulting & Other
Services)(a) 135,664 9,921,421
- --------------------------------------------------------------------------
Schneider Electric S.A. (Electrical
Components & Equipment)(a) 47,810 6,694,966
- --------------------------------------------------------------------------
Societe Generale (Diversified Banks)(a) 56,840 10,503,342
- --------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas)(a) 167,034 13,559,244
- --------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering)(a)(b) 204,536 15,255,278
==========================================================================
81,834,283
==========================================================================
GERMANY-8.87%
Bayer A.G. (Diversified Chemicals)(a) 163,845 12,412,447
- --------------------------------------------------------------------------
Commerzbank A.G. (Diversified Banks)(a) 234,872 11,257,899
- --------------------------------------------------------------------------
Continental A.G. (Tires & Rubber)(a) 56,704 7,998,667
- --------------------------------------------------------------------------
Deutsche Boerse A.G. (Specialized Finance) 39,803 4,511,727
- --------------------------------------------------------------------------
MAN A.G. (Industrial Machinery)(a) 84,828 12,216,360
- --------------------------------------------------------------------------
Merck KGaA (Pharmaceuticals)(a) 57,875 7,960,864
- --------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)(a) 32,340 14,431,711
- --------------------------------------------------------------------------
Siemens A.G. (Industrial Conglomerates)(a) 95,699 13,767,975
==========================================================================
84,557,650
==========================================================================
GREECE-0.72%
OPAP S.A. (Casinos & Gaming)(a) 192,930 6,819,111
==========================================================================
HONG KONG-2.38%
Esprit Holdings Ltd. (Apparel Retail)(a) 723,400 9,209,657
- --------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Industrial
Conglomerates) 632,000 6,276,272
- --------------------------------------------------------------------------
Li & Fung Ltd. (Distributors)(a) 1,996,000 7,206,159
==========================================================================
22,692,088
==========================================================================
</Table>
AIM V.I. International Growth Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
HUNGARY-0.84%
OTP Bank Nyrt. (Diversified Banks)(a) 138,306 $ 7,963,602
==========================================================================
INDIA-2.78%
Bharat Heavy Electricals Ltd. (Heavy
Electrical Equipment)(a) 225,737 8,497,328
- --------------------------------------------------------------------------
Housing Development Finance Corp. Ltd.
(Thrifts & Mortgage Finance) 126,025 6,297,224
- --------------------------------------------------------------------------
Infosys Technologies Ltd. (IT Consulting &
Other Services) 246,606 11,688,337
==========================================================================
26,482,889
==========================================================================
INDONESIA-0.57%
PT Telekomunikasi Indonesia-Series B
(Integrated Telecommunication Services)(a) 5,018,500 5,424,301
==========================================================================
IRELAND-2.42%
Anglo Irish Bank Corp. PLC (Diversified
Banks)(a) 609,364 12,485,145
- --------------------------------------------------------------------------
CRH PLC (Construction Materials)(a) 214,904 10,605,312
==========================================================================
23,090,457
==========================================================================
ISRAEL-1.47%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 338,584 13,966,590
==========================================================================
ITALY-1.29%
Eni S.p.A. (Integrated Oil & Gas)(a) 338,008 12,251,822
==========================================================================
JAPAN-10.62%
AEON Co., Ltd. (Hypermarkets & Super
Centers)(a)(b) 234,900 4,357,116
- --------------------------------------------------------------------------
Canon Inc. (Office Electronics)(b) 160,200 9,405,164
- --------------------------------------------------------------------------
Denso Corp. (Auto Parts & Equipment) 141,300 5,530,378
- --------------------------------------------------------------------------
FANUC Ltd. (Industrial Machinery)(a) 144,300 14,863,195
- --------------------------------------------------------------------------
Hitachi High-Technologies Corp. (Trading
Companies & Distributors) 171,300 4,451,157
- --------------------------------------------------------------------------
IBIDEN Co., Ltd. (Electronic Equipment
Manufacturers)(a)(b) 120,800 7,776,833
- --------------------------------------------------------------------------
Keyence Corp. (Electronic Equipment
Manufacturers)(b) 31,800 6,953,910
- --------------------------------------------------------------------------
Komatsu Ltd. (Construction & Farm Machinery &
Heavy Trucks)(a) 379,100 10,978,000
- --------------------------------------------------------------------------
Mizuho Financial Group, Inc. (Diversified
Banks) (Acquired 10/24/2005; Cost
$2,127,848)(a)(e) 354 2,443,796
- --------------------------------------------------------------------------
Mizuho Financial Group, Inc. (Diversified
Banks)(a) 779 5,377,731
- --------------------------------------------------------------------------
ORIX Corp. (Consumer Finance)(a)(b) 33,460 8,786,964
- --------------------------------------------------------------------------
Suzuki Motor Corp. (Automobile
Manufacturers)(b) 240,800 6,843,687
- --------------------------------------------------------------------------
Toyota Motor Corp. (Automobile
Manufacturers)(a) 213,900 13,484,451
==========================================================================
101,252,382
==========================================================================
MEXICO-2.90%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 165,294 10,236,658
- --------------------------------------------------------------------------
Desarrolladora Homex S.A. de C.V.-ADR
(Homebuilding)(c) 59,541 3,607,589
- --------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 166,914 4,608,496
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
MEXICO-(CONTINUED)
Urbi, Desarrollos Urbanos, S.A. de C.V.
(Homebuilding)(c) 914,400 $ 4,180,105
- --------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Hypermarkets & Super Centers)(b) 1,331,100 5,052,361
==========================================================================
27,685,209
==========================================================================
NETHERLANDS-1.06%
Heineken Holding N.V. (Brewers)(a) 194,506 10,066,246
==========================================================================
NORWAY-0.91%
Petroleum Geo-Services A.S.A. (Oil & Gas
Equipment & Services)(a) 350,570 8,671,986
==========================================================================
RUSSIA-0.39%
LUKOIL-ADR (Integrated Oil & Gas)(a) 48,971 3,694,644
==========================================================================
SINGAPORE-1.57%
Keppel Corp. Ltd. (Industrial
Conglomerates)(a) 1,031,000 8,407,828
- --------------------------------------------------------------------------
United Overseas Bank Ltd. (Diversified
Banks)(a) 457,000 6,561,119
==========================================================================
14,968,947
==========================================================================
SOUTH AFRICA-0.74%
Standard Bank Group Ltd. (Diversified
Banks)(a) 513,385 7,101,790
==========================================================================
SOUTH KOREA-1.33%
Hana Financial Group Inc. (Diversified
Banks)(a) 104,480 5,081,122
- --------------------------------------------------------------------------
Hyundai Heavy Industries Co., Ltd.
(Construction & Farm Machinery & Heavy
Trucks) 20,300 7,585,292
==========================================================================
12,666,414
==========================================================================
SPAIN-1.77%
Banco Santander Central Hispano S.A.
(Diversified Banks)(a) 403,224 7,418,295
- --------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 160,458 9,464,939
==========================================================================
16,883,234
==========================================================================
SWEDEN-2.61%
Assa Abloy A.B.-Class B (Building
Products)(a) 458,504 10,113,172
- --------------------------------------------------------------------------
Atlas Copco A.B.-Class A (Industrial
Machinery)(a) 442,200 7,380,780
- --------------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(a) 383,539 7,412,942
==========================================================================
24,906,894
==========================================================================
SWITZERLAND-9.17%
Adecco S.A. (Human Resource & Employment
Services)(a) 92,378 7,129,691
- --------------------------------------------------------------------------
Compagnie Financiere Richemont S.A.-Class A
(Apparel, Accessories & Luxury Goods)(a)(f) 199,489 11,915,649
- --------------------------------------------------------------------------
Credit Suisse Group (Diversified Capital
Markets)(a) 167,342 11,867,042
- --------------------------------------------------------------------------
Nestle S.A. (Packaged Foods & Meats)(a) 29,477 11,193,992
- --------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(a) 84,589 15,003,567
- --------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(a) 82,857 16,153,343
- --------------------------------------------------------------------------
UBS A.G. (Diversified Capital Markets)(a) 236,105 14,112,283
==========================================================================
87,375,567
==========================================================================
</Table>
AIM V.I. International Growth Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
TAIWAN-2.86%
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services) 1,281,451 $ 11,085,351
- --------------------------------------------------------------------------
MediaTek Inc. (Semiconductors) 748,700 11,676,345
- --------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-
ADR (Semiconductors) 407,645 4,537,085
==========================================================================
27,298,781
==========================================================================
TURKEY-0.77%
Akbank T.A.S. (Diversified Banks)(a) 1,332,785 7,363,705
==========================================================================
UNITED KINGDOM-9.95%
Aviva PLC (Multi-Line Insurance)(a) 575,214 8,543,047
- --------------------------------------------------------------------------
Capita Group PLC (Human Resource & Employment
Services)(a) 493,941 7,159,426
- --------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(a) 326,236 4,493,247
- --------------------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco)(a) 280,001 12,951,988
- --------------------------------------------------------------------------
Informa PLC (Publishing)(a) 657,494 7,309,687
- --------------------------------------------------------------------------
International Power PLC (Independent Power
Producers & Energy Traders)(a) 1,229,147 10,576,151
- --------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products)(a) 189,893 10,398,754
- --------------------------------------------------------------------------
Shire PLC (Pharmaceuticals)(a) 427,336 10,593,090
- --------------------------------------------------------------------------
Tesco PLC (Food Retail)(a) 991,442 8,300,477
- --------------------------------------------------------------------------
WPP Group PLC (Advertising)(a) 971,984 14,541,744
==========================================================================
94,867,611
==========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $522,521,680) 841,170,103
==========================================================================
FOREIGN PREFERRED STOCKS-4.37%
BRAZIL-1.27%
Companhia de Bebidas das Americas-Pfd.-ADR
(Brewers)(b) 104,556 7,318,920
- --------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Pfd.-ADR (Integrated
Oil & Gas) 44,803 4,779,584
==========================================================================
12,098,504
==========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
GERMANY-3.10%
Henkel KGaA-Pfd. (Household Products)(a) 254,845 $ 13,460,162
- --------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile
Manufacturers)(a) 9,044 16,100,842
==========================================================================
29,561,004
==========================================================================
Total Foreign Preferred Stocks (Cost
$22,650,998) 41,659,508
==========================================================================
MONEY MARKET FUNDS-6.71%
Liquid Assets Portfolio-Institutional
Class(g) 31,967,399 31,967,399
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 31,967,399 31,967,399
==========================================================================
Total Money Market Funds (Cost
$63,934,798) 63,934,798
==========================================================================
TOTAL INVESTMENTS (EXCLUDING INVESTMENTS
PURCHASED WITH CASH COLLATERAL FROM
SECURITIES ON LOAN)-99.35%
(Cost $609,107,476) 946,764,409
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-7.41%
Liquid Assets Portfolio-Institutional
Class(g)(h) 35,288,906 35,288,906
- --------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(g)(h) 35,288,905 35,288,905
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities on
loan) (Cost $70,577,811) 70,577,811
==========================================================================
TOTAL INVESTMENTS-106.76% (Cost $679,685,287) 1,017,342,220
==========================================================================
OTHER ASSETS LESS LIABILITIES-(6.76)% (64,393,687)
==========================================================================
NET ASSETS-100.00% $ 952,948,533
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $694,940,467, which
represented 72.93% of the Fund's Net Assets. See Note 1A.
(b) All or a portion of this security was out on loan at June 30, 2007.
(c) Non-income producing security.
(d) Each unit represents one common share and four preferred shares.
(e) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at June 30, 2007 represented 0.26% of the Fund's
Net Assets. Unless otherwise indicated, this security is not considered to
be illiquid.
(f) Each unit represents one A bearer share in the company and one bearer share
participation certificate in Richemont S.A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(h) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. International Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $545,172,678)* $ 882,829,611
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $134,512,609) 134,512,609
=============================================================
Total investments (Cost $679,685,287) 1,017,342,220
=============================================================
Foreign currencies, at value (Cost
$3,968,050) 3,990,212
- -------------------------------------------------------------
Cash 60,914
- -------------------------------------------------------------
Receivables for:
Investments sold 361,201
- -------------------------------------------------------------
Fund shares sold 1,775,840
- -------------------------------------------------------------
Dividends 3,417,230
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 52,322
- -------------------------------------------------------------
Other assets 2,380
=============================================================
Total assets 1,027,002,319
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 892,302
- -------------------------------------------------------------
Fund shares reacquired 1,427,077
- -------------------------------------------------------------
Trustee deferred compensation and
retirement plans 88,576
- -------------------------------------------------------------
Collateral upon return of securities loaned 70,577,811
- -------------------------------------------------------------
Accrued administrative services fees 579,986
- -------------------------------------------------------------
Accrued distribution fees -- Series II 147,141
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,737
- -------------------------------------------------------------
Accrued transfer agent fees 625
- -------------------------------------------------------------
Accrued operating expenses 335,531
=============================================================
Total liabilities 74,053,786
=============================================================
Net assets applicable to shares outstanding $ 952,948,533
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 610,989,590
- -------------------------------------------------------------
Undistributed net investment income 10,695,478
- -------------------------------------------------------------
Undistributed net realized gain (loss) (6,418,285)
- -------------------------------------------------------------
Unrealized appreciation 337,681,750
=============================================================
$ 952,948,533
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $ 670,784,839
_____________________________________________________________
=============================================================
Series II $ 282,163,694
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 20,182,659
_____________________________________________________________
=============================================================
Series II 8,581,733
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 33.24
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 32.88
_____________________________________________________________
=============================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $68,290,267 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$1,407,013) $11,062,273
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$201,498) 1,428,777
============================================================
Total investment income 12,491,050
============================================================
EXPENSES:
Advisory fees 2,881,522
- ------------------------------------------------------------
Administrative services fees 1,040,497
- ------------------------------------------------------------
Custodian fees 238,538
- ------------------------------------------------------------
Distribution fees -- Series II 253,835
- ------------------------------------------------------------
Transfer agent fees 21,229
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 19,201
- ------------------------------------------------------------
Other 40,810
============================================================
Total expenses 4,495,632
============================================================
Less: Fees waived and expense offset
arrangement (7,575)
============================================================
Net expenses 4,488,057
============================================================
Net investment income 8,002,993
============================================================
REALIZED AND UNREALIZED GAIN FROM:
Net realized gain from:
Investment securities 15,498,963
- ------------------------------------------------------------
Foreign currencies 83,205
============================================================
15,582,168
============================================================
Change in net unrealized appreciation of:
Investment securities (net of change in
estimated tax on foreign investments held
of $(237,889) -- Note 1I) 74,801,961
- ------------------------------------------------------------
Foreign currencies 26,918
============================================================
74,828,879
============================================================
Net realized and unrealized gain 90,411,047
============================================================
Net increase in net assets resulting from
operations $98,414,040
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. International Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,002,993 $ 5,082,538
- ------------------------------------------------------------------------------
Net realized gain 15,582,168 36,770,565
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 74,828,879 106,359,912
==============================================================================
Net increase in net assets resulting from
operations 98,414,040 148,213,015
==============================================================================
Distributions to shareholders from net
investment income:
Series I -- (5,173,427)
- ------------------------------------------------------------------------------
Series II -- (1,205,499)
- ------------------------------------------------------------------------------
Decrease in net assets resulting from
distributions -- (6,378,926)
==============================================================================
Share transactions-net:
Series I 33,461,326 317,895
- ------------------------------------------------------------------------------
Series II 93,956,195 85,698,882
==============================================================================
Net increase in net assets resulting from
share transactions 127,417,521 86,016,777
==============================================================================
Net increase in net assets 225,831,561 227,850,866
==============================================================================
NET ASSETS:
Beginning of period 727,116,972 499,266,106
==============================================================================
End of period (including undistributed net
investment income of $10,695,478 and
$2,692,485, respectively) $952,948,533 $727,116,972
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. International Growth Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. International Growth Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. International Growth Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. International Growth Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Over $250 million 0.70%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit net annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. AIM did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the fund). Prior July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $7,189.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$97,601 for accounting and fund administrative services and reimbursed $942,896
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. International Growth Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $22,755,651 $ 70,568,525 $ (61,356,777) $31,967,399 $ 615,197
- ----------------------------------------------------------------------------------------------------------------------
Premier Portfolio-
Institutional Class 22,755,651 70,568,525 (61,356,777) 31,967,399 612,082
======================================================================================================================
Subtotal $45,511,302 $141,137,050 $(122,713,554) $63,934,798 $1,227,279
======================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ----------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $ 28,210,678 $184,987,456 $(177,909,228) $ 35,288,906 $ 100,725
- ----------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 28,210,678 184,987,456 (177,909,229) 35,288,905 100,773
- ----------------------------------------------------------------------------------------------------------------------
Subtotal $ 56,421,356 $369,974,912 $(355,818,457) $ 70,577,811 $ 201,498
======================================================================================================================
Total Investments in Affiliates $101,932,658 $511,111,962 $(478,532,011) $134,512,609 $1,428,777
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $386.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$3,622 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
AIM V.I. International Growth Fund
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, securities with an aggregate value of $68,290,267 were on
loan to brokers. The loans were secured by cash collateral of $70,577,811
received by the Fund and subsequently invested in an affiliated money market
fund. For the six months ended June 30, 2007, the Fund received dividends on
cash collateral investments of $201,498 for securities lending transactions,
which are net of compensation to counterparties.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of December
31, 2006 to utilizing $20,815,284 of capital loss carryforward in the fiscal
year ended December 31, 2007.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2007 $ 431,410
- -----------------------------------------------------------------------------
December 31, 2010 20,383,874
=============================================================================
Total capital loss carryforward $20,815,284
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $195,745,756 and
$80,216,103, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $336,333,991
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,823,814)
==============================================================================
Net unrealized appreciation of investment securities $333,510,177
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $683,832,043.
</Table>
AIM V.I. International Growth Fund
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 3,501,505 $109,289,449 5,527,297 $145,984,568
- ----------------------------------------------------------------------------------------------------------------------
Series II 4,107,637 128,381,436 4,213,039 111,448,899
======================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 172,402 4,966,887
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- 42,239 1,205,499
======================================================================================================================
Reacquired:
Series I (2,460,597) (75,828,123) (5,743,301) (150,633,560)
- ----------------------------------------------------------------------------------------------------------------------
Series II (1,138,840) (34,425,241) (1,018,904) (26,955,516)
======================================================================================================================
4,009,705 $127,417,521 3,192,772 $ 86,016,777
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are three entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 29% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.44 $ 23.17 $ 19.77 $ 16.04 $ 12.49 $ 14.91
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.32 0.23 0.23 0.15 0.09 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 3.48 6.32 3.31 3.70 3.54 (2.40)
=================================================================================================================================
Total from investment operations 3.80 6.55 3.54 3.85 3.63 (2.34)
=================================================================================================================================
Less dividends from net investment income -- (0.28) (0.14) (0.12) (0.08) (0.08)
=================================================================================================================================
Net asset value, end of period $ 33.24 $ 29.44 $ 23.17 $ 19.77 $ 16.04 $ 12.49
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 12.91% 28.28% 17.93% 24.00% 29.06% (15.67)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $670,785 $563,460 $444,608 $346,605 $290,680 $247,580
=================================================================================================================================
Ratio of expenses to average net assets 1.05%(c) 1.10% 1.11% 1.14% 1.10% 1.09%
=================================================================================================================================
Ratio of net investment income to average net
assets 2.05%(c) 0.90% 1.11% 0.90% 0.69% 0.41%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 11% 34% 36% 48% 79% 71%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$607,507,196.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. International Growth Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
2007 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.16 $ 23.00 $ 19.65 $ 15.97 $ 12.45 $14.90
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.28 0.17 0.18 0.11 0.06 0.03
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.44 6.25 3.30 3.66 3.51 (2.40)
================================================================================================================================
Total from investment operations 3.72 6.42 3.48 3.77 3.57 (2.37)
================================================================================================================================
Less dividends from net investment income -- (0.26) (0.13) (0.09) (0.05) (0.08)
================================================================================================================================
Net asset value, end of period $ 32.88 $ 29.16 $ 23.00 $ 19.65 $ 15.97 $12.45
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 12.76% 27.92% 17.70% 23.63% 28.68% (15.89)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $282,164 $163,657 $54,658 $21,497 $10,972 $4,751
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.30%(c) 1.35% 1.36% 1.39% 1.35% 1.31%(d)
================================================================================================================================
Ratio of net investment income to average net assets 1.80%(c) 0.65% 0.86% 0.65% 0.44% 0.19%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 11% 34% 36% 48% 79% 71%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$204,750,534.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.34%.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
AIM V.I. International Growth Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. International Growth Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,129.50 $5.54 $1,019.59 $5.26 1.05%
Series II 1,000.00 1,127.90 6.86 1,018.35 6.51 1.30
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. International Growth Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM Committee considers each Sub-Committee's sory fees, expense limitations and/or fee
Variable Insurance Funds is required under recommendations and makes its own waivers.
the Investment Company Act of 1940 to recommendations regarding the performance,
approve annually the renewal of the AIM fees and expenses of the AIM Funds to the A. NATURE, EXTENT AND QUALITY OF SERVICES
V.I. International Growth Fund (the Fund) full Board. Moreover, the Investments PROVIDED BY AIM
investment advisory agreement with A I M Committee considers each SubCommittee's
Advisors, Inc. (AIM). During contract recommendations in making its annual The Board reviewed the advisory services
renewal meetings held on June 25-27, 2007, recommendation to the Board whether to provided to the Fund by AIM under the
the Board as a whole and the disinterested approve the continuance of each AIM Fund's Fund's advisory agreement, the performance
or "independent" Trustees, voting investment advisory agreement and of AIM in providing these services, and
separately, approved the continuance of sub-advisory agreement, if applicable the credentials and experience of the
the Fund's investment advisory agreement (advisory agreements), for another year. officers and employees of AIM who provide
for another year, effective July 1, 2007. these services. The Board's review of the
In doing so, the Board determined that the The independent Trustees, as mentioned qualifications of AIM to provide these
Fund's advisory agreement is in the best above, are assisted in their annual services included the Board's
interests of the Fund and its shareholders evaluation of the advisory agreements by consideration of AIM's portfolio and
and that the compensation to AIM under the the independent Senior Officer. One product review process, various back
Fund's advisory agreement is fair and responsibility of the Senior Officer is to office support functions provided by AIM,
reasonable. manage the process by which the AIM Funds' and AIM's equity and fixed income trading
proposed management fees are negotiated operations. The Board concluded that the
The independent Trustees met separately during the annual contract renewal process nature, extent and quality of the advisory
during their evaluation of the Fund's to ensure that they are negotiated in a services provided to the Fund by AIM were
investment advisory agreement with manner which is at arms' length and appropriate and that AIM currently is
independent legal counsel from whom they reasonable. Accordingly, the Senior providing satisfactory advisory services
received independent legal advice, and the Officer must either supervise a in accordance with the terms of the Fund's
independent Trustees also received competitive bidding process or prepare an advisory agreement. In addition, based on
assistance during their deliberations from independent written evaluation. The Senior their ongoing meetings throughout the year
the independent Senior Officer, a Officer has recommended that an with the Fund's portfolio managers, the
full-time officer of the AIM Funds who independent written evaluation be provided Board concluded that these individuals are
reports directly to the independent and, upon the direction of the Board, has competent and able to continue to carry
Trustees. The following discussion more prepared an independent written out their responsibilities under the
fully describes the process employed by evaluation. Fund's advisory agreement.
the Board to evaluate the performance of
the AIM Funds (including the Fund) During the annual contract renewal In determining whether to continue the
throughout the year and, more process, the Board considered the factors Fund's advisory agreement, the Board
specifically, during the annual contract discussed below under the heading "Factors considered the prior relationship between
renewal meetings. and Conclusions and Summary of Independent AIM and the Fund, as well as the Board's
Written Fee Evaluation" in evaluating the knowledge of AIM's operations, and
THE BOARD'S FUND EVALUATION PROCESS fairness and reasonableness of the Fund's concluded that it was beneficial to
advisory agreement at the contract renewal maintain the current relationship, in
The Board's Investments Committee has meetings and at their meetings throughout part, because of such knowledge. The Board
established three Sub-Committees which are the year as part of their ongoing also considered the steps that AIM and its
responsible for overseeing the management oversight of the Fund. The Fund's advisory affiliates have taken over the last
of a number of the series portfolios of agreement was considered separately, several years to improve the quality and
the AIM Funds. This SubCommittee structure although the Board also considered the efficiency of the services they provide to
permits the Trustees to focus on the common interests of all of the AIM Funds the Funds in the areas of investment
performance of the AIM Funds that have in their deliberations. The Board performance, product line diversification,
been assigned to them. The Sub-Committees comprehensively considered all of the distribution, fund operations, shareholder
meet throughout the year to review the information provided to them and did not services and compliance. The Board
performance of their assigned funds, and identify any particular factor that was concluded that the quality and efficiency
the Sub-Committees review monthly and controlling. Furthermore, each Trustee may of the services AIM and its affiliates
quarterly comparative performance have evaluated the information provided provide to the AIM Funds in each of these
information and periodic asset flow data differently from one another and areas have generally improved, and support
for their assigned funds. These materials attributed different weight to the various the Board's approval of the continuance of
are prepared under the direction and factors. The Trustees recognized that the the Fund's advisory agreement.
supervision of the independent Senior advisory arrangements and resulting
Officer. Over the course of each year, the advisory fees for the Fund and the other B. FUND PERFORMANCE
SubCommittees meet with portfolio managers AIM Funds are the result of years of
for their assigned funds and other members review and negotiation between the The Board compared the Fund's performance
of management and review with these Trustees and AIM, that the Trustees may during the past one, three and five
individuals the performance, investment focus to a greater extent on certain calendar years to the performance of funds
objective(s), policies, strategies and aspects of these arrangements in some in the Fund's Lipper peer group that are
limitations of these funds. years than others, and that the Trustees' not managed by AIM, and against the
deliberations and conclusions in a performance of all funds in the Lipper
In addition to their meetings particular year may be based in part on Variable Annuity Underlying Funds -
throughout the year, the Sub-Committees their deliberations and conclusions of International Growth Index. The Board also
meet at designated contract renewal these same arrangements throughout the reviewed the methodology used by Lipper to
meetings each year to conduct an in-depth year and in prior years. identify the Fund's peers. The Board noted
review of the performance, fees and that the Fund's performance was comparable
expenses of their assigned funds. During FACTORS AND CONCLUSIONS AND SUMMARY OF to the median performance of its peers for
the contract renewal process, the Trustees INDEPENDENT WRITTEN FEE EVALUATION the one and five year periods, and above
receive comparative performance and fee such performance for the three year
data regarding all the AIM Funds prepared The discussion below serves as a summary period. The Board noted that the Fund's
by an independent company, Lipper, Inc., of the Senior Officer's independent performance was comparable to the
under the direction and supervision of the written evaluation, as well as a performance of the Index for the one year
independent Senior Officer who also discussion of the material factors and period, and above such Index for the three
prepares a separate analysis of this related conclusions that formed the basis and five year periods. The Board also
information for the Trustees. Each for the Board's approval of the Fund's considered the steps AIM has taken over
Sub-Committee then makes recommendations advisory agreement. Unless otherwise the last several years to improve the
to the Investments Committee regarding the stated, information set forth below is as quality and efficiency of the services
performance, fees and expenses of their of June 27, 2007 and does not reflect any that AIM provides to the AIM Funds. The
assigned funds. The Investments changes that may have occurred since that Board concluded that AIM continues to be
date, including but not limited to changes responsive to the Board's focus on fund
to the Fund's performance, advi- performance. Although the independent
written evaluation of the Fund's Senior
Officer (dis-
(continued)
AIM V.I. International Growth Fund
cussed below) only considered Fund fees were fair and reasonable. tionship with the Fund, including the fees
performance through the most recent received by AIM and its affiliates for
calendar year, the Board also reviewed D. ECONOMIES OF SCALE AND BREAKPOINTS their provision of administrative,
more recent Fund performance and this transfer agency and distribution services
review did not change their conclusions. The Board considered the extent to which to the Fund. The Board considered the
there are economies of scale in AIM's performance of AIM and its affiliates in
C. ADVISORY FEES AND FEE WAIVERS provision of advisory services to the providing these services and the
Fund. The Board also considered whether organizational structure employed by AIM
The Board compared the Fund's contractual the Fund benefits from such economies of and its affiliates to provide these
advisory fee rate to the contractual scale through contractual breakpoints in services. The Board also considered that
advisory fee rates of funds in the Fund's the Fund's advisory fee schedule or these services are provided to the Fund
Lipper peer group that are not managed by through advisory fee waivers or expense pursuant to written contracts which are
AIM, at a common asset level and as of the limitations. The Board noted that the reviewed and approved on an annual basis
end of the past calendar year. The Board Fund's contractual advisory fee schedule by the Board. The Board concluded that AIM
noted that the Fund's advisory fee rate includes one breakpoint and that the level and its affiliates were providing these
was below the median advisory fee rate of of the Fund's advisory fees, as a services in a satisfactory manner and in
its peers. The Board also reviewed the percentage of the Fund's net assets, has accordance with the terms of their
methodology used by Lipper and noted that decreased as net assets increased because contracts, and were qualified to continue
the contractual fee rates shown by Lipper of the breakpoint. Based on this to provide these services to the Fund.
include any applicable long-term information, the Board concluded that the
contractual fee waivers. The Board also Fund's advisory fees appropriately reflect The Board considered the benefits
compared the Fund's contractual advisory economies of scale at current asset realized by AIM as a result of portfolio
fee rate to the contractual advisory fee levels. The Board also noted that the Fund brokerage transactions executed through
rates of other clients of AIM and its shares directly in economies of scale "soft dollar" arrangements. Under these
affiliates with investment strategies through lower fees charged by third party arrangements, portfolio brokerage
comparable to those of the Fund, including service providers based on the combined commissions paid by the Fund and/or other
one mutual fund advised by AIM, one size of all of the AIM Funds and funds advised by AIM are used to pay for
Canadian fund advised by an AIM affiliate affiliates. research and execution services. The Board
and sub-advised by AIM, and two mutual noted that soft dollar arrangements shift
funds sub-advised by an AIM affiliate. The E. PROFITABILITY AND FINANCIAL RESOURCES the payment obligation for the research
Board noted that the Fund's rate was: (i) OF AIM and executions services from AIM to the
below the rate for the mutual fund; (ii) funds and therefore may reduce AIM's
above the sub-advisory fee rate for the The Board reviewed information from AIM expenses. The Board also noted that
Canadian fund, although the advisory fee concerning the costs of the advisory and research obtained through soft dollar
rate for such Canadian fund was above the other services that AIM and its affiliates arrangements may be used by AIM in making
Fund's; and (iii) above the sub-advisory provide to the Fund and the profitability investment decisions for the Fund and may
fee rates for the two sub-advised funds, of AIM and its affiliates in providing therefore benefit Fund shareholders. The
although the advisory fee rates for such these services. The Board also reviewed Board concluded that AIM's soft dollar
sub-advised funds were above the Fund's. information concerning the financial arrangements were appropriate. The Board
condition of AIM and its affiliates. The also concluded that, based on their review
Additionally, the Board compared the Board also reviewed with AIM the and representations made by AIM, these
Fund's contractual advisory fee rate to methodology used to prepare the arrangements were consistent with
the total advisory fees paid by numerous profitability information. The Board regulatory requirements.
separately managed accounts/wrap accounts considered the overall profitability of
advised by an AIM affiliate. The Board AIM, as well as the profitability of AIM The Board considered the fact that the
noted that the Fund's rate was generally in connection with managing the Fund. The Fund's uninvested cash and cash collateral
above the rates for the separately managed Board noted that AIM continues to operate from any securities lending arrangements
accounts/wrap accounts. The Board at a net profit, although increased may be invested in money market funds
considered that management of the expenses in recent years have reduced the advised by AIM pursuant to procedures
separately managed accounts/wrap accounts profitability of AIM and its affiliates. approved by the Board. The Board noted
by the AIM affiliate involves different The Board concluded that the Fund's that AIM will receive advisory fees from
levels of services and different advisory fees were fair and reasonable, these affiliated money market funds
operational and regulatory requirements and that the level of profits realized by attributable to such investments, although
than AIM's management of the Fund. The AIM and its affiliates from providing AIM has contractually agreed to waive the
Board concluded that these differences are services to the Fund was not excessive in advisory fees payable by the Fund with
appropriately reflected in the fee light of the nature, quality and extent of respect to its investment of uninvested
structure for the Fund and the separately the services provided. The Board cash in these affiliated money market
managed accounts/wrap accounts. considered whether AIM is financially funds through at least April 30, 2009. The
sound and has the resources necessary to Board considered the contractual nature of
The Board noted that AIM has perform its obligations under the Fund's this fee waiver and noted that it remains
contractually agreed to waive fees and/or advisory agreement, and concluded that AIM in effect until at least April 30, 2009.
limit expenses of the Fund through at has the financial resources necessary to The Board concluded that the Fund's
least April 30, 2009 in an amount fulfill these obligations. investment of uninvested cash and cash
necessary to limit total annual operating collateral from any securities lending
expenses to a specified percentage of F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
average daily net assets for each class of FUND'S SENIOR OFFICER market funds is in the best interests of
the Fund. The Board considered the the Fund and its shareholders.
contractual nature of this fee waiver and The Board noted that, upon their
noted that it remains in effect until at direction, the Senior Officer of the Fund,
least April 30, 2009. The Board reviewed who is independent of AIM and AIM's
the Fund's effective advisory fee rate, affiliates, had prepared an independent
after taking account of this expense written evaluation to assist the Board in
limitation, and considered the effect this determining the reasonableness of the
expense limitation would have on the proposed management fees of the AIM Funds,
Fund's estimated total expenses. The Board including the Fund. The Board noted that
concluded that the levels of fee they had relied upon the Senior Officer's
waivers/expense limitations for the Fund written evaluation instead of a
were fair and reasonable. competitive bidding process. In
determining whether to continue the Fund's
After taking account of the Fund's advisory agreement, the Board considered
contractual advisory fee rate, as well as the Senior Officer's written evaluation.
the comparative advisory fee information
and the expense limitation discussed G. COLLATERAL BENEFITS TO AIM AND ITS
above, the Board concluded that the Fund's AFFILIATES
advisory
The Board considered various other
benefits received by AIM and its
affiliates resulting from AIM's rela-
AIM V.I. Large Cap Growth Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Growth
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Large Cap Growth Fund
Fund performance determined by the variable product
======================================================================================= issuers, will vary and will lower the
PERFORMANCE SUMMARY total return.
FUND VS. INDEXES Per NASD requirements, the most recent
month-end performance data at the Fund
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. level, excluding variable product charges,
If variable product issuer charges were included, returns would be lower. is available on the AIM automated
information line, 866-702-4402. As
Series I Shares 7.37% mentioned above, for the most recent
Series II Shares 7.17 month-end performance including variable
S&P 500 Index(1) (Broad Market Index) 6.96 product charges, please contact your
Russell 1000 Growth Index(1) (Style-Specific Index) 8.13 variable product issuer or financial
Lipper VUF Large-Cap Growth Funds Index(1) (Peer Group Index) 7.64 advisor.
Lipper Large Cap Growth Funds Index(1) (Former Peer Group Index) 7.66
Had the advisor not waived fees and/or
Source: (1) Lipper Inc. reimbursed expenses in the past,
performance would have been lower.
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance. (1) Total annual operating expenses less
any contractual fee waivers and/or
The unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Growth Index is a subset of expense reimbursements by the advisor
the unmanaged Russell 1000 -- REGISTERED TRADEMARK -- Index, which represents the in effect through at least April 30,
performance of the stocks of large-capitalization companies; the Growth subset 2009. See current prospectus for more
measures the performance of Russell 1000 companies with higher price/book ratios and information.
higher forecasted growth values. The Russell 1000 Growth Index and the Russell 1000
Index are trademarks/service marks of the Frank Russell Company. Russell
- -- REGISTERED TRADEMARK --is a trademark of the Frank Russell Company.
The Fund has elected to use the Lipper Variable Underlying Funds (Vuf) Large-Cap
Growth Funds Index as its peer group instead of the Lipper Large-Cap Growth Funds
Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund to be compared
with the Lipper VUF Large-Cap Growth Funds Index. The unmanaged Lipper VUF Large-Cap
Growth Funds Index is an equally weighted representation of the largest variable
insurance underlying funds in the Lipper Large-Cap Growth Funds category.
The unmanaged Lipper Large-Cap Growth Funds Index represents an average of the
performance of the largest large-capitalization growth funds tracked by Lipper Inc., an
independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== gain or loss when you sell shares.
FUND PERFORMANCE
As of 6/30/07 The net annual Fund operating expense
SERIES I SHARES ratio set forth in the most recent Fund
Inception (8/29/03) 10.80% prospectus as of the date of this report
1 Year 16.74 for Series I and Series II shares was
1.02% and 1.27%, respectively.(1) The
SERIES II SHARES total annual Fund operating expense ratio
Inception (8/29/03) 10.58% set forth in the most recent Fund
1 Year 16.37 prospectus as of the date of this report
========================================== and Series II shares was 1.17% and 1.42%,
for Series I respectively. The expense
The performance of the Fund's Series I and ratios presented above may vary from the
Series II share classes will differ expense ratios presented in other sections
primarily due to different class expenses. of this report that are based on expenses
incurred during the period covered by this
The performance data quoted represent report.
past performance and cannot guarantee
comparable future results; current AIM V.I. Large Cap Growth Fund, a
performance may be lower or higher. Please series portfolio of AIM Variable Insurance
contact your variable product issuer or Funds, is currently offered through
financial advisor for the most recent insurance companies issuing variable
month-end variable product performance. products. You cannot purchase shares of
Performance figures reflect Fund expenses, the Fund directly. Performance figures
reinvested distributions and changes in given represent the Fund and are not
net asset value. Investment return and intended to reflect actual variable
principal value will fluctuate so that you product values. They do not reflect sales
may have a charges, expenses and fees assessed in
connection with a variable product. Sales
charges, expenses and fees, which are
AIM V.I. Large Cap Growth Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 22.1%
- ----------------------------------------------------------
Health Care 20.1
- ----------------------------------------------------------
Financials 14.8
- ----------------------------------------------------------
Industrials 13.2
- ----------------------------------------------------------
Consumer Discretionary 10.6
- ----------------------------------------------------------
Consumer Staples 5.3
- ----------------------------------------------------------
Telecommunication Services 5.1
- ----------------------------------------------------------
Energy 3.9
- ----------------------------------------------------------
Materials 2.9
- ----------------------------------------------------------
Utilities 0.8
- ----------------------------------------------------------
Other Assets Less Liabilities 1.2
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
DOMESTIC COMMON STOCKS-84.96%
AEROSPACE & DEFENSE-9.14%
Boeing Co. (The) 26,004 $ 2,500,545
- -----------------------------------------------------------------------
General Dynamics Corp. 20,551 1,607,499
- -----------------------------------------------------------------------
Honeywell International Inc. 27,100 1,525,188
- -----------------------------------------------------------------------
Lockheed Martin Corp. 41,212 3,879,285
- -----------------------------------------------------------------------
Raytheon Co. 34,885 1,879,953
=======================================================================
11,392,470
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.86%
Coach, Inc.(a) 26,000 1,232,140
- -----------------------------------------------------------------------
Polo Ralph Lauren Corp. 11,000 1,079,210
=======================================================================
2,311,350
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.07%
Ameriprise Financial, Inc. 21,000 1,334,970
=======================================================================
AUTOMOTIVE RETAIL-0.90%
AutoZone, Inc.(a) 8,200 1,120,284
=======================================================================
BREWERS-0.75%
Anheuser-Busch Cos., Inc. 17,988 938,254
=======================================================================
COMMUNICATIONS EQUIPMENT-3.96%
Cisco Systems, Inc.(a) 177,136 4,933,238
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
COMPUTER HARDWARE-6.51%
Apple, Inc.(a) 12,000 $ 1,464,480
- -----------------------------------------------------------------------
Hewlett-Packard Co. 113,449 5,062,095
- -----------------------------------------------------------------------
International Business Machines Corp. 15,069 1,586,012
=======================================================================
8,112,587
=======================================================================
DEPARTMENT STORES-1.56%
Nordstrom, Inc. 38,136 1,949,512
=======================================================================
DIVERSIFIED METALS & MINING-0.88%
Freeport-McMoRan Copper & Gold, Inc. 13,219 1,094,798
=======================================================================
FOOD RETAIL-0.75%
Safeway Inc. 27,615 939,738
=======================================================================
FOOTWEAR-1.45%
Nike, Inc.-Class B 31,100 1,812,819
=======================================================================
GENERAL MERCHANDISE STORES-0.83%
Family Dollar Stores, Inc. 30,000 1,029,600
=======================================================================
HEALTH CARE DISTRIBUTORS-3.46%
AmerisourceBergen Corp. 39,619 1,959,952
- -----------------------------------------------------------------------
McKesson Corp. 39,373 2,348,206
=======================================================================
4,308,158
=======================================================================
HEALTH CARE EQUIPMENT-2.97%
Baxter International Inc. 43,806 2,468,030
- -----------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 14,519 1,232,518
=======================================================================
3,700,548
=======================================================================
</Table>
AIM V.I. Large Cap Growth Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
HEALTH CARE SERVICES-3.06%
Express Scripts, Inc.(a) 23,946 $ 1,197,539
- -----------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 13,168 1,030,528
- -----------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 20,347 1,586,863
=======================================================================
3,814,930
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.85%
Manpower Inc. 11,529 1,063,435
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.79%
NRG Energy, Inc.(a) 23,600 981,052
=======================================================================
INDUSTRIAL CONGLOMERATES-1.15%
McDermott International, Inc.(a) 17,178 1,427,835
=======================================================================
INTEGRATED OIL & GAS-3.92%
Exxon Mobil Corp. 12,412 1,041,119
- -----------------------------------------------------------------------
Marathon Oil Corp. 38,136 2,286,634
- -----------------------------------------------------------------------
Occidental Petroleum Corp. 26,973 1,561,197
=======================================================================
4,888,950
=======================================================================
INTERNET RETAIL-0.99%
Expedia, Inc.(a) 42,000 1,230,180
=======================================================================
INTERNET SOFTWARE & SERVICES-0.94%
Google Inc.-Class A(a) 2,244 1,174,465
=======================================================================
INVESTMENT BANKING & BROKERAGE-5.36%
Goldman Sachs Group, Inc. (The) 22,973 4,979,398
- -----------------------------------------------------------------------
Morgan Stanley 20,275 1,700,667
=======================================================================
6,680,065
=======================================================================
IT CONSULTING & OTHER SERVICES-2.89%
Accenture Ltd.-Class A 83,991 3,602,374
=======================================================================
LEISURE PRODUCTS-0.65%
Mattel, Inc. 31,924 807,358
=======================================================================
LIFE & HEALTH INSURANCE-2.25%
Prudential Financial, Inc. 28,885 2,808,488
=======================================================================
MANAGED HEALTH CARE-4.79%
Coventry Health Care, Inc.(a) 21,833 1,258,672
- -----------------------------------------------------------------------
UnitedHealth Group Inc. 44,082 2,254,354
- -----------------------------------------------------------------------
WellPoint Inc.(a) 30,795 2,458,365
=======================================================================
5,971,391
=======================================================================
MULTI-LINE INSURANCE-1.44%
Assurant, Inc. 30,550 1,800,006
=======================================================================
OFFICE ELECTRONICS-0.85%
Xerox Corp.(a) 57,000 1,053,360
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.06%
JPMorgan Chase & Co. 27,365 1,325,834
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
PHARMACEUTICALS-3.66%
Forest Laboratories, Inc.(a) 28,000 $ 1,278,200
- -----------------------------------------------------------------------
Merck & Co. Inc. 35,932 1,789,414
- -----------------------------------------------------------------------
Schering-Plough Corp. 49,000 1,491,560
=======================================================================
4,559,174
=======================================================================
PROPERTY & CASUALTY INSURANCE-3.60%
Ambac Financial Group, Inc. 10,466 912,531
- -----------------------------------------------------------------------
Chubb Corp. (The) 31,251 1,691,929
- -----------------------------------------------------------------------
SAFECO Corp. 15,359 956,251
- -----------------------------------------------------------------------
Travelers Cos., Inc. (The) 17,368 929,188
=======================================================================
4,489,899
=======================================================================
PUBLISHING-1.39%
McGraw-Hill Cos., Inc. (The) 25,407 1,729,708
=======================================================================
SEMICONDUCTOR EQUIPMENT-0.83%
MEMC Electronic Materials, Inc.(a) 17,000 1,039,040
=======================================================================
SOFT DRINKS-1.10%
PepsiCo, Inc. 21,088 1,367,557
=======================================================================
SYSTEMS SOFTWARE-5.31%
BMC Software, Inc.(a) 40,229 1,218,939
- -----------------------------------------------------------------------
McAfee Inc.(a) 27,147 955,574
- -----------------------------------------------------------------------
Microsoft Corp. 86,768 2,557,053
- -----------------------------------------------------------------------
Oracle Corp.(a) 95,365 1,879,644
=======================================================================
6,611,210
=======================================================================
TECHNOLOGY DISTRIBUTORS-0.80%
Avnet, Inc.(a) 25,000 991,000
=======================================================================
TOBACCO-1.19%
UST Inc. 27,503 1,477,186
=======================================================================
Total Domestic Common Stocks (Cost
$84,949,192) 105,872,823
=======================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-13.79%
HONG KONG-1.42%
China Mobile Ltd. (Wireless Telecommunication
Services)(b) 164,500 1,772,373
=======================================================================
MEXICO-4.62%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 73,779 4,569,133
- -----------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 43,000 1,187,230
=======================================================================
5,756,363
=======================================================================
SWITZERLAND-4.20%
ABB Ltd. (Heavy Electrical Equipment)(b) 115,653 2,602,157
- -----------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(b) 7,545 1,338,258
- -----------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(b) 6,611 1,288,844
=======================================================================
5,229,259
=======================================================================
</Table>
AIM V.I. Large Cap Growth Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
UNITED KINGDOM-3.55%
Diageo PLC (Distillers & Vintners)(b) 89,170 $ 1,852,470
- -----------------------------------------------------------------------
Rio Tinto PLC-ADR (Diversified Metals &
Mining) 4,043 1,237,643
- -----------------------------------------------------------------------
Shire PLC (Pharmaceuticals)(b) 54,000 1,338,588
=======================================================================
4,428,701
=======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $11,174,076) 17,186,696
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-1.86%
Liquid Assets Portfolio-Institutional
Class(c) 1,157,114 $ 1,157,114
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 1,157,114 1,157,114
=======================================================================
Total Money Market Funds (Cost
$2,314,228) 2,314,228
=======================================================================
TOTAL INVESTMENTS-100.61% (Cost $98,437,496) 125,373,747
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.61)% (765,475)
=======================================================================
NET ASSETS-100.00% $124,608,272
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $10,192,690, which
represented 8.18% of the Fund's Net Assets. See Note 1A.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Large Cap Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $96,123,268) $123,059,519
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $2,314,228) 2,314,228
=============================================================
Total investments (Cost $98,437,496) 125,373,747
=============================================================
Foreign currencies, at value (Cost $74) 88
=============================================================
Receivables for:
Fund shares sold 11,661
- -------------------------------------------------------------
Dividends 82,646
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 34,567
=============================================================
Total assets 125,502,709
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 700,107
- -------------------------------------------------------------
Fund shares reacquired 41,797
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 42,237
- -------------------------------------------------------------
Accrued administrative services fees 74,447
- -------------------------------------------------------------
Accrued distribution fees-Series II 1,188
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,491
- -------------------------------------------------------------
Accrued transfer agent fees 692
- -------------------------------------------------------------
Accrued operating expenses 30,478
=============================================================
Total liabilities 894,437
=============================================================
Net assets applicable to shares outstanding $124,608,272
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $109,313,369
- -------------------------------------------------------------
Undistributed net investment income (64,094)
- -------------------------------------------------------------
Undistributed net realized gain (loss) (11,577,205)
- -------------------------------------------------------------
Unrealized appreciation 26,936,202
=============================================================
$124,608,272
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $123,326,232
_____________________________________________________________
=============================================================
Series II $ 1,282,040
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 8,381,166
_____________________________________________________________
=============================================================
Series II 87,586
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 14.71
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 14.64
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$8,412) $ 640,214
- ------------------------------------------------------------
Dividends from affiliated money market funds 48,747
============================================================
Total investment income 688,961
============================================================
EXPENSES:
Advisory fees 459,744
- ------------------------------------------------------------
Administrative services fees 171,599
- ------------------------------------------------------------
Custodian fees 6,252
- ------------------------------------------------------------
Distribution fees-Series II 2,385
- ------------------------------------------------------------
Transfer agent fees 3,851
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 10,157
- ------------------------------------------------------------
Other 32,882
============================================================
Total expenses 686,870
============================================================
Less: Fees waived and expense offset arrangement (65,875)
============================================================
Net expenses 620,995
============================================================
Net investment income 67,966
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 2,907,634
- ------------------------------------------------------------
Foreign currencies 3,596
============================================================
2,911,230
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 5,700,858
- ------------------------------------------------------------
Foreign currencies (205)
============================================================
5,700,653
============================================================
Net realized and unrealized gain 8,611,883
============================================================
Net increase in net assets resulting from
operations $8,679,849
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Large Cap Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 67,966 $ 39,447
- ------------------------------------------------------------------------------
Net realized gain (loss) 2,911,230 (1,567,432)
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 5,700,653 15,089,538
==============================================================================
Net increase in net assets resulting from
operations 8,679,849 13,561,553
==============================================================================
Distributions to shareholders from net
investment income-Series I -- (201,184)
- ------------------------------------------------------------------------------
Share transactions-net:
Series I (6,028,729) 103,311,208
- ------------------------------------------------------------------------------
Series II (816,143) 1,113,671
==============================================================================
Net increase (decrease) in net assets
resulting from share transactions (6,844,872) 104,424,879
==============================================================================
Net increase in net assets 1,834,977 117,785,248
==============================================================================
NET ASSETS:
Beginning of period 122,773,295 4,988,047
==============================================================================
End of period (including undistributed net
investment income of $(64,094) and
$(132,060), respectively) $124,608,272 $122,773,295
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Large Cap Growth Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Large Cap Growth Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Large Cap Growth Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. Large Cap Growth Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $350 million 0.75%
- --------------------------------------------------------------------
Over $350 million 0.625%
___________________________________________________________________
====================================================================
</Table>
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.695%
- --------------------------------------------------------------------
Next $250 million 0.67%
- --------------------------------------------------------------------
Next $500 million 0.645%
- --------------------------------------------------------------------
Next $1.5 billion 0.62%
- --------------------------------------------------------------------
Next $2.5 billion 0.595%
- --------------------------------------------------------------------
Next $2.5 billion 0.57%
- --------------------------------------------------------------------
Next $2.5 billion 0.545%
- --------------------------------------------------------------------
Over $10 billion 0.52%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.01% and Series
II shares to 1.26% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $65,420.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,794 for accounting and fund administrative services and reimbursed $146,805
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. Large Cap Growth Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $ 868,402 $ 8,098,073 $ (7,809,361) $1,157,114 $24,437
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 868,402 8,098,073 (7,809,361) 1,157,114 24,310
=================================================================================================================================
Total Investments in Affiliates $1,736,804 $16,196,146 $(15,618,722) $2,314,228 $48,747
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities purchases of $430,669.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $455.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,435 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources exceed
10% of the Fund's total assets. To the extent that the loan is required to be
secured by collateral, the collateral is marked to market daily to ensure that
the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
AIM V.I. Large Cap Growth Fund
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of December
31, 2006 to utilizing $12,019,235 of capital loss carryforward in the fiscal
year ended December 31, 2007.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $ 7,793,745
- -----------------------------------------------------------------------------
December 31, 2010 3,544,700
- -----------------------------------------------------------------------------
December 31, 2013 10,284
- -----------------------------------------------------------------------------
December 31, 2014 1,757,332
=============================================================================
Total capital loss carryforward $13,106,061
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of June 12, 2006, the date of the
reorganization of AIM V.I. Blue Chip into the Fund are realized on securities
held in each Fund at such date, the capital loss carryforward may be further
limited for up to five years from the date of the reorganization.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $34,133,338 and
$40,642,238, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $26,289,613
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (426,069)
===============================================================================
Net unrealized appreciation of investment securities $25,863,544
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $99,510,203.
</Table>
AIM V.I. Large Cap Growth Fund
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Series I 453,672 $ 6,483,608 2,493,288 $ 31,035,114
- --------------------------------------------------------------------------------------------------------------------
Series II 33 468 2,883 35,815
====================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 14,674 201,184
- --------------------------------------------------------------------------------------------------------------------
Series II -- -- -- --
====================================================================================================================
Issued in connection with acquisitions:(b)
Series I -- -- 9,167,026 112,588,851
- --------------------------------------------------------------------------------------------------------------------
Series II -- -- 104,182 1,274,141
====================================================================================================================
Reacquired:
Series I (884,093) (12,512,338) (3,205,686) (40,513,941)
- --------------------------------------------------------------------------------------------------------------------
Series II (55,127) (816,610) (14,623) (96,285)
====================================================================================================================
(485,515) $ (6,844,872) 8,561,744 $104,524,879
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 89% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
(b) As of opening of business on June 12, 2006, the Fund acquired all the
net assets of AIM V.I. Blue Chip Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on November 14, 2005
and by shareholders of AIM V.I. Blue Chip Fund on April 4, 2006. The
acquisition was accomplished by a tax-free exchange of 9,271,208 shares
of the Fund for 16,731,926 shares of AIM V.I. Blue Chip Fund outstanding
as of the close of business on June 9, 2006. Each class of shares of AIM
V.I. Blue Chip Fund was exchanged for the like class of shares of the
Fund based on the relative net asset value of AIM V.I. Blue Chip Fund to
the net asset value of the Fund as of the close of business, June 9,
2007. AIM V.I. Blue Chip Fund's net assets as of the close of business
on June 9, 2007 of $113,862,992 including $5,643,661 of unrealized
appreciation were combined with the net assets of the Fund immediately
before the acquisition of $9,848,334. The combined aggregate net assets
of the Fund immediately following to the reorganization were
$123,711,326.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Large Cap Growth Fund
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------
AUGUST 29, 2003
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------------------- DECEMBER 31,
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.71 $ 12.71 $11.86 $10.90 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01 0.02 (0.01)(a) (0.04)(b) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.99 1.00 0.88 1.03 0.95
=================================================================================================================================
Total from investment operations 1.00 1.02 0.87 0.99 0.92
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.02) -- -- (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.02) (0.03) --
=================================================================================================================================
Total distributions -- (0.02) (0.02) (0.03) (0.02)
=================================================================================================================================
Net asset value, end of period $ 14.71 $ 13.71 $12.71 $11.86 $10.90
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.29% 8.05% 7.30% 9.08% 9.16%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $123,326 $120,825 $4,352 $ 596 $ 546
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(d) 1.02% 1.13% 1.33% 1.33%(e)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.12%(d) 1.23% 7.30% 9.88% 14.54%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.11%(d) 0.06% (0.06)% (0.35)%(b) (0.73)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 76% 99% 104% 37%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.06) and (0.51)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$121,690,635.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Large Cap Growth Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
---------------------------------------------------------------------
AUGUST 29, 2003
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ----------------------------- DECEMBER 31,
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.66 $12.67 $11.84 $10.90 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02) (0.01) (0.03)(a) (0.06)(b) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.00 1.00 0.88 1.03 0.94
=================================================================================================================================
Total from investment operations 0.98 0.99 0.85 0.97 0.91
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.02) (0.03) --
=================================================================================================================================
Total distributions -- -- (0.02) (0.03) (0.01)
=================================================================================================================================
Net asset value, end of period $14.64 $13.66 $12.67 $11.84 $10.90
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.17% 7.81% 7.15% 8.89% 9.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,282 $1,949 $ 636 $ 594 $ 546
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(d) 1.27% 1.33% 1.48% 1.48%(e)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.37%(d) 1.48% 7.55% 10.13% 14.79%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.14)%(d) (0.19)% (0.26)% (0.50)%(b) (0.88)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 28% 76% 99% 104% 37%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (0.66)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$1,923,657.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM
Distributors, Inc. ("ADI") (Order No. 05-1318). The WVASC makes findings of fact
that AIM and ADI entered into certain arrangements permitting market timing of
the AIM Funds and failed to disclose these arrangements in the prospectuses for
such Funds, and conclusions of law to the effect that AIM and ADI violated the
West Virginia securities laws. The WVASC orders AIM and ADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, AIM's time to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three
AIM V.I. Large Cap Growth Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
amended complaints against various AIM- and IFG-related parties: (i) a
Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Large Cap Growth Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service fees (12b-1); You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR relative total costs of owning different
the examples below do not represent the COMPARISON PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides
product; if they did, the expenses shown information about hypothetical account
would be higher while the ending account values and hypothetical expenses based on
values shown would be lower. the Fund's actual expense ratio and an
assumed rate of return of 5% per year
before expenses, which is not the Fund's
actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,073.70 $5.19 $1,019.79 $5.06 1.01%
Series II 1,000.00 1,071.70 6.47 1,018.55 6.31 1.26
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Large Cap Growth Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Large Cap Growth Fund (the Fund) Committee considers each Sub-Committee's provided to the Fund by AIM under the
investment advisory agreement with A I M recommendations in making its annual Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendation to the Board whether to of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, approve the continuance of each AIM Fund's the credentials and experience of the
the Board as a whole and the disinterested investment advisory agreement and officers and employees of AIM who provide
or "independent" Trustees, voting sub-advisory agreement, if applicable these services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another year. qualifications of AIM to provide these
the Fund's investment advisory agreement services included the Board's
for another year, effective July 1, 2007. The independent Trustees, as mentioned consideration of AIM's portfolio and
In doing so, the Board determined that the above, are assisted in their annual product review process, various back
Fund's advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one and three calendar
Sub-Committees meet with portfolio review and negotiation between the years to the performance of funds in the
managers for their assigned funds and Trustees and AIM, that the Trustees may Fund's Lipper peer group that are not
other members of management and review focus to a greater extent on certain managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds - Large
strategies and limitations of these funds. deliberations and conclusions in a Cap Growth Index. The Board also reviewed
particular year may be based in part on the methodology used by Lipper to identify
In addition to their meetings their deliberations and conclusions of the Fund's peers. The Board noted that the
throughout the year, the Sub-Committees these same arrangements throughout the Fund's performance was above the median
meet at designated contract renewal year and in prior years. performance of its peers for the one and
meetings each year to conduct an in-depth three year periods. The Board noted that
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF the Fund's performance was above the
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION performance of the Index for the one year
the contract renewal process, the Trustees period, and comparable to such Index for
receive comparative performance and fee The discussion below serves as a summary the three year period. The Board also
data regarding all the AIM Funds prepared of the Senior Officer's independent considered the steps AIM has taken over
by an independent company, Lipper, Inc., written evaluation, as well as a the last several years to improve the
under the direction and supervision of the discussion of the material factors and quality and efficiency of the services
independent Senior Officer who also related conclusions that formed the basis that AIM provides to the AIM Funds. The
prepares a separate analysis of this for the Board's approval of the Fund's Board concluded that AIM continues to be
information for the Trustees. Each advisory agreement. Unless otherwise responsive to the Board's focus on fund
Sub-Committee then makes recommendations stated, information set forth below is as performance. Although the independent
to the Investments Committee regarding the of June 27, 2007 and does not reflect any written evaluation of the Fund's Senior
performance, fees and expenses of their changes that may have occurred since that Officer (discussed below) only considered
assigned funds. The Investments Committee date, including but not limited to changes Fund performance through the most recent
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, calendar year, the Board also reviewed
expense limitations and/or fee waivers. more recent Fund performance and this
(continued)
AIM V.I. Large Cap Growth Fund
review did not change their conclusions. AIM Funds, including the Fund, should be mining the reasonableness of the proposed
simplified. The Board concluded that it management fees of the AIM Funds,
C. ADVISORY FEES AND FEE WAIVERS would be appropriate to approve the including the Fund. The Board noted that
proposed amendment to the Fund's they had relied upon the Senior Officer's
The Board compared the Fund's contractual contractual advisory fee schedule and that written evaluation instead of a
advisory fee rate to the contractual it was not necessary at this time to competitive bidding process. In
advisory fee rates of funds in the Fund's discuss with AIM whether to implement any determining whether to continue the Fund's
Lipper peer group that are not managed by fee waivers for the Fund. advisory agreement, the Board considered
AIM, at a common asset level and as of the the Senior Officer's written evaluation.
end of the past calendar year. The Board After taking account of the Fund's
noted that the Fund's advisory fee rate contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
was comparable to the median advisory fee the comparative advisory fee information AFFILIATES
rate of its peers. The Board also reviewed and the expense limitation discussed
the methodology used by Lipper and noted above, the Board concluded that the Fund's The Board considered various other
that the contractual fee rates shown by advisory fees were fair and reasonable. benefits received by AIM and its
Lipper include any applicable long-term affiliates resulting from AIM's
contractual fee waivers. The Board also D. ECONOMIES OF SCALE AND BREAKPOINTS relationship with the Fund, including the
compared the Fund's contractual advisory fees received by AIM and its affiliates
fee rate to the contractual advisory fee The Board considered the extent to which for their provision of administrative,
rates of other clients of AIM and its there are economies of scale in AIM's transfer agency and distribution services
affiliates with investment strategies provision of advisory services to the to the Fund. The Board considered the
comparable to those of the Fund, including Fund. The Board also considered whether performance of AIM and its affiliates in
two mutual funds advised by AIM and two the Fund benefits from such economies of providing these services and the
mutual funds sub-advised by an AIM scale through contractual breakpoints in organizational structure employed by AIM
affiliate. The Board noted that the Fund's the Fund's advisory fee schedule or and its affiliates to provide these
rate was: (i) above the rates for the two through advisory fee waivers or expense services. The Board also considered that
mutual funds; and (ii) above the limitations. The Board noted that the these services are provided to the Fund
sub-advisory fee rates for the two Fund's contractual advisory fee schedule pursuant to written contracts which are
sub-advised funds, although the advisory currently includes only one breakpoint but reviewed and approved on an annual basis
fee rate for one such sub-advised fund was that the amendment to the Fund's by the Board. The Board concluded that
comparable to the Fund's. contractual advisory fee schedule AIM and its affiliates were providing
discussed above provides for seven these services in a satisfactory manner
Additionally, the Board compared the breakpoints. Based on this information, and in accordance with the terms of
Fund's contractual advisory fee rate to the Board concluded that the Fund's their contracts, and were qualified to
the total advisory fees paid by numerous advisory fees will appropriately reflect continue to provide these services to the
separately managed accounts/wrap accounts economies of scale upon the Board's Fund.
advised by an AIM affiliate. The Board approval of the amendment to the Fund's
noted that the Fund's rate was above the contractual advisory fee schedule. The The Board considered the benefits
rates for the separately managed Board also noted that the Fund shares realized by AIM as a result of portfolio
accounts/wrap accounts. The Board directly in economies of scale through brokerage transactions executed through
considered that management of the lower fees charged by third party service "soft dollar" arrangements. Under these
separately managed accounts/wrap accounts providers based on the combined size of arrangements, portfolio brokerage
by the AIM affiliate involves different all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
levels of services and different funds advised by AIM are used to pay for
operational and regulatory requirements E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
than AIM's management of the Fund. The OF AIM noted that soft dollar arrangements shift
Board concluded that these differences are the payment obligation for the research
appropriately reflected in the fee The Board reviewed information from AIM and executions services from AIM to the
structure for the Fund and the separately concerning the costs of the advisory and funds and therefore may reduce AIM's
managed accounts/wrap accounts. other services that AIM and its affiliates expenses. The Board also noted that
provide to the Fund and the profitability research obtained through soft dollar
The Board noted that AIM has of AIM and its affiliates in providing arrangements may be used by AIM in making
contractually agreed to waive fees and/or these services. The Board also reviewed investment decisions for the Fund and may
limit expenses of the Fund through at information concerning the financial therefore benefit Fund shareholders. The
least April 30, 2009 in an amount condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
necessary to limit total annual operating Board also reviewed with AIM the arrangements were appropriate. The Board
expenses to a specified percentage of methodology used to prepare the also concluded that, based on their review
average daily net assets for each class of profitability information. The Board and representations made by AIM, these
the Fund. The Board considered the considered the overall profitability of arrangements were consistent with
contractual nature of this fee waiver and AIM, as well as the profitability of AIM regulatory requirements.
noted that it remains in effect until at in connection with managing the Fund. The
least April 30, 2009. The Board reviewed Board noted that AIM continues to operate The Board considered the fact that the
the Fund's effective advisory fee rate, at a net profit, although increased Fund's uninvested cash and cash collateral
after taking account of this expense expenses in recent years have reduced the from any securities lending arrangements
limitation, and considered the effect this profitability of AIM and its affiliates. may be invested in money market funds
expense limitation would have on the The Board concluded that the Fund's advised by AIM pursuant to procedures
Fund's estimated total expenses. The Board advisory fees were fair and reasonable, approved by the Board. The Board noted
concluded that the levels of fee and that the level of profits realized by that AIM will receive advisory fees from
waivers/expense limitations for the Fund AIM and its affiliates from providing these affiliated money market funds
were fair and reasonable. services to the Fund was not excessive in attributable to such investments, although
light of the nature, quality and extent of AIM has contractually agreed to waive the
The Board noted that AIM has not the services provided. The Board advisory fees payable by the Fund with
proposed any advisory fee waivers for the considered whether AIM is financially respect to its investment of uninvested
Fund. However, the Board also noted that sound and has the resources necessary to cash in these affiliated money market
AIM has recommended that the Board approve perform its obligations under the Fund's funds through at least April 30, 2009. The
an amendment to the Fund's contractual advisory agreement, and concluded that AIM Board considered the contractual nature of
advisory fee schedule that would implement has the financial resources necessary to this fee waiver and noted that it remains
the contractual advisory fee waiver that fulfill these obligations. in effect until at least April 30, 2009.
had been formerly committed to by AIM, The Board concluded that the Fund's
which waiver provided for lower effective F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
fee rates at all asset levels than the FUND'S SENIOR OFFICER collateral from any securities lending
Fund's current contractual advisory fee arrangements in the affiliated money
schedule. The Board noted that AIM's The Board noted that, upon their market funds is in the best interests of
recommendation was made in response to the direction, the Senior Officer of the Fund, the Fund and its shareholders.
recommendation of the independent Senior who is independent of AIM and AIM's
Officer that AIM consider whether the affiliates, had prepared an independent
advisory fee waivers for certain equity written evaluation to assist the Board in
deter
AIM V.I. Leisure Fund
Semiannual Report to Shareholders o June 30, 2007
SECTOR EQUITY
Sectors
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Leisure Fund
Fund performance connection with a variable product. Sales
======================================================================================= charges, expenses and fees, which are
PERFORMANCE SUMMARY determined by the variable product
issuers, will vary and will lower the
FUND VS. INDEXES total return.
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. Per NASD requirements, the most recent
If variable product issuer charges were included, returns would be lower. month-end performance data at the Fund
level, excluding variable product charges,
Series I Shares 8.25% is available on this AIM automated
Series II Shares 8.13 information line, 866-702-4402. As
S&P 500 Index(1) (Broad Market Index / Style-Specific Index) 6.96 mentioned above, for the most recent
month-end performance including variable
Source: (1) Lipper Inc. product charges, please contact your
variable product issuer or financial
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks advisor.
frequently used as a general measure of U.S. stock market performance.
Had the advisor waived fees and/or
The Fund is not managed to track the performance of any particular index, including reimbursements expense, performance would
the index defined here, and consequently, the performance of the Fund may deviate have been lower.
significantly from the performance of the index.
(1) Total annual operating expenses less
A direct investment cannot be made in an index. Unless otherwise indicated, index any contractual fee waivers and/or
results include reinvested dividends, and they do not reflect sales charges. expense reimbursements by the advisor
Performance of an index of funds reflects fund expenses; performance of a market index in effect through at least April 30,
does not. 2009. See current prospectus for more
======================================================================================= information.
========================================== Please contact your variable product
FUND PERFORMANCE issuer or financial advisor for the most
As of 6/30/07 recent month-end variable product
SERIES I SHARES performance. Performance figures reflect
Inception (4/30/02) 10.26% Fund expenses, reinvested distributions
5 Years 12.95 and changes in net asset value. Investment
1 Year 27.38 return and principal value will fluctuate
so that you may have a gain or loss when
SERIES II SHARES you sell shares.
Inception 10.02%
5 Years 12.71 The net annual Fund operating expense
1 Year 27.09 ratio set forth in the most recent Fund
========================================== prospectus as of the date of this report
for Series I and Series II shares was
Series II shares' inception date is April 1.02% and 1.27%, respectively.(1) The
30, 2004. Returns since that date are total annual Fund operating expense ratio
historical. All other returns are the set forth in the most recent Fund
blended returns of the historical prospectus as of the date of this report
performance of Series II shares since for Series I and Series II shares was 1.27%
their inception and the restated and 1.52%, respectively. The expense
historical performance of Series I shares ratios presented above may vary from the
(for periods prior to inception of Series expense ratios presented in other
II shares) adjusted to reflect the Rule sections of this report that are based
12b-1 fees applicable to the Series II on expenses incurred during the period
shares. The inception date of Series I covered by this report.
shares is April 30, 2002.
AIM V.I. Leisure Fund, a series
The performance of the Fund's Series I portfolio of AIM Variable Insurance Funds,
and Series II share classes will differ is currently offered through insurance
primarily due to different class expenses. companies issuing variable products. You
cannot purchase shares of the Fund
The performance data quoted represent directly. Performance figures given
past performance and cannot guarantee represent the Fund and are not intended to
comparable future results; current reflect actual variable product values.
performance may be lower or higher. They do not reflect sales charges,
expenses and fees assessed in
AIM V.I. Leisure Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Consumer Discretionary 80.4%
- ----------------------------------------------------------
Consumer Staples 11.9
- ----------------------------------------------------------
Financials 4.8
- ----------------------------------------------------------
Information Technology 1.4
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 1.5
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
DOMESTIC COMMON STOCKS-78.67%
ADVERTISING-5.65%
Harte-Hanks, Inc. 9,377 $ 240,801
- ----------------------------------------------------------------------
Omnicom Group Inc. 50,038 2,648,011
======================================================================
2,888,812
======================================================================
APPAREL RETAIL-2.04%
Abercrombie & Fitch Co.-Class A 14,317 1,044,855
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-3.79%
Carter's, Inc.(a) 23,097 599,136
- ----------------------------------------------------------------------
Columbia Sportswear Co. 2,873 197,318
- ----------------------------------------------------------------------
Polo Ralph Lauren Corp. 11,646 1,142,589
======================================================================
1,939,043
======================================================================
BREWERS-0.98%
Anheuser-Busch Cos., Inc. 9,633 502,457
======================================================================
BROADCASTING & CABLE TV-13.22%
Cablevision Systems Corp.-Class A(a) 37,681 1,363,675
- ----------------------------------------------------------------------
CBS Corp.-Class A 4,181 139,353
- ----------------------------------------------------------------------
CBS Corp.-Class B 4,181 139,311
- ----------------------------------------------------------------------
Citadel Broadcasting Corp. 2,701 17,423
- ----------------------------------------------------------------------
Clear Channel Communications, Inc. 20,915 791,005
- ----------------------------------------------------------------------
Comcast Corp.-Class A(a) 52,757 1,483,527
- ----------------------------------------------------------------------
EchoStar Communications Corp.-Class A(a) 16,840 730,351
- ----------------------------------------------------------------------
Liberty Global, Inc.-Class A(a) 5,172 212,259
- ----------------------------------------------------------------------
Liberty Global, Inc.-Series C(a) 7,903 310,588
- ----------------------------------------------------------------------
Liberty Media Corp. Capital-Series A(a) 5,389 634,178
- ----------------------------------------------------------------------
Scripps Co. (E.W.) (The)-Class A 7,250 331,252
- ----------------------------------------------------------------------
Sinclair Broadcast Group, Inc.-Class A 22,438 319,068
- ----------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
BROADCASTING & CABLE TV-(CONTINUED)
Spanish Broadcasting System, Inc.-Class A(a) 16,433 $ 70,662
- ----------------------------------------------------------------------
Virgin Media Inc. 9,075 221,158
======================================================================
6,763,810
======================================================================
CASINOS & GAMING-7.57%
Harrah's Entertainment, Inc. 26,127 2,227,588
- ----------------------------------------------------------------------
International Game Technology 16,070 637,979
- ----------------------------------------------------------------------
MGM Mirage(a) 12,211 1,007,163
======================================================================
3,872,730
======================================================================
CATALOG RETAIL-1.20%
Liberty Media Corp.-Interactive-Series A(a) 27,548 615,147
======================================================================
COMPUTER & ELECTRONICS RETAIL-0.99%
Best Buy Co., Inc. 10,844 506,090
======================================================================
DEPARTMENT STORES-0.57%
Kohl's Corp.(a) 4,111 292,004
======================================================================
DISTILLERS & VINTNERS-0.75%
Brown-Forman Corp.-Class B 5,223 381,697
======================================================================
FOOTWEAR-3.77%
Crocs, Inc.(a) 33,338 1,434,534
- ----------------------------------------------------------------------
Nike, Inc.-Class B 8,454 492,784
======================================================================
1,927,318
======================================================================
GENERAL MERCHANDISE STORES-1.08%
Target Corp. 8,720 554,592
======================================================================
HOME ENTERTAINMENT SOFTWARE-0.30%
Electronic Arts Inc.(a) 3,222 152,465
======================================================================
</Table>
AIM V.I. Leisure Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
HOME IMPROVEMENT RETAIL-2.57%
Home Depot, Inc. (The) 22,925 $ 902,099
- ----------------------------------------------------------------------
Lowe's Cos., Inc. 13,449 412,750
======================================================================
1,314,849
======================================================================
HOTELS, RESORTS & CRUISE LINES-11.09%
Carnival Corp.(b) 20,916 1,020,073
- ----------------------------------------------------------------------
Hilton Hotels Corp. 50,743 1,698,368
- ----------------------------------------------------------------------
Marriott International, Inc.-Class A 20,116 869,816
- ----------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 9,786 420,602
- ----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 24,867 1,667,830
======================================================================
5,676,689
======================================================================
HYPERMARKETS & SUPER CENTERS-0.46%
Wal-Mart Stores, Inc. 4,893 235,402
======================================================================
INTERNET SOFTWARE & SERVICES-1.11%
Google Inc.-Class A(a) 1,087 568,914
======================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-1.92%
iShares Russell 3000 Index Fund 3,700 322,011
- ----------------------------------------------------------------------
iShares S&P 500 Index Fund 2,159 324,951
- ----------------------------------------------------------------------
S&P 500 Depositary Receipts Trust-Series 1 2,220 333,955
======================================================================
980,917
======================================================================
MOVIES & ENTERTAINMENT-10.27%
News Corp.-Class A 111,979 2,375,075
- ----------------------------------------------------------------------
Time Warner Inc. 53,060 1,116,382
- ----------------------------------------------------------------------
Viacom Inc.-Class A(a) 6,888 286,541
- ----------------------------------------------------------------------
Viacom Inc.-Class B(a) 6,681 278,130
- ----------------------------------------------------------------------
Walt Disney Co. (The) 35,177 1,200,943
======================================================================
5,257,071
======================================================================
PUBLISHING-2.60%
Belo Corp.-Class A 16,816 346,241
- ----------------------------------------------------------------------
Gannett Co., Inc. 4,221 231,944
- ----------------------------------------------------------------------
McClatchy Co. (The)-Class A 6,096 154,290
- ----------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 8,798 598,968
======================================================================
1,331,443
======================================================================
RESTAURANTS-2.98%
Burger King Holdings Inc. 14,618 385,038
- ----------------------------------------------------------------------
McDonald's Corp. 9,700 492,372
- ----------------------------------------------------------------------
Ruth's Chris Steak House, Inc.(a) 16,222 275,612
- ----------------------------------------------------------------------
Yum! Brands, Inc. 11,318 370,325
======================================================================
1,523,347
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
SOFT DRINKS-1.13%
PepsiCo, Inc. 8,900 $ 577,165
======================================================================
SPECIALIZED REIT'S-1.06%
Felcor Lodging Inc. 20,882 543,558
======================================================================
SPECIALTY STORES-1.57%
PetSmart, Inc. 24,697 801,418
======================================================================
Total Domestic Common Stocks (Cost
$29,618,243) 40,251,793
======================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-19.88%
BELGIUM-2.36%
Compagnie Nationale a Portfeuille/Nationale
Portefeuille Maatschappis (Multi-Sector
Holdings)(c) 1,372 98,768
- ----------------------------------------------------------------------
Groupe Bruxelles Lambert S.A. (Multi-Sector
Holdings)(c) 4,084 508,261
- ----------------------------------------------------------------------
InBev N.V. (Brewers)(c) 7,569 599,357
======================================================================
1,206,386
======================================================================
BRAZIL-1.83%
Companhia de Bebidas das Americas-ADR
(Brewers) 13,366 938,293
======================================================================
DENMARK-1.04%
Carlsberg A.S.-Class B (Brewers)(c) 4,410 533,409
======================================================================
FRANCE-3.55%
Accor S.A. (Hotels, Resorts & Cruise
Lines)(c) 10,923 965,362
- ----------------------------------------------------------------------
JC Decaux S.A. (Advertising)(c) 11,123 352,921
- ----------------------------------------------------------------------
Pernod Ricard S.A. (Distillers & Vintners)(c) 2,260 499,997
======================================================================
1,818,280
======================================================================
HONG KONG-0.67%
Regal Hotels International Holdings Ltd.
(Hotels, Resorts & Cruise Lines)(c) 2,900,000 245,187
- ----------------------------------------------------------------------
Television Broadcasts Ltd.-ADR (Broadcasting
& Cable TV)(d) 6,976 98,154
======================================================================
343,341
======================================================================
JAPAN-0.36%
Sony Corp.-ADR (Consumer Electronics) 3,641 187,038
======================================================================
MEXICO-0.66%
Coca-Cola Femsa S.A. B. de C.V.-ADR (Soft
Drinks) 7,588 335,997
======================================================================
NETHERLANDS-2.28%
Heineken Holding N.V. (Brewers)(c) 11,500 595,158
- ----------------------------------------------------------------------
Jetix Europe N.V. (Broadcasting & Cable
TV)(a)(c) 23,033 571,146
======================================================================
1,166,304
======================================================================
</Table>
AIM V.I. Leisure Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
SWEDEN-0.69%
Rezidor Hotel Group A.B (Hotels, Resorts &
Cruise Lines)(c) 37,800 $ 329,893
- ----------------------------------------------------------------------
Rezidor Hotel Group A.B. (Acquired 11/28/06;
Cost $20,647) (Hotels, Resorts & Cruise
Lines)(c)(e) 2,734 23,860
======================================================================
353,753
======================================================================
SWITZERLAND-1.85%
Compagnie Financiere Richemont S.A.-Class A
(Apparel, Accessories & Luxury Goods)(c)(f) 10,214 610,091
- ----------------------------------------------------------------------
Pargesa Holding S.A. (Multi-Sector
Holdings)(c) 3,000 334,986
======================================================================
945,077
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
UNITED KINGDOM-4.59%
Diageo PLC (Distillers & Vintners)(c) 43,773 $ 909,366
- ----------------------------------------------------------------------
Intercontinental Hotels (Hotels, Resorts &
Cruise Lines)(c) 19,429 482,797
- ----------------------------------------------------------------------
WPP Group PLC (Advertising)(c) 63,814 954,714
======================================================================
2,346,877
======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $5,901,888) 10,174,755
======================================================================
MONEY MARKET FUNDS-1.55%
Liquid Assets Portfolio-Institutional
Class(g) 395,755 395,755
- ----------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 395,755 395,755
======================================================================
Total Money Market Funds (Cost $791,510) 791,510
======================================================================
TOTAL INVESTMENTS-100.10% (Cost $36,311,641) 51,218,058
======================================================================
OTHER ASSETS LESS LIABILITIES-(0.10)% (51,936)
======================================================================
NET ASSETS-100.00% $51,166,122
______________________________________________________________________
======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) Each unit represents one common share and one trust share.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $8,615,273, which
represented 16.84% of the Fund's Net Assets. See Note 1A.
(d) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The value of this security at June 30, 2007 represented
0.19% of the Fund's Net Assets. See Note 1A.
(e) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at June 30, 2007 represented 0.69% of the Fund's
Net Assets. Unless otherwise indicated, this security is not considered to
be illiquid.
(f) Each unit represents one A bearer share in the company and one bearer share
participation certificate in Richemont S.A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Leisure Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $35,520,131) $50,426,548
- ------------------------------------------------------------
Investments in affiliated money market funds
(Cost $791,510) 791,510
============================================================
Total investments (Cost $36,311,641) 51,218,058
============================================================
Foreign currencies, at value (Cost $145,418) 147,128
- ------------------------------------------------------------
Receivables for:
Investments sold 266,781
- ------------------------------------------------------------
Dividends 50,311
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 10,166
- ------------------------------------------------------------
Other assets 1,808
============================================================
Total assets 51,694,252
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 407,613
- ------------------------------------------------------------
Fund shares reacquired 47,381
- ------------------------------------------------------------
Trustee deferred compensation and retirement
plans 12,325
- ------------------------------------------------------------
Accrued administrative services fees 32,529
- ------------------------------------------------------------
Accrued distribution fees -- Series II 9
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,424
- ------------------------------------------------------------
Accrued transfer agent fees 92
- ------------------------------------------------------------
Accrued operating expenses 24,757
============================================================
Total liabilities 528,130
============================================================
Net assets applicable to shares outstanding $51,166,122
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $30,717,460
- ------------------------------------------------------------
Undistributed net investment income 91,673
- ------------------------------------------------------------
Undistributed net realized gain 5,449,076
- ------------------------------------------------------------
Unrealized appreciation 14,907,913
============================================================
$51,166,122
____________________________________________________________
============================================================
NET ASSETS:
Series I $51,155,970
____________________________________________________________
============================================================
Series II $ 10,152
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 3,419,127
____________________________________________________________
============================================================
Series II 682
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 14.96
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 14.90
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$16,868) $ 402,077
- ------------------------------------------------------------
Dividends from affiliated money market funds 12,826
============================================================
Total investment income 414,903
============================================================
EXPENSES:
Advisory fees 194,296
- ------------------------------------------------------------
Administrative services fees 89,500
- ------------------------------------------------------------
Custodian fees 7,947
- ------------------------------------------------------------
Distribution fees -- Series II 17
- ------------------------------------------------------------
Transfer agent fees 504
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 9,206
- ------------------------------------------------------------
Professional services fees 20,532
- ------------------------------------------------------------
Other 6,764
============================================================
Total expenses 328,766
============================================================
Less: Fees waived and expense offset arrangement (67,319)
============================================================
Net expenses 261,447
============================================================
Net investment income 153,456
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 2,830,244
- ------------------------------------------------------------
Foreign currencies 1,618
============================================================
2,831,862
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,162,526
- ------------------------------------------------------------
Foreign currencies (343)
============================================================
1,162,183
============================================================
Net realized and unrealized gain 3,994,045
============================================================
Net increase in net assets resulting from
operations $4,147,501
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Leisure Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 153,456 $ 279,276
- ----------------------------------------------------------------------------------------
Net realized gain 2,831,862 3,640,936
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation 1,162,183 7,348,588
========================================================================================
Net increase in net assets resulting from operations 4,147,501 11,268,800
========================================================================================
Distributions to shareholders from net investment income:
Series I -- (576,999)
- ----------------------------------------------------------------------------------------
Series II -- (129)
========================================================================================
Total distributions from net investment income -- (577,128)
========================================================================================
Distributions to shareholders from net realized gains:
Series I -- (2,816,331)
- ----------------------------------------------------------------------------------------
Series II -- (731)
========================================================================================
Total distributions from net realized gains -- (2,817,062)
========================================================================================
Decrease in net assets resulting from distributions -- (3,394,190)
========================================================================================
Share transactions-net:
Series I (5,810,016) (9,244,726)
- ----------------------------------------------------------------------------------------
Series II (4,700) 859
========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (5,814,716) (9,243,867)
========================================================================================
Net increase (decrease) in net assets (1,667,215) (1,369,257)
========================================================================================
NET ASSETS:
Beginning of period 52,833,337 54,202,594
========================================================================================
End of period (including undistributed net investment
income of $91,673 and $(61,783), respectively) $51,166,122 $52,833,337
________________________________________________________________________________________
========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Leisure Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Leisure Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is capital growth.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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. Leisure Fund
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- Single
Sector/Non-Diversified -- The Fund's investments are concentrated in a
comparatively narrow segment of the economy. Consequently, the Fund may
tend to be more volatile than other mutual funds, and the value of the
Fund's investments may tend to rise and fall more rapidly.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
K. 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
AIM V.I. Leisure Fund
foreign currency in order to "lock in" the U.S. dollar price of that
security. Fluctuations in the value of these contracts are recorded as
unrealized appreciation (depreciation) until the contracts are closed. When
these contracts are closed, realized gains (losses) are recorded. Realized
and unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
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 FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of 0.75% of the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Next $250 million 0.74%
- -------------------------------------------------------------------
Next $500 million 0.73%
- -------------------------------------------------------------------
Next $1.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.71%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.69%
- -------------------------------------------------------------------
Over $10 billion 0.58%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.01% and Series
II shares to 1.26% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $66,914.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $64,705
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. Leisure Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional Class $220,127 $3,505,843 $(3,330,215) $395,755 $ 6,429
- ---------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional
Class 220,127 3,505,843 (3,330,215) 395,755 6,397
=====================================================================================================================
Total Investments in Affiliates $440,254 $7,011,686 $(6,660,430) $791,510 $12,826
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangements are comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $405.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,296 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan. During the six months ended June 30, 2007, the
Fund did not borrow or lend under the interfund lending facility or borrow under
the uncommitted unsecured line of credit.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
AIM V.I. Leisure Fund
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $4,460,815 and
$10,216,547, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 15,144,846
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (759,768)
===========================================================================================================
Net unrealized appreciation of investment securities $ 14,385,078
___________________________________________________________________________________________________________
===========================================================================================================
Cost of investments for tax purposes is $36,832,980.
</Table>
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Sold:
Series I 877 $ 12,968 95,922 $ 1,166,490
- -----------------------------------------------------------------------------------------------------------
Series II -- -- -- --
===========================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 249,510 3,393,330
- -----------------------------------------------------------------------------------------------------------
Series II -- -- 63 859
===========================================================================================================
Reacquired:
Series I (403,382) (5,822,984) (1,093,508) (13,804,546)
- -----------------------------------------------------------------------------------------------------------
Series II (314) (4,700) -- --
===========================================================================================================
(402,819) $(5,814,716) (748,013) $ (9,243,867)
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 99% of the outstanding shares of the
Fund. The Fund and the Fund's principal underwriter or advisor, are parties
to participation agreements with this entity whereby this entity sell units
of interest in separate accounts funding variable products that are invested
in the Fund. The Fund, AIM and/or AIM affiliates may make payments to this
entity, which are considered to be related to the Fund, for providing
services to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no knowledge as
to whether all or any portion of the shares owned of record by this entity
are also owned beneficially.
NOTE 10--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Leisure Fund
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------------
APRIL 30, 2002
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------------------------------- DECEMBER 31,
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.82 $ 11.86 $ 12.38 $ 10.96 $ 8.52 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) 0.07 0.04 0.00 (0.00) (0.00)(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.10 2.83 (0.19) 1.47 2.44 (1.48)
=================================================================================================================================
Total from investment operations 1.14 2.90 (0.15) 1.47 2.44 (1.48)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.16) (0.14) (0.04) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.78) (0.23) (0.01) -- --
=================================================================================================================================
Total distributions -- (0.94) (0.37) (0.05) -- --
=================================================================================================================================
Net asset value, end of period $ 14.96 $ 13.82 $ 11.86 $ 12.38 $ 10.96 $ 8.52
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.25% 24.61% (1.19)% 13.40% 28.64% (14.80)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,156 $52,820 $54,192 $55,967 $34,424 $ 6,097
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(d) 1.01% 1.16% 1.29% 1.26% 1.29%(e)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.27%(d) 1.26% 1.31% 1.34% 1.64% 3.96%(e)
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.59%(d) 0.54% 0.34% 0.00% (0.14)% (0.30)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 9% 14% 32% 15% 22% 15%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding
(b) The net investment income (loss) per share was calculated after
permanent book tax differences, such as net operating losses, which were
reclassified from accumulated net investment income (loss) to paid in
capital. Had net investment income (loss) per share been calculated
using the current method, which is before reclassification of net
operating losses, net investment income (loss) per share would have been
$(0.01) for the period ended April 30, 2002 (date operations commenced)
to December 31, 2002.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$52,227,670.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Leisure Fund
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
---------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.78 $11.84 $12.37 $11.09
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) 0.04 0.02 (0.02)
- -----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.10 2.82 (0.19) 1.35
=================================================================================================================
Total from investment operations 1.12 2.86 (0.17) 1.33
=================================================================================================================
Less distributions:
Dividends from net investment income -- (0.14) (0.13) (0.04)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.78) (0.23) (0.01)
=================================================================================================================
Total distributions -- (0.92) (0.36) (0.05)
=================================================================================================================
Net asset value, end of period $14.90 $13.78 $11.84 $12.37
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 8.13% 24.28% (1.37)% 11.98%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10 $ 14 $ 11 $ 11
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(c) 1.26% 1.36% 1.45%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.52%(c) 1.51% 1.56% 1.60%(d)
=================================================================================================================
Ratio of net investment income (loss) to average net assets 0.34%(c) 0.29% 0.14% (0.16)%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 9% 14% 32% 15%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of $13,894.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
AIM V.I. Leisure Fund
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Leisure Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,082.50 $5.22 $1,019.79 $5.06 1.01%
Series II 1,000.00 1,081.30 6.50 1,018.55 6.31 1.26
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Leisure Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Leisure Fund (the Fund) investment Committee considers each Sub-Committee's provided to the Fund by AIM under the
advisory agreement with A I M Advisors, recommendations in making its annual Fund's advisory agreement, the performance
Inc. (AIM). During contract renewal recommendation to the Board whether to of AIM in providing these services, and
meetings held on June 25-27, 2007, the approve the continuance of each AIM Fund's the credentials and experience of the
Board as a whole and the disinterested or investment advisory agreement and officers and employees of AIM who provide
"independent" Trustees, voting separately, sub-advisory agreement, if applicable these services. The Board's review of the
approved the continuance of the Fund's (advisory agreements), for another year. qualifications of AIM to provide these
investment advisory agreement for another services included the Board's
year, effective July 1, 2007. In doing so, The independent Trustees, as mentioned consideration of AIM's portfolio and
the Board determined that the Fund's above, are assisted in their annual product review process, various back
advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one and three calendar
Sub-Committees meet with portfolio review and negotiation between the years to the performance of funds in the
managers for their assigned funds and Trustees and AIM, that the Trustees may Fund's Lipper peer group that are not
other members of management and review focus to a greater extent on certain managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the S&P 500
investment objective(s), policies, years than others, and that the Trustees' Index. The Board also reviewed the
strategies and limitations of these funds. deliberations and conclusions in a methodology used by Lipper to identify the
particular year may be based in part on Fund's peers. The Board noted that the
In addition to their meetings their deliberations and conclusions of Fund's performance was above the median
throughout the year, the Sub-Committees these same arrangements throughout the performance of its peers for the one and
meet at designated contract renewal year and in prior years. three year periods. The Board noted that
meetings each year to conduct an in-depth the Fund's performance was above the
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF performance of the Index for the one and
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION three year periods. The Board also
the contract renewal process, the Trustees considered the steps AIM has taken over
receive comparative performance and fee The discussion below serves as a summary the last several years to improve the
data regarding all the AIM Funds prepared of the Senior Officer's independent quality and efficiency of the services
by an independent company, Lipper, Inc., written evaluation, as well as a that AIM provides to the AIM Funds. The
under the direction and supervision of the discussion of the material factors and Board concluded that AIM continues to be
independent Senior Officer who also related conclusions that formed the basis responsive to the Board's focus on fund
prepares a separate analysis of this for the Board's approval of the Fund's performance. Although the independent
information for the Trustees. Each advisory agreement. Unless otherwise written evaluation of the Fund's Senior
Sub-Committee then makes recom mendations stated, information set forth below is as Officer (discussed below) only considered
to the Investments Committee regarding the of June 27, 2007 and does not reflect any Fund performance through the most recent
performance, fees and expenses of their changes that may have occurred since that calendar year, the Board also reviewed
assigned funds. The Investments Committee date, including but not limited to changes more recent Fund performance and this
considers each Sub-Committee's to the Fund's performance, advisory fees, review did not change their conclusions.
recom- expense limitations and/or fee waivers.
(continued)
AIM V.I. Leisure Fund
C. ADVISORY FEES AND FEE WAIVERS services to the Fund. The Board also istrative, transfer agency and
considered whether the Fund benefits from distribution services to the Fund. The
The Board compared the Fund's contractual such economies of scale through Board considered the performance of AIM
advisory fee rate to the contractual contractual breakpoints in the Fund's and its affiliates in providing these
advisory fee rates of funds in the Fund's advisory fee schedule or through advisory services and the organizational structure
Lipper peer group that are not managed by fee waivers or expense limitations. The employed by AIM and its affiliates to
AIM, at a common asset level and as of the Board noted that the Fund's contractual provide these services. The Board also
end of the past calendar year. The Board advisory fee schedule currently does not considered that these services are
noted that the Fund's advisory fee rate include any breakpoints but that the provided to the Fund pursuant to written
was at the median advisory fee rate of its amendment to the Fund's contractual contracts which are reviewed and approved
peers. The Board also reviewed the advisory fee schedule discussed above on an annual basis by the Board. The Board
methodology used by Lipper and noted that provides for seven breakpoints. Based on concluded that AIM and its affiliates were
the contractual fee rates shown by Lipper this information, the Board concluded that providing these services in a satisfactory
include any applicable long-term the Fund's advisory fees will manner and in accordance with the terms of
contractual fee waivers. The Board also appropriately reflect economies of scale their contracts, and were qualified to
compared the Fund's contractual advisory upon the Board's approval of the amendment continue to provide these services to the
fee rate to the contractual advisory fee to the Fund's contractual advisory fee Fund.
rates of other clients of AIM and its schedule. The Board also noted that the
affiliates with investment strategies Fund shares directly in economies of scale The Board considered the benefits
comparable to those of the Fund, including through lower fees charged by third party realized by AIM as a result of portfolio
one mutual fund advised by AIM and one service providers based on the combined brokerage transactions executed through
offshore fund advised and sub-advised by size of all of the AIM Funds and "soft dollar" arrangements. Under these
AIM affiliates. The Board noted that the affiliates. arrangements, portfolio brokerage
Fund's rate was: (i) above the rate for commissions paid by the Fund and/or other
the mutual fund; and (ii) below the E. PROFITABILITY AND FINANCIAL RESOURCES funds advised by AIM are used to pay for
advisory fee rate for the offshore fund. OF AIM research and execution services. The Board
noted that soft dollar arrangements shift
The Board noted that AIM has The Board reviewed information from AIM the payment obligation for the research
contractually agreed to waive fees and/or concerning the costs of the advisory and and executions services from AIM to the
limit expenses of the Fund through at other services that AIM and its affiliates funds and therefore may reduce AIM's
least April 30, 2009 in an amount provide to the Fund and the profitability expenses. The Board also noted that
necessary to limit total annual operating of AIM and its affiliates in providing research obtained through soft dollar
expenses to a specified percentage of these services. The Board also reviewed arrangements may be used by AIM in making
average daily net assets for each class of information concerning the financial investment decisions for the Fund and may
the Fund. The Board considered the condition of AIM and its affiliates. The therefore benefit Fund shareholders. The
contractual nature of this fee waiver and Board also reviewed with AIM the Board concluded that AIM's soft dollar
noted that it remains in effect until at methodology used to prepare the arrangements were appropriate. The Board
least April 30, 2009. The Board reviewed profitability information. The Board also concluded that, based on their review
the Fund's effective advisory fee rate, considered the overall profitability of and representations made by AIM, these
after taking account of this expense AIM, as well as the profitability of AIM arrangements were consistent with
limitation, and considered the effect this in connection with managing the Fund. The regulatory requirements.
expense limitation would have on the Board noted that AIM continues to operate
Fund's estimated total expenses. The Board at a net profit, although increased The Board considered the fact that the
concluded that the levels of fee expenses in recent years have reduced the Fund's uninvested cash and cash collateral
waivers/expense limitations for the Fund profitability of AIM and its affiliates. from any securities lending arrangements
were fair and reasonable. The Board concluded that the Fund's may be invested in money market funds
advisory fees were fair and reasonable, advised by AIM pursuant to procedures
The Board noted that AIM has not and that the level of profits realized by approved by the Board The Board noted that
proposed any advisory fee waivers for the AIM and its affiliates from providing AIM will receive advisory fees from these
Fund. However, the Board also noted that services to the Fund was not excessive in affiliated money market funds attributable
AIM has recommended that the Board approve light of the nature, quality and extent of to such investments, although AIM has
an amendment to the Fund's contractual the services provided. The Board contractually agreed to waive the advisory
advisory fee schedule that would implement considered whether AIM is financially fees payable by the Fund with respect to
the contractual advisory fee waiver that sound and has the resources necessary to its investment of uninvested cash in these
had been formerly committed to by AIM, perform its obligations under the Fund's affiliated money market funds through at
which waiver provided for lower effective advisory agreement, and concluded that AIM least April 30, 2009. The Board considered
fee rates at all asset levels than the has the financial resources necessary to the contractual nature of this fee waiver
Fund's current contractual advisory fee fulfill these obligations. and noted that it remains in effect until
schedule. The Board noted that AIM's at least April 30, 2009. The Board
recommendation was made in response to the F. INDEPENDENT WRITTEN EVALUATION OF THE concluded that the Fund's investment of
recommendation of the independent Senior FUND'S SENIOR OFFICER uninvested cash and cash collateral from
Officer that AIM consider whether the any securities lending arrangements in the
advisory fee waivers for certain equity The Board noted that, upon their affiliated money market funds is in the
AIM Funds, including the Fund, should be direction, the Senior Officer of the Fund, best interests of the Fund and its
simplified. The Board concluded that it who is independent of AIM and AIM's shareholders.
would be appropriate to approve the affiliates, had prepared an independent
proposed amendment to the Fund's written evaluation to assist the Board in
contractual advisory fee schedule and that determining the reasonableness of the
it was not necessary at this time to proposed management fees of the AIM Funds,
discuss with AIM whether to implement any including the Fund. The Board noted that
fee waivers for the Fund. they had relied upon the Senior Officer's
written evaluation instead of a
After taking account of the Fund's competitive bidding process. In
contractual advisory fee rate, as well as determining whether to continue the Fund's
the comparative advisory fee information advisory agreement, the Board considered
and the expense limitation discussed the Senior Officer's written evaluation.
above, the Board concluded that the Fund's
advisory fees were fair and reasonable. G. COLLATERAL BENEFITS TO AIM AND ITS
AFFILIATES
D. ECONOMIES OF SCALE AND BREAKPOINTS
The Board considered various other
The Board considered the extent to which benefits received by AIM and its
there are economies of scale in AIM's affiliates resulting from AIM's
provision of advisory relationship with the Fund, including the
fees received by AIM and its affiliates
for their provision of admin-
AIM V.I. Mid Cap Core Equity Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Mid-Cap Blend
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Mid Cap Core Equity Fund
Fund performance Per NASD requirements, the most recent
======================================================================================= month-end performance data at the Fund
PERFORMANCE SUMMARY level, excluding variable product charges,
is available on this AIM automated
FUND VS. INDEXES information line, 866-702-4402. As
mentioned above, for the most recent
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. month-end performance including variable
If variable product issuer charges were included, returns would be lower. product charges, please contact your
variable product issuer or financial
Series I Shares 10.06% advisor.
Series II Shares 9.91
S&P 500 Index(1) (Broad Market Index) 6.96
Russell Midcap Index(1) (Style-Specific Index) 9.90
Lipper VUF Mid-Cap Core Funds Index(1) (Peer Group Index) 11.11
Lipper Mid-Cap Core Funds Index(1) (Former Peer Group Index) 11.09
Source: (1) Lipper Inc.
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance.
The unmanaged Russell Midcap -- REGISTERED TRADEMARK -- Index represents the
performance of the stocks of domestic mid-capitalization companies. The Russell Midcap
Index is a trademark/service mark of the Frank Russell Company. Russell -- REGISTERED
TRADEMARK -- is a trademark of the Frank Russell Company.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Mid-Cap Core
Funds Index as its peer group instead of the Lipper Mid-Cap Core Funds Index. In 2006,
Lipper began publishing VUF indexes, allowing the Fund to be compared with the Lipper
VUF Mid-Cap Core Funds Index. The unmanaged Lipper VUF Mid-Cap Core Funds Index is an
equally weighted representation of the largest variable insurance underlying funds in
the Lipper Mid-Cap Core Funds category. Lipper Inc. is an independent mutual fund
performance monitor.
The unmanaged Lipper Mid-Cap Core Funds Index represents an average of the
performance of the largest mid-capitalization core funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== will fluctuate so that you may have a gain
FUND PERFORMANCE or loss when you sell shares.
As of 6/30/07
SERIES I SHARES The total annual Fund operating expense
Inception (9/10/01) 10.90% ratio set forth in the most recent Fund
5 Years 11.60 prospectus as of the date of this report
1 Year 20.31 for Series I and Series II shares was
1.06% and 1.31%, respectively. The expense
SERIES II SHARES ratios presented above may vary from the
Inception (9/10/01) 10.63% expense ratios presented in other sections
5 Years 11.33 of this report that are based on expenses
1 Year 20.03 incurred during the period covered by this
========================================== report.
The performance of the Fund's Series I
and Series II share classes will differ AIM V.I. Mid Cap Core Equity Fund, a
primarily due to different class expenses. series portfolio of AIM Variable Insurance
Funds, is currently offered through
The performance data quoted represent insurance companies issuing variable
past performance and cannot guarantee products. You cannot purchase shares of
comparable future results; current the Fund directly. Performance figures
performance may be lower or higher. Please given represent the Fund and are not
contact your variable product issuer or intended to reflect actual variable
financial advisor for the most recent product values. They do not reflect sales
month-end variable product performance. charges, expenses and fees assessed in
Performance figures reflect Fund expenses, connection with a variable product. Sales
reinvested distributions and changes in charges, expenses and fees, which are
net asset value. Investment return and determined by the variable product
principal value issuers, will vary and will lower the
total return.
AIM V.I. Mid Cap Core Equity Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 11.4%
- ----------------------------------------------------------
Energy 10.8
- ----------------------------------------------------------
Consumer Discretionary 10.4
- ----------------------------------------------------------
Health Care 9.6
- ----------------------------------------------------------
Industrials 8.7
- ----------------------------------------------------------
Materials 8.4
- ----------------------------------------------------------
Financials 8.1
- ----------------------------------------------------------
Consumer Staples 8.0
- ----------------------------------------------------------
Telecommunication Services 3.6
- ----------------------------------------------------------
Utilities 1.4
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 19.6
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 20007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-64.04%
ADVERTISING-0.91%
Omnicom Group Inc. 124,896 $ 6,609,496
========================================================================
AEROSPACE & DEFENSE-0.56%
Goodrich Corp. 69,025 4,111,129
========================================================================
APPAREL RETAIL-1.34%
Gap, Inc., (The) 512,673 9,792,054
========================================================================
APPLICATION SOFTWARE-2.18%
Amdocs Ltd.(a) 106,906 4,256,997
- ------------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 528,526 11,606,431
========================================================================
15,863,428
========================================================================
BROADCASTING & CABLE TV-0.76%
Scripps Co. (E.W.) (The)-Class A 120,812 5,519,900
========================================================================
COMPUTER & ELECTRONICS RETAIL-0.34%
RadioShack Corp. 73,807 2,445,964
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.58%
Joy Global Inc. 197,575 11,524,550
========================================================================
DISTRIBUTORS-1.18%
Genuine Parts Co. 173,531 8,607,138
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.40%
Agilent Technologies, Inc.(a) 74,900 2,879,156
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
ELECTRONIC MANUFACTURING SERVICES-0.98%
Molex Inc. 239,128 $ 7,176,231
========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.98%
Republic Services, Inc. 234,118 7,173,376
========================================================================
FOOD RETAIL-0.73%
SUPERVALU Inc. 115,540 5,351,813
========================================================================
GAS UTILITIES-1.04%
UGI Corp. 276,682 7,547,885
========================================================================
GENERAL MERCHANDISE STORES-0.68%
99 Cents Only Stores(a) 376,239 4,932,493
========================================================================
HEALTH CARE EQUIPMENT-1.66%
Hospira, Inc.(a) 161,256 6,295,434
- ------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 136,169 5,788,544
========================================================================
12,083,978
========================================================================
HEALTH CARE SERVICES-0.64%
Quest Diagnostics Inc. 89,645 4,630,164
========================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.34%
Administaff, Inc. 290,726 9,736,414
========================================================================
INDUSTRIAL MACHINERY-2.79%
Dover Corp. 135,888 6,950,671
- ------------------------------------------------------------------------
ITT Corp. 84,893 5,796,494
- ------------------------------------------------------------------------
Parker Hannifin Corp. 77,546 7,592,529
========================================================================
20,339,694
========================================================================
</Table>
AIM V.I. Mid Cap Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INSURANCE BROKERS-0.91%
Marsh & McLennan Cos., Inc. 214,121 $ 6,612,056
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.21%
IDT Corp.-Class B 853,366 8,806,737
========================================================================
LIFE SCIENCES TOOLS & SERVICES-4.19%
Invitrogen Corp.(a) 150,295 11,084,256
- ------------------------------------------------------------------------
PerkinElmer, Inc. 162,122 4,224,899
- ------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 83,121 3,181,041
- ------------------------------------------------------------------------
Techne Corp.(a) 168,259 9,626,098
- ------------------------------------------------------------------------
Waters Corp.(a) 40,812 2,422,600
========================================================================
30,538,894
========================================================================
MULTI-LINE INSURANCE-0.34%
Genworth Financial Inc.-Class A 71,417 2,456,745
========================================================================
MULTI-UTILITIES-0.40%
Wisconsin Energy Corp. 65,352 2,890,519
========================================================================
OFFICE ELECTRONICS-1.71%
Xerox Corp.(a) 673,339 12,443,305
========================================================================
OFFICE SERVICES & SUPPLIES-0.70%
Pitney Bowes Inc. 108,982 5,102,537
========================================================================
OIL & GAS DRILLING-0.83%
Noble Corp. 62,120 6,057,942
========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.78%
BJ Services Co. 242,642 6,900,739
- ------------------------------------------------------------------------
FMC Technologies, Inc.(a) 55,352 4,384,985
- ------------------------------------------------------------------------
Grant Prideco, Inc.(a) 85,148 4,583,517
- ------------------------------------------------------------------------
Smith International, Inc. 74,816 4,387,210
========================================================================
20,256,451
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-5.50%
Chesapeake Energy Corp. 389,628 13,481,129
- ------------------------------------------------------------------------
Newfield Exploration Co.(a) 163,318 7,439,135
- ------------------------------------------------------------------------
Pioneer Natural Resources Co. 198,987 9,692,657
- ------------------------------------------------------------------------
Whiting Petroleum Corp.(a) 233,877 9,476,696
========================================================================
40,089,617
========================================================================
PAPER PRODUCTS-1.52%
MeadWestvaco Corp. 314,139 11,095,389
========================================================================
PERSONAL PRODUCTS-2.74%
Avon Products, Inc. 197,154 7,245,410
- ------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 279,948 12,740,433
========================================================================
19,985,843
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
PHARMACEUTICALS-3.10%
Barr Pharmaceuticals Inc.(a) 365,197 $ 18,343,845
- ------------------------------------------------------------------------
Warner Chilcott Ltd.-Class A(a) 232,840 4,212,076
========================================================================
22,555,921
========================================================================
PRECIOUS METALS & MINERALS-1.53%
Coeur d'Alene Mines Corp.(a) 3,109,084 11,161,612
========================================================================
PROPERTY & CASUALTY INSURANCE-3.79%
Axis Capital Holdings Ltd. 321,311 13,061,292
- ------------------------------------------------------------------------
Progressive Corp. (The) 371,659 8,893,800
- ------------------------------------------------------------------------
XL Capital Ltd.-Class A 67,083 5,654,426
========================================================================
27,609,518
========================================================================
PUBLISHING-1.31%
McClatchy Co. (The)-Class A 90,504 2,290,656
- ------------------------------------------------------------------------
Washington Post Co. (The)-Class B 9,331 7,241,696
========================================================================
9,532,352
========================================================================
REGIONAL BANKS-0.74%
SVB Financial Group(a) 101,532 5,392,365
========================================================================
SEMICONDUCTORS-1.74%
Analog Devices, Inc. 169,315 6,373,017
- ------------------------------------------------------------------------
Linear Technology Corp. 174,744 6,322,238
========================================================================
12,695,255
========================================================================
SPECIALIZED CONSUMER SERVICES-0.75%
Service Corp. International 430,547 5,502,391
========================================================================
SPECIALTY CHEMICALS-5.37%
International Flavors & Fragrances Inc. 268,705 14,010,279
- ------------------------------------------------------------------------
Rohm and Haas Co. 102,231 5,589,991
- ------------------------------------------------------------------------
Sigma-Aldrich Corp. 458,459 19,562,445
========================================================================
39,162,715
========================================================================
SPECIALTY STORES-0.50%
Tractor Supply Co.(a) 70,445 3,666,662
========================================================================
SYSTEMS SOFTWARE-0.58%
McAfee Inc.(a) 120,756 4,250,611
========================================================================
THRIFTS & MORTGAGE FINANCE-1.71%
People's United Financial Inc. 703,955 12,481,122
========================================================================
Total Domestic Common Stocks (Cost
$393,033,868) 466,671,422
========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-14.09%
BELGIUM-0.61%
Groupe Bruxelles Lambert S.A. (Multi-Sector
Holdings)(b) 35,745 4,448,465
========================================================================
</Table>
AIM V.I. Mid Cap Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
!x
CANADA-3.12%
Nortel Networks Corp. (Communications
Equipment)(a) 437,203 $ 10,514,732
- ------------------------------------------------------------------------
Penn West Energy Trust (Oil & Gas Exploration
& Production) 366,725 12,237,614
========================================================================
22,752,346
========================================================================
FRANCE-1.63%
Business Objects S.A.-ADR (Application
Software)(a) 304,786 11,837,888
========================================================================
JAPAN-3.37%
Fujitsu Ltd. (Computer Hardware) 765,000 5,640,438
- ------------------------------------------------------------------------
Namco Bandai Holdings Inc. (Leisure Products) 483,100 7,633,882
- ------------------------------------------------------------------------
Sega Sammy Holdings Inc. (Leisure Products) 693,377 11,232,539
========================================================================
24,506,859
========================================================================
SOUTH KOREA-2.40%
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services) 640,054 17,505,477
========================================================================
SWEDEN-0.74%
Atlas Copco A.B.-Class A (Industrial
Machinery)(b) 323,400 5,397,884
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
UNITED KINGDOM-2.22%
Cadbury Schweppes PLC (Packaged Foods &
Meats)(a)(b) 1,189,597 $ 16,187,517
========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $95,227,595) 102,636,436
========================================================================
PREFERRED STOCKS-2.28%
HOUSEHOLD PRODUCTS-2.28%
Henkel KGaA-Pfd. (Germany)(b) 314,733 16,623,270
========================================================================
Total Preferred Stocks (Cost $13,136,105) 16,623,270
========================================================================
MONEY MARKET FUNDS-17.28%
Liquid Assets Portfolio-Institutional
Class(c) 62,957,447 62,957,447
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 62,957,447 62,957,447
========================================================================
Total Money Market Funds (Cost
$125,914,894) 125,914,894
========================================================================
TOTAL INVESTMENTS-97.69% (Cost $627,312,462) 711,846,022
========================================================================
OTHER ASSETS LESS LIABILITIES-2.31% 16,863,373
========================================================================
NET ASSETS-100.00% $728,709,395
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $42,657,136, which
represented 5.85% of the Fund's Net Assets. See Note 1A.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Mid Cap Core Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $501,397,568) $585,931,128
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $125,914,894) 125,914,894
=============================================================
Total investments (Cost $627,312,462) 711,846,022
=============================================================
Foreign currencies, at value (Cost $1,199,984) 1,208,317
- -------------------------------------------------------------
Cash 185,595
- -------------------------------------------------------------
Receivables for:
Investments sold 11,666,346
- -------------------------------------------------------------
Fund shares sold 3,887,882
- -------------------------------------------------------------
Dividends 1,070,962
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 21,155
- -------------------------------------------------------------
Other assets 400
=============================================================
Total assets 729,886,679
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 369,378
- -------------------------------------------------------------
Fund shares reacquired 209,914
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 51,202
- -------------------------------------------------------------
Accrued administrative services fees 444,542
- -------------------------------------------------------------
Accrued distribution fees -- Series II 45,389
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 5,306
- -------------------------------------------------------------
Accrued transfer agent fees 4,449
- -------------------------------------------------------------
Accrued operating expenses 47,104
=============================================================
Total liabilities 1,177,284
=============================================================
Net assets applicable to shares outstanding $728,709,395
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $573,845,347
- -------------------------------------------------------------
Undistributed net investment income 3,828,121
- -------------------------------------------------------------
Undistributed net realized gain 66,500,348
- -------------------------------------------------------------
Unrealized appreciation 84,535,579
=============================================================
$728,709,395
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $649,160,290
_____________________________________________________________
=============================================================
Series II $ 79,549,105
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 43,641,785
_____________________________________________________________
=============================================================
Series II 5,393,683
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 14.87
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 14.75
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$289,869) $ 4,603,749
- ------------------------------------------------------------
Dividends from affiliated money market funds 2,788,856
============================================================
Total investment income 7,392,605
============================================================
EXPENSES:
Advisory fees 2,423,420
- ------------------------------------------------------------
Administrative services fees 916,473
- ------------------------------------------------------------
Custodian fees 14,604
- ------------------------------------------------------------
Distribution fees -- Series II 81,128
- ------------------------------------------------------------
Transfer agent fees 10,770
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 18,382
- ------------------------------------------------------------
Other 25,644
============================================================
Total expenses 3,490,421
============================================================
Less: Fees waived and expense offset
arrangement (17,235)
============================================================
Net expenses 3,473,186
============================================================
Net investment income 3,919,419
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$34,004) 57,531,066
- ------------------------------------------------------------
Foreign currencies (58,794)
============================================================
57,472,272
============================================================
Change in net unrealized appreciation of:
Investment securities 1,682,969
- ------------------------------------------------------------
Foreign currencies 5,328
============================================================
1,688,297
============================================================
Net realized and unrealized gain 59,160,569
============================================================
Net increase in net assets resulting from
operations $63,079,988
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Mid Cap Core Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,919,419 $ 5,790,981
- ------------------------------------------------------------------------------
Net realized gain 57,472,272 53,482,109
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 1,688,297 7,335,543
==============================================================================
Net increase in net assets resulting from
operations 63,079,988 66,608,633
==============================================================================
Distributions to shareholders from net
investment income:
Series I -- (5,369,075)
- ------------------------------------------------------------------------------
Series II -- (394,014)
==============================================================================
Total distributions from net investment
income -- (5,763,089)
==============================================================================
Distributions to shareholders from net
realized gains:
Series I -- (57,207,085)
- ------------------------------------------------------------------------------
Series II -- (5,625,901)
==============================================================================
Total distributions from net realized
gains -- (62,832,986)
==============================================================================
Decrease in net assets resulting from
distributions -- (68,596,075)
==============================================================================
Share transactions-net:
Series I 10,744,739 (2,215,259)
- ------------------------------------------------------------------------------
Series II 16,964,324 6,883,123
==============================================================================
Net increase in net assets resulting from
share transactions 27,709,063 4,667,864
==============================================================================
Net increase in net assets 90,789,051 2,680,422
==============================================================================
NET ASSETS:
Beginning of period 637,920,344 635,239,922
==============================================================================
End of period (including undistributed net
investment income of $3,828,121 and
$(91,298), respectively) $728,709,395 $637,920,344
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Mid Cap Core Equity Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Mid Cap Core Equity Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Mid Cap Core Equity Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
K. COVERED CALL OPTIONS WRITTEN -- The Fund may write call options. 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. Written call options are recorded
as a liability in the Statement of Assets and Liabilities. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value
AIM V.I. Mid Cap Core Equity Fund
of the option written. 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. Realized gains
and losses on these contracts are included in the Statement of Operations. A
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised.
L. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. 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, securities index, 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. Realized and unrealized gains and losses on these contracts are
included in the Statement of Operations. A risk in buying an option is that
the Fund pays a premium whether or not the option is exercised. In
addition, there can be no assurance that a liquid secondary market will
exist for any option purchased.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $500 million 0.725%
- --------------------------------------------------------------------
Next $500 million 0.70%
- --------------------------------------------------------------------
Next $500 million 0.675%
- --------------------------------------------------------------------
Over $1.5 billion 0.65%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year. AIM did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $16,809.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$82,549 for accounting and fund administrative services and reimbursed $833,924
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average
AIM V.I. Mid Cap Core Equity Fund
daily net assets of the Series II shares may be paid to insurance companies who
furnish continuing personal shareholder services to customers who purchase and
own Series II shares of the Fund. For the six months ended June 30, 2007,
expenses incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $38,447,715 $ 96,091,253 $ (71,581,521) $ 62,957,447 $1,397,954
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 38,447,715 96,091,253 (71,581,521) 62,957,447 1,390,902
=================================================================================================================================
Total Investments in Affiliates $76,895,430 $192,182,506 $(143,163,042) $125,914,894 $2,788,856
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $119,955, which resulted in net realized gains of
$34,004, and securities purchases of $66,779.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $426.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$3,471 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources exceed
10% of the Fund's total assets. To the extent that the loan is required to be
secured by collateral, the collateral is marked to market daily to ensure that
the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
AIM V.I. Mid Cap Core Equity Fund
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $236,178,452 and
$270,066,347, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 94,793,646
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,591,299)
==============================================================================
Net unrealized appreciation of investment securities $ 83,202,347
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $628,643,675.
</Table>
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 3,042,019 $ 44,657,400 1,804,056 $ 25,439,433
- ----------------------------------------------------------------------------------------------------------------------
Series II 1,634,321 23,652,816 962,594 13,444,373
======================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 4,608,241 62,349,500
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- 448,244 6,019,915
======================================================================================================================
Reacquired:
Series I (2,379,679) (33,912,661) (6,405,942) (90,004,192)
- ----------------------------------------------------------------------------------------------------------------------
Series II (469,497) (6,688,492) (907,250) (12,581,165)
======================================================================================================================
1,827,164 $ 27,709,063 509,943 $ 4,667,864
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 76% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Mid Cap Core Equity Fund
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.52 $ 13.61 $ 13.11 $ 12.06 $ 9.53 $ 10.72
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.08 0.14 0.06 0.03(a) 0.00(a) (0.02)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.27 1.39 0.94 1.63 2.60 (1.17)
=================================================================================================================================
Total from investment operations 1.35 1.53 1.00 1.66 2.60 (1.19)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.14) (0.07) (0.02) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.48) (0.43) (0.59) (0.07) --
=================================================================================================================================
Total distributions -- (1.62) (0.50) (0.61) (0.07) --
=================================================================================================================================
Net asset value, end of period $ 14.87 $ 13.52 $ 13.61 $ 13.11 $ 12.06 $ 9.53
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.98% 11.24% 7.62% 13.82% 27.31% (11.10)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $649,160 $581,154 $584,860 $496,606 $293,162 $68,271
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.01%(c) 1.04% 1.03% 1.04% 1.07% 1.30%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 1.19%(c) 0.93% 0.50% 0.25% 0.01% (0.22)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 41% 83% 70% 55% 37% 36%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$614,846,104.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.42 $ 13.52 $ 13.04 $ 12.01 $ 9.51 $ 10.71
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06 0.10 0.03 (0.00)(a) (0.03)(a) (0.04)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.27 1.38 0.92 1.62 2.60 (1.16)
=================================================================================================================================
Total from investment operations 1.33 1.48 0.95 1.62 2.57 (1.20)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.10) (0.04) (0.00) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.48) (0.43) (0.59) (0.07) --
=================================================================================================================================
Total distributions -- (1.58) (0.47) (0.59) (0.07) --
=================================================================================================================================
Net asset value, end of period $ 14.75 $ 13.42 $ 13.52 $ 13.04 $12.01 $ 9.51
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.91% 10.98% 7.27% 13.57% 27.05% (11.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $79,549 $56,766 $50,380 $33,495 $4,874 $ 1,214
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.26%(c) 1.29% 1.28% 1.29% 1.32% 1.45%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets(b) 0.94%(c) 0.68% 0.25% (0.00)% (0.24)% (0.37)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 41% 83% 70% 55% 37% 36%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$65,440,608.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55% for the year ended December 31, 2002.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Mid Cap Core Equity Fund
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM
Distributors, Inc. ("ADI") (Order No. 05-1318). The WVASC makes findings of fact
that AIM and ADI entered into certain arrangements permitting market timing of
the AIM Funds and failed to disclose these arrangements in the prospectuses for
such Funds, and conclusions of law to the effect that AIM and ADI violated the
West Virginia securities laws. The WVASC orders AIM and ADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, AIM's time to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Mid Cap Core Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,100.60 $5.26 $1,019.79 $5.06 1.01%
Series II 1,000.00 1,099.10 6.56 1,018.55 6.31 1.26
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Mid Cap Core Equity Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of Committee considers each Sub-Committee's sory fees, expense limitations and/or fee
AIM Variable Insurance Funds is required recommendations and makes its own waivers.
under the Investment Company Act of 1940 recommendations regarding the performance,
to approve annually the renewal of the AIM fees and expenses of the AIM Funds to the A. NATURE, EXTENT AND QUALITY OF SERVICES
V.I. Mid Cap Core Equity Fund (the Fund) full Board. Moreover, the Investments PROVIDED BY AIM
investment advisory agreement with A I M Committee considers each Sub-Committee's
Advisors, Inc. (AIM). During contract recommendations in making its annual The Board reviewed the advisory services
renewal meetings held on June 25-27, 2007, recommendation to the Board whether to provided to the Fund by AIM under the
the Board as a whole and the disinterested approve the continuance of each AIM Fund's Fund's advisory agreement, the performance
or "independent" Trustees, voting investment advisory agreement and of AIM in providing these services, and
separately, approved the continuance of sub-advisory agreement, if applicable the credentials and experience of the
the Fund's investment advisory agreement (advisory agreements), for another year. officers and employees of AIM who provide
for another year, effective July 1, 2007. these services. The Board's review of the
In doing so, the Board determined that the The independent Trustees, as mentioned qualifications of AIM to provide these
Fund's advisory agreement is in the best above, are assisted in their annual services included the Board's
interests of the Fund and its shareholders evaluation of the advisory agreements by consideration of AIM's portfolio and
and that the compensation to AIM under the the independent Senior Officer. One product review process, various back
Fund's advisory agreement is fair and responsibility of the Senior Officer is to office support functions provided by AIM,
reasonable. manage the process by which the AIM Funds' and AIM's equity and fixed income trading
proposed management fees are negotiated operations. The Board concluded that the
The independent Trustees met separately during the annual contract renewal process nature, extent and quality of the advisory
during their evaluation of the Fund's to ensure that they are negotiated in a services provided to the Fund by AIM were
investment advisory agreement with manner which is at arms' length and appropriate and that AIM currently is
independent legal counsel from whom they reasonable. Accordingly, the Senior providing satisfactory advisory services
received independent legal advice, and the Officer must either supervise a in accordance with the terms of the Fund's
independent Trustees also received competitive bidding process or prepare an advisory agreement. In addition, based on
assistance during their deliberations from independent written evaluation. The Senior their ongoing meetings throughout the year
the independent Senior Officer, a Officer has recommended that an with the Fund's portfolio managers, the
full-time officer of the AIM Funds who independent written evaluation be provided Board concluded that these individuals are
reports directly to the independent and, upon the direction of the Board, has competent and able to continue to carry
Trustees. The following discussion more prepared an independent written out their responsibilities under the
fully describes the process employed by evaluation. Fund's advisory agreement.
the Board to evaluate the performance of
the AIM Funds (including the Fund) During the annual contract renewal In determining whether to continue the
throughout the year and, more process, the Board considered the factors Fund's advisory agreement, the Board
specifically, during the annual contract discussed below under the heading "Factors considered the prior relationship between
renewal meetings. and Conclusions and Summary of Independent AIM and the Fund, as well as the Board's
Written Fee Evaluation" in evaluating the knowledge of AIM's operations, and
THE BOARD'S FUND EVALUATION PROCESS fairness and reasonableness of the Fund's concluded that it was beneficial to
advisory agreement at the contract renewal maintain the current relationship, in
The Board's Investments Committee has meetings and at their meetings throughout part, because of such knowledge. The Board
established three Sub-Committees which are the year as part of their ongoing also considered the steps that AIM and its
responsible for overseeing the management oversight of the Fund. The Fund's advisory affiliates have taken over the last
of a number of the series portfolios of agreement was considered separately, several years to improve the quality and
the AIM Funds. This Sub-Committee although the Board also considered the efficiency of the services they provide to
structure permits the Trustees to focus on common interests of all of the AIM Funds the Funds in the areas of investment
the performance of the AIM Funds that have in their deliberations. The Board performance, product line diversification,
been assigned to them. The Sub-Committees comprehensively considered all of the distribution, fund operations, shareholder
meet throughout the year to review the information provided to them and did not services and compliance. The Board
performance of their assigned funds, and identify any particular factor that was concluded that the quality and efficiency
the Sub-Committees review monthly and controlling. Furthermore, each Trustee may of the services AIM and its affiliates
quarterly comparative performance have evaluated the information provided provide to the AIM Funds in each of these
information and periodic asset flow data differently from one another and areas generally have improved, and support
for their assigned funds. These materials attributed different weight to the various the Board's approval of the continuance of
are prepared under the direction and factors. The Trustees recognized that the the Fund's advisory agreement.
supervision of the independent Senior advisory arrangements and resulting
Officer. Over the course of each year, the advisory fees for the Fund and the other B. FUND PERFORMANCE
Sub-Committees meet with portfolio AIM Funds are the result of years of
managers for their assigned funds and review and negotiation between the The Board compared the Fund's performance
other members of management and review Trustees and AIM, that the Trustees may during the past one, three and five
with these individuals the performance, focus to a greater extent on certain calendar years to the performance of funds
investment objective(s), policies, aspects of these arrangements in some in the Fund's Lipper peer group that are
strategies and limitations of these funds. years than others, and that the Trustees' not managed by AIM, and against the
deliberations and conclusions in a performance of all funds in the Lipper
In addition to their meetings particular year may be based in part on Variable Annuity Underlying Funds -
throughout the year, the Sub-Committees their deliberations and conclusions of Mid-Cap Core Index. The Board also
meet at designated contract renewal these same arrangements throughout the reviewed the methodology used by Lipper to
meetings each year to conduct an in-depth year and in prior years. identify the Fund's peers. The Board noted
review of the performance, fees and that the Fund's performance was below the
expenses of their assigned funds. During FACTORS AND CONCLUSIONS AND SUMMARY OF median performance of its peers for the
the contract renewal process, the Trustees INDEPENDENT WRITTEN FEE EVALUATION one, three and five year periods. The
receive comparative performance and fee Board noted that the Fund's performance
data regarding all the AIM Funds prepared The discussion below serves as a summary was below the performance of the Index for
by an independent company, Lipper, Inc., of the Senior Officer's independent the one, three and five year periods. The
under the direction and supervision of the written evaluation, as well as a Board also considered the steps AIM has
independent Senior Officer who also discussion of the material factors and taken over the last several years to
prepares a separate analysis of this related conclusions that formed the basis improve the quality and efficiency of the
information for the Trustees. Each for the Board's approval of the Fund's services that AIM provides to the AIM
Sub-Committee then makes recommendations advisory agreement. Unless otherwise Funds. The Board concluded that AIM
to the Investments Committee regarding the stated, information set forth below is as continues to be responsive to the Board's
performance, fees and expenses of their of June 27, 2007 and does not reflect any focus on fund performance. However, due to
assigned funds. The Investments changes that may have occurred since that the Fund's underperformance, the Board
date, including but not limited to changes also concluded that it would be
to the Fund's performance, advi- appropriate for the Board to continue to
closely monitor and review the per-
(continued)
AIM V.I. Mid Cap Core Equity Fund
formance of the Fund. Although the D. ECONOMIES OF SCALE AND BREAKPOINTS istrative, transfer agency and
independent written evaluation of the distribution services to the Fund. The
Fund's Senior Officer (discussed below) The Board considered the extent to which Board considered the performance of AIM
only considered Fund performance through there are economies of scale in AIM's and its affiliates in providing these
the most recent calendar year, the Board provision of advisory services to the services and the organizational structure
also reviewed more recent Fund performance Fund. The Board also considered whether employed by AIM and its affiliates to
and this review did not change their the Fund benefits from such economies of provide these services. The Board also
conclusions. scale through contractual breakpoints in considered that these services are
the Fund's advisory fee schedule or provided to the Fund pursuant to written
C. ADVISORY FEES AND FEE WAIVERS through advisory fee waivers or expense contracts which are reviewed and approved
limitations. The Board noted that the on an annual basis by the Board. The Board
The Board compared the Fund's contractual Fund's contractual advisory fee schedule concluded that AIM and its affiliates were
advisory fee rate to the contractual includes three breakpoints and that the providing these services in a satisfactory
advisory fee rates of funds in the Fund's level of the Fund's advisory fees, as a manner and in accordance with the terms of
Lipper peer group that are not managed by percentage of the Fund's net assets, has their contracts, and were qualified to
AIM, at a common asset level and as of the decreased as net assets increased because continue to provide these services to the
end of the past calendar year. The Board of the breakpoints. Based on this Fund.
noted that the Fund's advisory fee rate information, the Board concluded that the
was comparable to the median advisory fee Fund's advisory fees appropriately reflect The Board considered the benefits
rate of its peers. The Board also reviewed economies of scale at current asset realized by AIM as a result of portfolio
the methodology used by Lipper and noted levels. The Board also noted that the Fund brokerage transactions executed through
that the contractual fee rates shown by shares directly in economies of scale "soft dollar" arrangements. Under these
Lipper include any applicable long-term through lower fees charged by third party arrangements, portfolio brokerage
contractual fee waivers. The Board also service providers based on the combined commissions paid by the Fund and/or other
compared the Fund's contractual advisory size of all of the AIM Funds and funds advised by AIM are used to pay for
fee rate to the contractual advisory fee affiliates. research and execution services. The Board
rates of other clients of AIM and its noted that soft dollar arrangements shift
affiliates with investment strategies E. PROFITABILITY AND FINANCIAL RESOURCES the payment obligation for the research
comparable to those of the Fund, including OF AIM and executions services from AIM to the
two mutual funds advised by AIM and a funds and therefore may reduce AIM's
Canadian fund advised by an AIM affiliate The Board reviewed information from AIM expenses. The Board also noted that
and sub-advised by AIM. The Board noted concerning the costs of the advisory and research obtained through soft dollar
that the Fund's rate was: (i) comparable other services that AIM and its affiliates arrangements may be used by AIM in making
to the rate for one of the mutual funds provide to the Fund and the profitability investment decisions for the Fund and may
and below the rate for the other mutual of AIM and its affiliates in providing therefore benefit Fund shareholders. The
fund; and (ii) above the sub-advisory fee these services. The Board also reviewed Board concluded that AIM's soft dollar
rate for the Canadian fund, although the information concerning the financial arrangements were appropriate. The Board
advisory fee rate for such Canadian fund condition of AIM and its affiliates. The also concluded that, based on their review
was above the Fund's. Board also reviewed with AIM the and representations made by AIM, these
methodology used to prepare the arrangements were consistent with
Additionally, the Board compared the profitability information. The Board regulatory requirements.
Fund's contractual advisory fee rate to considered the overall profitability of
the total advisory fees paid by numerous AIM, as well as the profitability of AIM The Board considered the fact that the
separately managed accounts/wrap accounts in connection with managing the Fund. The Fund's uninvested cash and cash collateral
advised by an AIM affiliate. The Board Board noted that AIM continues to operate from any securities lending arrangements
noted that the Fund's rate was generally at a net profit, although increased may be invested in money market funds
above the rates for the separately managed expenses in recent years have reduced the advised by AIM pursuant to procedures
accounts/wrap accounts. The Board profitability of AIM and its affiliates. approved by the Board. The Board noted
considered that management of the The Board concluded that the Fund's that AIM will receive advisory fees from
separately managed accounts/wrap accounts advisory fees were fair and reasonable, these affiliated money market funds
by the AIM affiliate involves different and that the level of profits realized by attributable to such investments, although
levels of services and different AIM and its affiliates from providing AIM has contractually agreed to waive the
operational and regulatory requirements services to the Fund was not excessive in advisory fees payable by the Fund with
than AIM's management of the Fund. The light of the nature, quality and extent of respect to its investment of uninvested
Board concluded that these differences are the services provided. The Board cash in these affiliated money market
appropriately reflected in the fee considered whether AIM is financially funds through at least April 30, 2009. The
structure for the Fund and the separately sound and has the resources necessary to Board considered the contractual nature of
managed accounts/wrap accounts. perform its obligations under the Fund's this fee waiver and noted that it remains
advisory agreement, and concluded that AIM in effect until at least April 30, 2009.
The Board noted that AIM has has the financial resources necessary to The Board concluded that the Fund's
contractually agreed to waive fees and/or fulfill these obligations. investment of uninvested cash and cash
limit expenses of the Fund through at collateral from any securities lending
least April 30, 2009 in an amount F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
necessary to limit total annual operating FUND'S SENIOR OFFICER market funds is in the best interests of
expenses to a specified percentage of the Fund and its shareholders.
average daily net assets for each class of The Board noted that, upon their
the Fund. The Board considered the direction, the Senior Officer of the Fund,
contractual nature of this fee waiver and who is independent of AIM and AIM's
noted that it remains in effect until at affiliates, had prepared an independent
least April 30, 2009. The Board reviewed written evaluation to assist the Board in
the Fund's effective advisory fee rate, determining the reasonableness of the
after taking account of this expense proposed management fees of the AIM Funds,
limitation, and considered the effect this including the Fund. The Board noted that
expense limitation would have on the they had relied upon the Senior Officer's
Fund's estimated total expenses. The Board written evaluation instead of a
concluded that the levels of fee competitive bidding process. In
waivers/expense limitations for the Fund determining whether to continue the Fund's
were fair and reasonable. advisory agreement, the Board considered
the Senior Officer's written evaluation.
After taking account of the Fund's
contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
the comparative advisory fee information AFFILIATES
and the expense limitation discussed
above, the Board concluded that the Fund's The Board considered various other
advisory fees were fair and reasonable. benefits received by AIM and its
affiliates resulting from AIM's
relationship with the Fund, including the
fees received by AIM and its affiliates
for their provision of admin-
AIM V.I. Money Market Fund
Semiannual Report to Shareholders o June 30, 2007
FIXED INCOME
Cash Equivalents
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Money Market Fund
Fund performance
As of June 30, 2007, the seven-day SEC yield on the Fund's Series I shares was 4.53% and the seven-day SEC yield on the Fund's
Series II shares was 4.28%.
====================================================================================================================================
AN INVESTMENT IN THE FUND 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.
====================================================================================================================================
The performance data quoted represent past connection with a variable product. Sales
performance and cannot guarantee charges, expenses and fees, which are
comparable future results; current determined by the variable product
performance may be lower or higher. Please issuers, will vary and will lower the
see your variable product issuer or total return.
financial advisor for the most recent
month-end variable product performance. Per NASD requirements, the most recent
Performance figures reflect fund expenses, month-end performance data at the Fund
reinvested distributions and changes in level, excluding variable product charges,
net asset value. is available on the AIM automated
Investment return and principal value will information line, 866-702-4402. As
fluctuate so that you may have a gain or mentioned above, for the most recent
loss when you sell shares. month-end performance including variable
product charges, please contact your
AIM V.I. Money Market Fund, a series variable product issuer or financial
portfolio of AIM Variable Insurance Funds, advisor.
is currently offered through insurance
companies issuing variable products. You
cannot purchase shares of the Fund
directly. Performance figures given
represent the Fund and are not intended to
reflect actual variable product values.
They do not reflect sales charges,
expenses and fees assessed in
AIM V.I. Money Market Fund
PORTFOLIO COMPOSITION*
Number of days to Maturity
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
1-7 60.0%
- ----------------------------------------------------------
8-30 8.3
- ----------------------------------------------------------
31-90 23.6
- ----------------------------------------------------------
91-180 6.0
- ----------------------------------------------------------
181+ 2.1
__________________________________________________________
==========================================================
</Table>
* The number of days to maturity of each holding is determined in accordance
with the provisions of Rule 2a-7 of the Investment Company Act of 1940.
SCHEDULE OF INVESTMENTS
June 30, 2007
(Unaudited)
<Table>
<Caption>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER-36.21%(A)
ASSET-BACKED SECURITIES-FULLY SUPPORTED
BANK-5.52%
Govco LLC (Multi CEP's-Government sponsored
entities) (Acquired 03/16/07; Cost
$973,560) 5.15%(b) 09/17/07 $1,000 $ 986,427
- --------------------------------------------------------------------------------
Legacy Capital Co., LLC-Series A (Multi
CEP's-Liberty Hampshire Co., LLC; agent)
(Acquired 04/17/07; Cost $1,022,450)
5.19%(b) 10/16/07 1,050 1,033,954
- --------------------------------------------------------------------------------
(Acquired 04/16/07; Cost $652,227) 5.19%(b) 10/17/07 670 659,665
================================================================================
2,680,046
================================================================================
ASSET-BACKED SECURITIES-MULTI-PURPOSE-3.99%
Mont Blanc Capital Corp. (Acquired 06/13/07;
Cost $1,932,145) 5.25%(b)(c) 09/17/07 1,959 1,937,002
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES- SECURITY INVESTMENT
VEHICLES-16.63%
Aquifer Funding Ltd./LLC (Acquired 06/06/07;
Cost $1,991,493) 5.28%(b) 07/05/07 2,000 1,999,120
- --------------------------------------------------------------------------------
Grampian Funding Ltd./LLC (Acquired 03/27/07;
Cost $975,538) 5.15%(b)(c) 09/14/07 1,000 989,414
- --------------------------------------------------------------------------------
(Acquired 05/22/07; Cost $974,363)
5.19%(b)(c) 11/16/07 1,000 980,268
- --------------------------------------------------------------------------------
Liberty Harbour CDO Ltd./Inc. (Acquired
05/16/07; Cost $1,853,019) 5.25%(b) 08/10/07 1,876 1,865,330
- --------------------------------------------------------------------------------
Perry Global Funding, Ltd./LLC (Acquired
05/22/07; Cost $244,387) 5.22%(b) 10/25/07 250 245,835
- --------------------------------------------------------------------------------
Scaldis Capital Ltd./LLC (Acquired 02/22/07;
Cost $978,457) 5.21%(b)(c) 07/25/07 1,000 996,675
- --------------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
<Caption>
ASSET-BACKED SECURITIES-SECURITY INVESTMENT
VEHICLES-(CONTINUED)
Surrey Funding Corp. (Acquired 06/05/07; Cost
$991,534) 5.26%(b) 08/02/07 $1,000 $ 995,475
================================================================================
8,072,117
================================================================================
DIVERSIFIED BANKS-10.07%
Bank of America Corp. 5.23% 09/04/07 2,000 1,981,422
- --------------------------------------------------------------------------------
CALYON North America Inc. 5.18%(c) 08/22/07 1,927 1,912,859
- --------------------------------------------------------------------------------
HBOS Treasury Services PLC 5.20%(c) 07/23/07 1,000 996,970
================================================================================
4,891,251
================================================================================
Total Commercial Paper (Cost $17,580,416) 17,580,416
================================================================================
VARIABLE RATE DEMAND NOTES-23.42%(D)(E)
INSURED-0.47%(F)
Omaha (City of), Nebraska; (Riverfront
Redevelopment Project); Series 2002 B,
Special Obligation Taxable RB (INS-Ambac
Assurance Corp.) 5.37%(g) 02/01/13 230 230,000
================================================================================
LETTER OF CREDIT ENHANCED-22.95%(H)
A Mining Group LLC; Series 2006, Taxable
Floating Rate Bonds (LOC-Wachovia Bank,
N.A.) 5.44%(g) 06/01/29 200 200,000
- --------------------------------------------------------------------------------
Albany (City of), New York Industrial
Development Agency (Albany Medical Center
Hospital); Series 2006 B, Taxable IDR
(LOC-Citizens Bank of Pennsylvania)
5.32%(g) 05/01/35 985 985,000
- --------------------------------------------------------------------------------
Albuquerque (City of), New Mexico (KTech
Corp. Project); Series 2002, Taxable RB
(LOC-Wells Fargo Bank, N.A.) 5.40% 11/01/22 650 650,000
- --------------------------------------------------------------------------------
</Table>
AIM V.I. Money Market Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
LETTER OF CREDIT ENHANCED-(CONTINUED)
Corp. Finance Managers, Inc. Integrated Loan
Program; Series 2003 B, PARTs (LOC-Wells
Fargo Bank, N.A.) 5.40%(g) 02/02/43 $2,150 $2,150,000
- --------------------------------------------------------------------------------
EPC Allentown, LLC; Series 2005, Taxable
Floating Rate Bonds (LOC-Wachovia Bank,
N.A.) 5.32%(g) 07/01/30 3,200 3,200,000
- --------------------------------------------------------------------------------
Moon (Township of), Allegheny (County of),
Pennsylvania Industrial Development
Authority (One Thorn Run Project); Series
1995 B, Taxable IDR (LOC-National City Bank
of Pennsylvania) 5.41%(g) 11/01/15 755 755,000
- --------------------------------------------------------------------------------
Roman Catholic Diocese of Charlotte; Series
2002, Taxable Floating Rate Bonds
(LOC-Wachovia Bank, N.A.) 5.32%(g) 05/01/14 1,200 1,200,000
- --------------------------------------------------------------------------------
Thomasville (City of), Georgia Payroll
Development Authority (American Fresh Foods
L.P.); Series 2005 B, Taxable RB
(LOC-Wachovia Bank, N.A.) 5.39%(g) 09/01/17 2,000 2,000,000
================================================================================
11,140,000
================================================================================
Total Variable Rate Demand Notes (Cost
$11,370,000) 11,370,000
================================================================================
MEDIUM-TERM NOTES-5.56%
Metropolitan Life Global Funding I Floating
Rate MTN (Acquired 11/10/04; Cost $700,525)
5.43%(b)(e) 01/28/08 700 700,125
- --------------------------------------------------------------------------------
Societe Generale S.A.; Unsec. Floating Rate
MTN (Acquired 10/26/05; Cost $2,000,000)
5.31%(b)(c)(e) 02/29/08 2,000 2,000,000
================================================================================
Total Medium-Term Notes (Cost $2,700,125) 2,700,125
================================================================================
CERTIFICATES OF DEPOSIT-4.12%
Deutsche Bank A.G (United Kingdom) 5.34%(c) 07/23/07 1,000 1,000,000
- --------------------------------------------------------------------------------
UBS A.G. 5.38% 06/02/08 1,000 1,000,000
================================================================================
Total Certificates of Deposit (Cost
$2,000,000) 2,000,000
================================================================================
MASTER NOTE AGREEMENT-4.12%
Merrill Lynch Mortgage Capital, Inc.
(Acquired 06/06/07; Cost $2,000,000)
5.51%(b)(e)(g)(i) 08/08/07 2,000 2,000,000
================================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
<Caption>
FUNDING AGREEMENT-2.06%
New York Life Insurance Co. (Acquired
04/04/07; Cost $1,000,000) 5.42%(b)(e)(j) 04/04/08 $1,000 $1,000,000
================================================================================
ASSET-BACKED SECURITIES-2.06%
ASSET-BACKED SECURITIES-FULLY SUPPORTED
BANK-2.06%
RACERS Trust; Series 2004-6-MM, Floating Rate
Notes (CEP-Lehman Brothers Holdings Inc.)
(Acquired 04/13/04; Cost $1,000,000)
5.37%(b)(e) (Cost $1,000,000) 11/22/07 1,000 1,000,000
================================================================================
TOTAL INVESTMENTS (excluding Repurchase
Agreements)-77.55% (Cost $37,650,541) 37,650,541
________________________________________________________________________________
================================================================================
</Table>
<Table>
<Caption>
REPURCHASE
AMOUNT
REPURCHASE AGREEMENTS-21.88%(K)
Fortis Bank S.A., Joint agreement dated
06/29/07, aggregate maturing value
$1,100,497,292 (collateralized by Corporate
obligations valued at $1,155,000,001;
5.25%-5.55%, 01/25/37-06/03/52) 5.43%,
07/02/07(c) 2,000,904 2,000,000
- --------------------------------------------------------------------------------------
Greenwich Capital Markets, Inc., Joint
agreement dated 06/29/07, aggregate
maturing value $800,358,667 (collateralized
by U.S. Government obligations valued at
$816,001,200; 4.29%-7.35%,
04/01/27-06/01/47) 5.38%, 07/02/07 8,624,389 8,621,524
======================================================================================
Total Repurchase Agreements (Cost
$10,621,524) 10,621,524
======================================================================================
TOTAL INVESTMENTS-99.43% (Cost
$48,272,065)(l)(m) 48,272,065
- --------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES- 0.57% 278,240
- --------------------------------------------------------------------------------------
NET ASSETS-100.00% $48,550,305
______________________________________________________________________________________
======================================================================================
</Table>
Investment Abbreviations:
<Table>
CEP - Credit Enhancement Provider
IDR - Industrial Development Revenue Bonds
INS - Insurer
LOC - Letter of Credit
MTN - Medium-Term Notes
PARTs - Pooled Adjustable Rate Taxable Notes(SM)
RACERS - Restructured Asset Certificates with Enhanced ReturnS(SM)
RB - Revenue Bonds
Unsec. - Unsecured
</Table>
AIM V.I. Money Market Fund
Notes to Schedule of Investments:
(a) Securities may be traded on a discount basis. The interest rate shown
represents the discount rate at the time of purchase by the Fund.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at June 30, 2007 was $19,389,290,
which represented 39.94% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) The security is credit guaranteed, enhanced or has credit risk by a foreign
entity. The foreign credit exposure to countries other than the United
States of America (as a percentage of net assets) is summarized as follows:
United Kingdom: 8.3%; France: 8.1%; Belgium: 6.2% other countries less than
5%: 4.0%.
(d) Demand security; payable upon demand by the Fund at specified time intervals
no greater than thirteen months. Interest rate is redetermined periodically.
Rate shown is the rate in effect on June 30, 2007.
(e) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on June 30, 2007.
(f) Principal and/or interest payments are secured by the bond insurance company
listed.
(g) In accordance with the procedures established by the Board of Trustees,
investments 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.
(h) Principal and interest payments are fully enhanced by a letter of credit
from the bank listed or a predecessor bank, branch or subsidiary.
(i) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon one or two business day's notice depending upon the
timing of the demand. Interest rates on master notes are redetermined daily.
Rate shown is the rate in effect on June 30, 2007.
(j) Security considered to be illiquid. The Fund is limited to investing 10% of
net assets in illiquid securities at the time of purchase. The value of this
security considered illiquid at June 30, 2007 represented 2.06% of the
Fund's Net Assets.
(k) Principal amount equals value at period end. See Note 1I.
(l) Also represents cost for federal income tax purposes.
(m) This table provides a listing of those entities that have either issued,
guaranteed, backed or otherwise enhanced the credit quality of more than 5%
of the securities held in the portfolio. In instances where the entity has
guaranteed, backed or otherwise enhanced the credit quality of a security,
it is not primarily responsible for the issuer's obligations but may be
called upon to satisfy the issuer's obligations.
<Table>
<Caption>
ENTITIES PERCENTAGE
------------------------------------------------------------------------
Wachovia Bank, N.A. 13.7%
------------------------------------------------------------------------
Wells Fargo Bank, N.A. 5.8
________________________________________________________________________
========================================================================
</Table>
AIM V.I. Money Market Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, excluding repurchase agreements,
at value (Cost $37,650,541) $37,650,541
- ------------------------------------------------------------
Repurchase agreements (Cost $10,621,524) 10,621,524
============================================================
Total investments (Cost $48,272,065) 48,272,065
============================================================
Receivables for:
Fund shares sold 231,233
- ------------------------------------------------------------
Interest 115,028
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 45,699
- ------------------------------------------------------------
Other assets 2,086
============================================================
Total assets 48,666,111
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 10,355
- ------------------------------------------------------------
Trustee deferred compensation and retirement
plans 52,539
- ------------------------------------------------------------
Accrued administrative services fees 24,178
- ------------------------------------------------------------
Accrued distribution fees -- Series II 1,427
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,417
- ------------------------------------------------------------
Accrued transfer agent fees 537
- ------------------------------------------------------------
Accrued operating expenses 23,353
============================================================
Total liabilities 115,806
============================================================
Net assets applicable to shares outstanding $48,550,305
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $48,543,961
- ------------------------------------------------------------
Undistributed net investment income 6,344
============================================================
$48,550,305
____________________________________________________________
============================================================
NET ASSETS:
Series I $46,291,807
____________________________________________________________
============================================================
Series II $ 2,258,498
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 46,290,480
____________________________________________________________
============================================================
Series II 2,258,399
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 1.00
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 1.00
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $1,237,474
============================================================
EXPENSES:
Advisory fees 91,921
- ------------------------------------------------------------
Administrative services fees 66,706
- ------------------------------------------------------------
Custodian fees 1,670
- ------------------------------------------------------------
Distribution fees -- Series II 2,858
- ------------------------------------------------------------
Transfer agent fees 2,222
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 9,143
- ------------------------------------------------------------
Professional services fees 17,809
- ------------------------------------------------------------
Other 4,569
============================================================
Total expenses 196,898
============================================================
Net investment income 1,040,576
============================================================
Net increase in net assets resulting from
operations $1,040,576
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Money Market Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,040,576 $ 2,025,521
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Series I (991,529) (1,928,189)
- -----------------------------------------------------------------------------------------
Series II (49,047) (97,332)
=========================================================================================
Decrease in net assets resulting from distributions (1,040,576) (2,025,521)
=========================================================================================
Share transactions-net:
Series I 2,723,546 (1,354,278)
- -----------------------------------------------------------------------------------------
Series II (82,937) (738,190)
=========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 2,640,609 (2,092,468)
=========================================================================================
Net increase (decrease) in net assets 2,640,609 (2,092,468)
=========================================================================================
NET ASSETS:
Beginning of period 45,909,696 48,002,164
=========================================================================================
End of period (including undistributed net investment
income of $6,344 and $6,344, respectively) $48,550,305 $45,909,696
_________________________________________________________________________________________
=========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Money Market Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Money Market Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is to provide as high a level of current
income as is consistent with the preservation of capital and liquidity.
A. SECURITY VALUATIONS -- The Fund's securities are recorded on the basis of
amortized cost which approximates value as permitted by Rule 2a-7 under the
1940 Act. This method values a security at its cost on the date of purchase
and, thereafter, assumes a constant amortization to maturity of any
premiums or accretion of any discounts.
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 accretion
of discounts on investments, is recorded on the accrual basis from
settlement date. Paydown gains and losses on mortgage and asset-backed
securities are recorded as adjustments to interest income.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized gain (loss) from
investment securities reported in the Statement of Operations and the
Statement of Changes in Net Assets and the realized net gains (losses) on
securities per share in the Financial Highlights. Transaction costs are
included in the calculation of the Fund's net asset value and, accordingly,
they reduce the Fund's total returns. These transaction costs are not
considered operating expenses and are not reflected in net investment
income reported in the Statement of Operations and Statement of Changes in
Net Assets, or the net investment income per share and ratios of expenses
and net investment income reported in the Financial Highlights, nor are
they limited by any expense limitation arrangements between the Fund and
the advisor.
The Fund allocates realized and unrealized capital gains and losses to a
class based on the relative net assets of each class. The Fund allocates
income to a class based on the relative value of the settled shares of each
class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income are declared daily and paid
monthly to separate accounts of participating insurance companies.
Distributions from net realized gain, if any, are generally paid annually
and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
AIM V.I. Money Market Fund
I. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements.
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. Eligible securities for collateral
are securities consistent with the Fund's investment objectives and may
consist of U.S. Government Securities, U.S. Government Agency Securities
and/or, Investment Grade Debt Securities. Collateral consisting of U.S.
Government Securities and U.S. Government Agency Securities is marked to
market daily to ensure its market value is at least 102% of the sales price
of the repurchase agreement. Collateral consisting of Investment Grade Debt
Securities is marked to market daily to ensure its market value is at least
105% of the sales price of the repurchase agreement. The investments in
some repurchase agreements, pursuant to procedures approved by the Board of
Trustees, are through participation with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates ("Joint repurchase agreements"). The
principal amount of the repurchase agreement is equal to the value at
period-end. If the seller of a repurchase agreement fails to repurchase the
security in accordance with the terms of the agreement, the Fund might
incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the collateral and loss of income.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.40%
===================================================================
Over $250 million 0.35%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) extraordinary items; (iv) expenses related to a
merger or reorganization, as approved by the Fund's Board of Trustees; and (v)
expenses that the Fund has incurred but did not actually pay because of an
expense offset arrangement. Currently, in addition to the expense reimbursement
arrangement with INVESCO PLC ("INVESCO") (formerly "AMVESCAP PLC") described
more fully below, the only expense offset arrangements from which the Fund may
benefit are in the form of credits that the Fund receives from banks where the
Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. These credits are used to pay certain expenses incurred by the Fund. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year. AIM did not waive fees
and/or reimburse expenses during the period under this expense limitation.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $41,911
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. Money Market Fund
NOTE 3--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,286 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 4--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources exceed
10% of the Fund's total assets. To the extent that the loan is required to be
secured by collateral, the collateral is marked to market daily to ensure that
the market value is at least 102% of the outstanding principal value of the
loan. For the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with The Bank of New York, the custodian bank.
To compensate the custodian bank for such overdrafts, the overdrawn Fund may
either (i) leave funds as a compensating balance in the account so the custodian
bank can be compensated by earning the additional interest; or (ii) compensate
by paying the custodian bank at a rate agreed upon by the custodian bank and
AIM, not to exceed the contractually agreed upon rate.
NOTE 5--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 6--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 15,524,282 $ 15,524,282 29,676,430 $ 29,676,430
- ------------------------------------------------------------------------------------------------------------------------
Series II 172,224 172,224 808,564 808,564
========================================================================================================================
Issued as reinvestment of dividends:
Series I 991,511 991,511 1,928,164 1,928,164
- ------------------------------------------------------------------------------------------------------------------------
Series II 49,043 49,043 97,332 97,332
========================================================================================================================
Reacquired:
Series I (13,792,247) (13,792,247) (32,958,863) (32,958,863)
- ------------------------------------------------------------------------------------------------------------------------
Series II (304,204) (304,204) (1,644,095) (1,644,095)
========================================================================================================================
2,640,609 $ 2,640,609 (2,092,468) $ (2,092,468)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 84% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
AIM V.I. Money Market Fund
NOTE 7--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
NOTE 8--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
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 0.02 0.04 0.02 0.01 0.01 0.01
=================================================================================================================================
Less dividends from net investment income (0.02) (0.04) (0.02) (0.01) (0.01) (0.01)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 2.27% 4.27% 2.51% 0.69% 0.58% 1.19%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,292 $43,568 $44,923 $54,008 $77,505 $119,536
=================================================================================================================================
Ratio of expenses to average net assets 0.84%(b) 0.90% 0.82% 0.75% 0.66% 0.67%
=================================================================================================================================
Ratio of net investment income to average net assets 4.54%(b) 4.20% 2.46% 0.67% 0.59% 1.18%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(b) Ratios are annualized and based on average daily net assets of
$44,035,978.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
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 0.02 0.04 0.02 0.004 0.003 0.01
=================================================================================================================================
Less dividends from net investment income (0.02) (0.04) (0.02) (0.004) (0.003) (0.01)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 2.14% 4.01% 2.26% 0.44% 0.33% 0.93%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,258 $2,341 $3,080 $ 6,076 $ 2,382 $7,831
=================================================================================================================================
Ratio of expenses to average net assets 1.09%(b) 1.15% 1.07% 1.00% 0.91% 0.92%
=================================================================================================================================
Ratio of net investment income to average net assets 4.29%(b) 3.95% 2.21% 0.42% 0.34% 0.93%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(b) Ratios are annualized and based on average daily net assets of
$2,305,298.
AIM V.I. Money Market Fund
NOTE 9--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Money Market Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,022.70 $4.21 $1,020.63 $4.21 0.84%
Series II 1,000.00 1,021.40 5.46 1,019.39 5.46 1.09
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Money Market Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM Committee considers each Sub-Committee's sory fees, expense limitations and/or fee
Variable Insurance Funds required under recommendations and makes its own waivers.
the Investment Company Act of 1940 to recommendations regarding the performance,
approve annually the renewal of the AIM fees and expenses of the AIM Funds to the A. NATURE, EXTENT AND QUALITY OF SERVICES
V.I. Money Market Fund (the Fund) full Board. Moreover, the Investments PROVIDED BY AIM
investment advisory agreement with A I M Committee considers each Sub-Committee's
Advisors, Inc. (AIM). During contract recommendations in making its annual The Board reviewed the advisory services
renewal meetings held on June 25-27, 2007, recommendation to the Board whether to provided to the Fund by AIM under the
the Board as a whole and the disinterested approve the continuance of each AIM Fund's Fund's advisory agreement, the performance
or "independent" Trustees, voting investment advisory agreement and of AIM in providing these services, and
separately, approved the continuance of sub-advisory agreement, if applicable the credentials and experience of the
the Fund's investment advisory agreement (advisory agreements), for another year. officers and employees of AIM who provide
for another year, effective July 1, 2007. these services. The Board's review of the
In doing so, the Board determined that the The independent Trustees, as mentioned qualifications of AIM to provide these
Fund's advisory agreement is in the best above, are assisted in their annual services included the Board's
interests of the Fund and its shareholders evaluation of the advisory agreements by consideration of AIM's portfolio and
and that the compensation to AIM under the the independent Senior Officer. One product review process, various back
Fund's advisory agreement is fair and responsibility of the Senior Officer is to office support functions provided by AIM,
reasonable. manage the process by which the AIM Funds' and AIM's equity and fixed income trading
proposed management fees are negotiated operations. The Board concluded that the
The independent Trustees met separately during the annual contract renewal process nature, extent and quality of the advisory
during their evaluation of the Fund's to ensure that they are negotiated in a services provided to the Fund by AIM were
investment advisory agreement with manner which is at arms' length and appropriate and that AIM currently is
independent legal counsel from whom they reasonable. Accordingly, the Senior providing satisfactory advisory services
received independent legal advice, and the Officer must either supervise a in accordance with the terms of the Fund's
independent Trustees also received competitive bidding process or prepare an advisory agreement. In addition, based on
assistance during their deliberations from independent written evaluation. The Senior their ongoing meetings throughout the year
the independent Senior Officer, a Officer has recommended that an with the Fund's portfolio managers, the
full-time officer of the AIM Funds who independent written evaluation be provided Board concluded that these individuals are
reports directly to the independent and, upon the direction of the Board, has competent and able to continue to carry
Trustees. The following discussion more prepared an independent written out their responsibilities under the
fully describes the process employed by evaluation. Fund's advisory agreement.
the Board to evaluate the performance of
the AIM Funds (including the Fund) During the annual contract renewal In determining whether to continue the
throughout the year and, more process, the Board considered the factors Fund's advisory agreement, the Board
specifically, during the annual contract discussed below under the heading "Factors considered the prior relationship between
renewal meetings. and Conclusions and Summary of Independent AIM and the Fund, as well as the Board's
Written Fee Evaluation" in evaluating the knowledge of AIM's operations, and
THE BOARD'S FUND EVALUATION PROCESS fairness and reasonableness of the Fund's concluded that it was beneficial to
advisory agreement at the contract renewal maintain the current relationship, in
The Board's Investments Committee has meetings and at their meetings throughout part, because of such knowledge. The Board
established three Sub-Committees which are the year as part of their ongoing also considered the steps that AIM and its
responsible for overseeing the management oversight of the Fund. The Fund's advisory affiliates have taken over the last
of a number of the series portfolios of agreement was considered separately, several years to improve the quality and
the AIM Funds. This Sub-Committee although the Board also considered the efficiency of the services they provide to
structure permits the Trustees to focus on common interests of all of the AIM Funds the Funds in the areas of investment
the performance of the AIM Funds that have in their deliberations. The Board performance, product line diversification,
been assigned to them. The Sub-Committees comprehensively considered all of the distribution, fund operations, shareholder
meet throughout the year to review the information provided to them and did not services and compliance. The Board
performance of their assigned funds, and identify any particular factor that was concluded that the quality and efficiency
the Sub-Committees review monthly and controlling. Furthermore, each Trustee may of the services AIM and its affiliates
quarterly comparative performance have evaluated the information provided provide to the AIM Funds in each of these
information and periodic asset flow data differently from one another and areas have generally improved, and support
for their assigned funds. These materials attributed different weight to the various the Board's approval of the continuance of
are prepared under the direction and factors. The Trustees recognized that the the Fund's advisory agreement.
supervision of the independent Senior advisory arrangements and resulting
Officer. Over the course of each year, the advisory fees for the Fund and the other B. FUND PERFORMANCE
Sub-Committees meet with portfolio AIM Funds are the result of years of
managers for their assigned funds and review and negotiation between the The Board compared the Fund's performance
other members of management and review Trustees and AIM, that the Trustees may during the past one, three and five
with these individuals the performance, focus to a greater extent on certain calendar years to the performance of funds
investment objective(s), policies, aspects of these arrangements in some in the Fund's Lipper peer group that are
strategies and limitations of these funds. years than others, and that the Trustees' not managed by AIM, and against the
deliberations and conclusions in a performance of all funds in the Lipper
In addition to their meetings particular year may be based in part on Variable Annuity Underlying Funds - Money
throughout the year, the Sub-Committees their deliberations and conclusions of Market Index. The Board also reviewed the
meet at designated contract renewal these same arrangements throughout the methodology used by Lipper to identify the
meetings each year to conduct an in-depth year and in prior years. Fund's peers. The Board noted that the
review of the performance, fees and Fund's performance was comparable to the
expenses of their assigned funds. During FACTORS AND CONCLUSIONS AND SUMMARY OF median performance of its peers for the
the contract renewal process, the Trustees INDEPENDENT WRITTEN FEE EVALUATION one year period, and below such
receive comparative performance and fee performance for the three and five year
data regarding all the AIM Funds prepared The discussion below serves as a summary periods. The Board noted that the Fund's
by an independent company, Lipper, Inc., of the Senior Officer's independent written performance was comparable to the
under the direction and supervision of the evaluation, as well as a discussion of the performance of the Index for the one year
independent Senior Officer who also material factors and related conclusions period, and below such Index for the
prepares a separate analysis of this that formed the basis for the Board's three and five year periods. The Board
information for the Trustees. Each approval of the Fund's advisory agreement. also considered the steps AIM has
Sub-Committee then makes recommendations Unless otherwise stated, information set taken over the last several years to
to the Investments Committee regarding the forth below is as of June 27, 2007 and improve the quality and efficiency of the
performance, fees and expenses of their does not reflect any changes that may have services that AIM provides to the AIM
assigned funds. The Investments occurred since that date, including but Funds. The Board concluded that AIM
not limited to changes to the Fund's continues to be responsive to the Board's
performance, advi- focus on fund performance. However, due to
the Fund's underperformance, the Board
also
(continued)
AIM V.I. Money Market Fund
concluded that it would be appropriate for at the end of the past calendar year and ates were providing these services in a
the Board to continue to closely monitor the way in which the breakpoint has been satisfactory manner and in accordance with
and review the per-formance of the Fund. structured, the Fund has yet to benefit the terms of their contracts, and were
Although the independent written from the breakpoint. Based on this qualified to continue to provide these
evaluation of the Fund's Senior Officer information, the Board concluded that the services to the Fund.
(discussed below) only considered Fund Fund's advisory fees would reflect
performance through the most recent economies of scale at higher asset levels. The Board considered the benefits
calendar year, the Board also reviewed The Board also noted that the Fund shares realized by as a result of portfolio
more recent Fund performance and this directly in economies of scale through brokerage transactions executed through
review did not change their conclusions. lower fees charged by third party service "soft dollar" arrangements. Under these
providers based on the combined size of arrangements, portfolio brokerage
C. ADVISORY FEES AND FEE WAIVERS all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
funds advised by AIM are used to pay for
The Board compared the Fund's E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
contractual advisory fee rate to the OF AIM noted that soft dollar arrangements shift
contractual advisory fee rates of funds in the payment obligation for the research
the Fund's Lipper peer group that are not The Board reviewed information from AIM and executions services from AIM to the
managed by AIM, at a common asset level concerning the costs of the advisory and funds and therefore may reduce AIM's
and as of the end of the past calendar other services that AIM and its affiliates expenses. The Board also noted that
year. The Board noted that the Fund's provide to the Fund and the profitability research obtained through soft dollar
advisory fee rate was comparable to the of AIM and its affiliates in providing arrangements may be used by AIM in making
median advisory fee rate of its peers. The these services. The Board also reviewed investment decisions for the Fund and may
Board also reviewed the methodology used information concerning the financial therefore benefit Fund shareholders. The
by Lipper and noted that the contractual condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
fee rates shown by Lipper include any Board also reviewed with AIM the arrangements were appropriate. The Board
applicable long-term contractual fee methodology used to prepare the also concluded that, based on their
waivers. The Board also compared the profitability information. review and representations made by AIM,
Fund's contractual advisory fee rate to The Board considered the overall these arrangements were consistent with
the contractual advisory fee rates of profitability of AIM, as well as the regulatory requirements.
other clients of AIM and its affiliates profitability of AIM in connection with
with investment strategies comparable to managing the Fund. The Board noted that
those of the Fund, including two mutual AIM continues to operate at a net profit,
funds advised by AIM and four Canadian although increased expenses in recent
funds advised by an AIM affiliate and years have reduced the profitability of
sub-advised by AIM. The Board noted that AIM and its affiliates. The Board
the Fund's rate was: (i) the same as the concluded that the Fund's advisory fees
rate for one of the mutual funds and above were fair and reasonable, and that the
the rate for the other mutual fund; and level of profits realized by AIM and its
(ii) above the sub-advisory fee rate and affiliates from providing services to the
the advisory fee rate for one of the Fund was not excessive in light of the
Canadian funds and above or equal to the nature, quality and extent of the services
sub-advisory fee rates and below the provided. The Board considered whether AIM
advisory fee rates for the other three is financially sound and has the resources
Canadian funds. necessary to perform its obligations under
the Fund's advisory agreement, and
The Board noted that AIM has concluded that AIM has the financial
contractually agreed to waive fees and/or resources necessary to fulfill these
limit expenses of the Fund through at obligations.
least April 30, 2009 in an amount
necessary to limit total annual operating F. INDEPENDENT WRITTEN EVALUATION OF THE
expenses to a specified percentage of FUND'S SENIOR OFFICER
average daily net assets for each class of
the Fund. The Board considered the The Board noted that, upon their
contractual nature of this fee waiver and direction, the Senior Officer of the Fund,
noted that it remains in effect until at who is independent of AIM and AIM's
least April 30, 2009. The Board reviewed affiliates, had prepared an independent
the Fund's effective advisory fee rate, written evaluation to assist the Board in
after taking account of this expense determining the reasonableness of the
limitation, and considered the effect this proposed management fees of the AIM Funds,
expense limitation would have on the including the Fund. The Board noted that
Fund's estimated total expenses. The Board they had relied upon the Senior Officer's
concluded that the levels of fee written evaluation instead of a
waivers/expense limitations for the Fund competitive bidding process. In
were fair and reasonable. determining whether to continue the Fund's
advisory agreement, the Board considered
After taking account of the Fund's the Senior Officer's written evaluation.
contractual advisory fee rate, as well as
the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
and the expense limitation discussed AFFILIATES
above, the Board concluded that the Fund's
advisory fees were fair and reasonable. The Board considered various other
benefits received by AIM and its
D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
relationship with the Fund, including the
The Board considered the extent to which fees received by AIM and its affiliates
there are economies of scale in AIM's for their provision of administrative,
provision of advisory services to the transfer agency and distribution services
Fund. The Board also considered whether to the Fund. The Board considered the
the Fund benefits from such economies of performance of AIM and its affiliates in
scale through contractual breakpoints in providing these services and the
the Fund's advisory fee schedule or organizational structure employed by AIM
through advisory fee waivers or expense and its affiliates to provide these
limitations. The Board noted that the services. The Board also considered that
Fund's contractual advisory fee schedule these services are provided to the Fund
includes one breakpoint but that, due to pursuant to written contracts which are
the Fund's asset level reviewed and approved on an annual basis
by the Board. The Board concluded that AIM
and its affili-
AIM V.I. Small Cap Equity Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Small Cap
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Small Cap Equity Fund
Fund performance Per NASD requirements, the most recent
======================================================================================= month-end performance data at the Fund
PERFORMANCE SUMMARY level, excluding variable product charges,
is available on this AIM automated
FUND VS. INDEXES information line, 866-702-4402. As
mentioned above, for the most recent
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. month-end performance including variable
If variable product issuer charges were included, returns would be lower. product charges, please contact your
variable product issuer or financial
Series I Shares 8.95% advisor.
Series II Shares 8.74
S&P 500 Index(1) (Broad Market Index) 6.96 Had the advisor not waived fees and/or
Russell 2000 Index(1) (Style-Specific Index) 6.45 reimbursed expenses in the past,
Lipper VUF Small-Cap Core Funds Index(1) (Peer Group Index) 7.82 performance would have been lower.
Lipper Small-Cap Core Funds Index(1) (Former Peer Group Index) 9.54
(1) Total annual operating expenses less
Source: (1) Lipper Inc. contractual advisory fees by the
advisor in effect through at least
The unmanaged S&P 500 -- REGISTERED TRADEMARK -- Index is an index of common stocks April 30, 2009. See current
frequently used as a general measure of U.S. stock market performance. prospectus for more information.
The unmanaged Russell 2000 -- REGISTERED TRADEMARK -- Index represents the
performance of the stocks of small-capitalization companies. The Russell 2000 Index is
a trademark/service mark of the Frank Russell Company. Russell
- -- REGISTERED TRADEMARK -- is a trademark of the Frank Russell Company.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Small-Cap
Core Funds Index as its peer group instead of the Lipper Small-Cap Core Funds Index. In
2006, Lipper began publishing VUF indexes, allowing the Fund to be compared with the
Lipper VUF Small-Cap Core Funds Index. The unmanaged Lipper VUF Small-Cap Core Funds
Index is an equally weighted representation of the largest variable insurance
underlying funds in the Lipper Small-Cap Core Funds category. Lipper Inc. is an
independent mutual fund performance monitor.
The unmanaged Lipper Small-Cap Core Funds Index represents an average of the
performance of the largest small-capitalization core equity funds tracked by Lipper
Inc. an independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== expense ratio set forth in the most recent
FUND PERFORMANCE Fund prospectus as of the date of this
As of 6/30/07 report for Series I and Series II shares
SERIES I SHARES was 1.16% and 1.41%, respectively.1 The
Inception (8/29/03) 15.23% total annual Fund operating expense ratio
1 Year 16.45 set forth in the most recent Fund
prospectus as of the date of this report
SERIES II SHARES for Series I and Series II shares was
Inception (8/29/03) 14.99% 1.29% and 1.54%, respectively. The expense
1 Year 16.11 ratios presented above may vary from the
========================================== expense ratios presented in other sections
of this report that are based on expenses
The performance of the Fund's Series I and incurred during the period covered by this
Series II share classes will differ report.
primarily due to different class expenses.
AIM V.I. Small Cap Equity Fund, a series
The performance data quoted represent portfolio of AIM Variable Insurance Funds,
past performance and cannot guarantee is currently offered through insurance
comparable future results; current companies issuing variable products. You
performance may be lower or higher. Please cannot purchase shares of the Fund
contact your variable product issuer or directly. Performance figures given
financial advisor for the most recent represent the Fund and are not intended to
month-end variable product performance. reflect actual variable product values.
Performance figures reflect Fund expenses, They do not reflect sales charges,
reinvested distributions and changes in expenses and fees assessed in connection
net asset value. Investment return and with a variable product. Sales charges,
principal value will fluctuate so that you expenses and fees, which are determined by
may have a gain or loss when you sell the variable product issuers, will vary
shares. and will lower the total return.
The net annual Fund operating
AIM V.I. Small Cap Equity Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 19.1%
- ----------------------------------------------------------
Industrials 18.0
- ----------------------------------------------------------
Financials 13.0
- ----------------------------------------------------------
Consumer Discretionary 12.8
- ----------------------------------------------------------
Health Care 12.2
- ----------------------------------------------------------
Materials 7.3
- ----------------------------------------------------------
Energy 5.7
- ----------------------------------------------------------
Consumer Staples 4.4
- ----------------------------------------------------------
Telecommunication Services 3.3
- ----------------------------------------------------------
Utilities 1.4
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 2.8
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.19%
AEROSPACE & DEFENSE-1.25%
Aeroviroment, Inc.(a) 18,099 $ 373,020
- -----------------------------------------------------------------------
Curtiss-Wright Corp. 27,029 1,259,822
=======================================================================
1,632,842
=======================================================================
AIRLINES-0.87%
Allegiant Travel Co.(a) 37,220 1,144,143
=======================================================================
APPAREL RETAIL-3.04%
Cache, Inc.(a) 54,905 728,589
- -----------------------------------------------------------------------
Charming Shoppes, Inc.(a) 100,576 1,089,238
- -----------------------------------------------------------------------
Gymboree Corp. (The)(a) 21,180 834,704
- -----------------------------------------------------------------------
Wet Seal, Inc. (The)-Class A(a) 219,543 1,319,454
=======================================================================
3,971,985
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.58%
Fossil, Inc.(a) 25,767 759,869
=======================================================================
APPLICATION SOFTWARE-2.47%
Blackbaud, Inc. 35,707 788,410
- -----------------------------------------------------------------------
Epicor Software Corp.(a) 69,472 1,033,049
- -----------------------------------------------------------------------
Transaction Systems Architects, Inc.(a) 41,838 1,408,267
=======================================================================
3,229,726
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.17%
Affiliated Managers Group, Inc.(a) 11,935 1,536,751
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
BIOTECHNOLOGY-0.45%
InterMune, Inc.(a) 22,923 $ 594,623
=======================================================================
BUILDING PRODUCTS-2.25%
Goodman Global, Inc.(a) 72,134 1,602,817
- -----------------------------------------------------------------------
NCI Building Systems, Inc.(a) 27,284 1,345,920
=======================================================================
2,948,737
=======================================================================
COMMUNICATIONS EQUIPMENT-2.18%
Comtech Telecommunications Corp.(a) 31,632 1,468,357
- -----------------------------------------------------------------------
OpNext, Inc.(a) 71,091 941,245
- -----------------------------------------------------------------------
Starent Networks Corp.(a) 30,154 443,264
=======================================================================
2,852,866
=======================================================================
COMPUTER STORAGE & PERIPHERALS-1.03%
Emulex Corp.(a) 61,539 1,344,012
=======================================================================
CONSTRUCTION & ENGINEERING-0.92%
Infrasource Services Inc.(a) 32,487 1,205,268
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.86%
Euronet Worldwide, Inc.(a) 35,395 1,032,118
- -----------------------------------------------------------------------
Wright Express Corp.(a) 40,934 1,402,808
=======================================================================
2,434,926
=======================================================================
DIVERSIFIED CHEMICALS-1.13%
FMC Corp. 16,532 1,477,795
=======================================================================
DIVERSIFIED METALS & MINING-1.13%
Compass Minerals International, Inc. 42,644 1,478,041
=======================================================================
</Table>
AIM V.I. Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
EDUCATION SERVICES-0.53%
Capella Education Co.(a) 9,217 $ 424,259
- -----------------------------------------------------------------------
Universal Technical Institute Inc.(a) 10,475 265,960
=======================================================================
690,219
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.00%
Genlyte Group Inc. (The)(a) 16,651 1,307,770
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-2.94%
Benchmark Electronics, Inc.(a) 59,847 1,353,739
- -----------------------------------------------------------------------
Methode Electronics, Inc. 82,548 1,291,876
- -----------------------------------------------------------------------
Park Electrochemical Corp. 42,513 1,198,017
=======================================================================
3,843,632
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.82%
Waste Connections, Inc.(a) 35,656 1,078,237
=======================================================================
FOOD RETAIL-0.97%
Ruddick Corp. 42,250 1,272,570
=======================================================================
GAS UTILITIES-1.01%
Energen Corp. 23,956 1,316,143
=======================================================================
HEALTH CARE DISTRIBUTORS-0.93%
Owens & Minor, Inc. 34,670 1,211,370
=======================================================================
HEALTH CARE EQUIPMENT-1.86%
ev3 Inc.(a) 52,752 890,454
- -----------------------------------------------------------------------
STERIS Corp. 50,306 1,539,363
=======================================================================
2,429,817
=======================================================================
HEALTH CARE FACILITIES-1.52%
LCA-Vision Inc. 21,723 1,026,629
- -----------------------------------------------------------------------
Skilled Healthcare Group Inc.-Class A(a) 62,101 963,186
=======================================================================
1,989,815
=======================================================================
HEALTH CARE SERVICES-0.85%
Cross Country Healthcare, Inc.(a) 67,049 1,118,377
=======================================================================
HEALTH CARE SUPPLIES-2.62%
DJO Inc.(a) 27,090 1,118,004
- -----------------------------------------------------------------------
Haemonetics Corp.(a) 27,972 1,471,607
- -----------------------------------------------------------------------
Medical Action Industries Inc.(a) 46,617 841,903
=======================================================================
3,431,514
=======================================================================
HEALTH CARE TECHNOLOGY-0.39%
Omnicell, Inc.(a) 24,524 509,609
=======================================================================
HOTELS, RESORTS & CRUISE LINES-1.01%
Red Lion Hotels Corp.(a) 102,400 1,315,840
=======================================================================
HOUSEHOLD APPLIANCES-1.10%
Snap-on Inc. 28,442 1,436,605
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
HOUSEHOLD PRODUCTS-0.54%
Central Garden & Pet Co.(a) 25,263 $ 309,724
- -----------------------------------------------------------------------
Central Garden & Pet Co.-Class A(a) 34,254 401,800
=======================================================================
711,524
=======================================================================
HOUSEWARES & SPECIALTIES-1.15%
Tupperware Brands Corp. 52,428 1,506,781
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.69%
Heidrick & Struggles International, Inc.(a) 15,752 807,133
- -----------------------------------------------------------------------
Kforce Inc.(a) 88,234 1,409,979
=======================================================================
2,217,112
=======================================================================
INDUSTRIAL MACHINERY-4.84%
Chart Industries, Inc.(a) 66,971 1,904,655
- -----------------------------------------------------------------------
Kadant Inc.(a) 48,242 1,505,151
- -----------------------------------------------------------------------
RBC Bearings Inc.(a) 34,935 1,441,069
- -----------------------------------------------------------------------
Valmont Industries, Inc. 20,295 1,476,664
=======================================================================
6,327,539
=======================================================================
INSURANCE BROKERS-0.87%
Hilb Rogal and Hobbs Co. 26,658 1,142,562
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-3.30%
Alaska Communications Systems Group Inc. 63,201 1,001,104
- -----------------------------------------------------------------------
Cincinnati Bell Inc.(a) 185,089 1,069,814
- -----------------------------------------------------------------------
NTELOS Holdings Corp. 81,198 2,244,313
=======================================================================
4,315,231
=======================================================================
INTERNET SOFTWARE & SERVICES-2.70%
Ariba, Inc.(a) 138,056 1,368,135
- -----------------------------------------------------------------------
CyberSource Corp.(a) 98,552 1,188,537
- -----------------------------------------------------------------------
DealerTrack Holdings Inc.(a) 26,662 982,228
=======================================================================
3,538,900
=======================================================================
INVESTMENT BANKING & BROKERAGE-0.81%
CMET Finance Holdings, Inc. (Acquired
12/08/03; Cost $20,000)(a)(b)(c) 200 3,404
- -----------------------------------------------------------------------
Thomas Weisel Partners Group, Inc.(a) 63,299 1,053,928
=======================================================================
1,057,332
=======================================================================
IT CONSULTING & OTHER SERVICES-0.17%
EnerNOC, Inc.(a) 5,915 225,539
=======================================================================
LEISURE PRODUCTS-0.72%
Smith & Wesson Holding Corp.(a) 55,937 936,945
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-1.77%
Bio-Rad Laboratories, Inc.-Class A(a) 17,809 1,345,826
- -----------------------------------------------------------------------
Dionex Corp.(a) 13,592 964,896
=======================================================================
2,310,722
=======================================================================
</Table>
AIM V.I. Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
MANAGED HEALTH CARE-0.89%
Healthspring, Inc.(a) 61,100 $ 1,164,566
=======================================================================
METAL & GLASS CONTAINERS-1.91%
AptarGroup, Inc. 41,338 1,469,979
- -----------------------------------------------------------------------
Bway Holding Co.(a) 69,319 1,025,921
=======================================================================
2,495,900
=======================================================================
MOVIES & ENTERTAINMENT-0.90%
World Wrestling Entertainment, Inc. 73,528 1,175,713
=======================================================================
MULTI-UTILITIES-0.40%
Avista Corp. 24,492 527,803
=======================================================================
OFFICE REIT'S-0.82%
Alexandria Real Estate Equities, Inc. 11,115 1,076,154
=======================================================================
OFFICE SERVICES & SUPPLIES-0.30%
PeopleSupport Inc.(a) 34,992 397,159
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.41%
NATCO Group Inc.-Class A(a) 35,733 1,645,147
- -----------------------------------------------------------------------
Oceaneering International, Inc.(a) 28,710 1,511,295
=======================================================================
3,156,442
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.10%
Comstock Resources, Inc.(a) 45,931 1,376,552
- -----------------------------------------------------------------------
Penn Virginia Corp. 34,092 1,370,498
=======================================================================
2,747,050
=======================================================================
OIL & GAS REFINING & MARKETING-1.20%
Alon USA Energy, Inc. 35,731 1,572,521
=======================================================================
PACKAGED FOODS & MEATS-2.91%
Flowers Foods, Inc. 42,745 1,425,973
- -----------------------------------------------------------------------
J & J Snack Foods Corp. 31,874 1,202,925
- -----------------------------------------------------------------------
TreeHouse Foods, Inc.(a) 44,207 1,176,348
=======================================================================
3,805,246
=======================================================================
PHARMACEUTICALS-1.96%
Axcan Pharma Inc. (Canada)(a) 73,214 1,415,226
- -----------------------------------------------------------------------
Sciele Pharma, Inc.(a) 3,766 88,727
- -----------------------------------------------------------------------
ViroPharma Inc.(a) 76,971 1,062,200
=======================================================================
2,566,153
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.79%
Assured Guaranty Ltd. 48,130 1,422,723
- -----------------------------------------------------------------------
FPIC Insurance Group, Inc.(a) 29,983 1,222,407
- -----------------------------------------------------------------------
Philadelphia Consolidated Holding Corp.(a) 24,113 1,007,923
=======================================================================
3,653,053
=======================================================================
PUBLISHING-0.92%
GateHouse Media, Inc. 64,665 1,199,536
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.92%
Jones Lang LaSalle Inc. 10,597 $ 1,202,760
=======================================================================
REGIONAL BANKS-4.34%
Alabama National BanCorp. 15,291 945,596
- -----------------------------------------------------------------------
Columbia Banking System, Inc. 25,610 749,093
- -----------------------------------------------------------------------
First Financial Bankshares, Inc. 16,381 635,747
- -----------------------------------------------------------------------
Provident Bankshares Corp. 26,808 878,766
- -----------------------------------------------------------------------
Sterling Bancshares, Inc. 79,919 903,884
- -----------------------------------------------------------------------
Sterling Financial Corp. 27,210 787,457
- -----------------------------------------------------------------------
United Community Banks, Inc. 29,996 776,596
=======================================================================
5,677,139
=======================================================================
RESTAURANTS-1.83%
IHOP Corp. 22,297 1,213,626
- -----------------------------------------------------------------------
Papa John's International, Inc.(a) 41,091 1,181,777
=======================================================================
2,395,403
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.55%
ATMI, Inc.(a) 42,937 1,288,110
- -----------------------------------------------------------------------
Nextest Systems Corp.(a) 53,825 735,788
=======================================================================
2,023,898
=======================================================================
SEMICONDUCTORS-3.32%
DSP Group, Inc.(a) 64,434 1,318,964
- -----------------------------------------------------------------------
Power Integrations, Inc.(a) 43,861 1,149,158
- -----------------------------------------------------------------------
Semtech Corp.(a) 69,644 1,206,931
- -----------------------------------------------------------------------
Supertex, Inc.(a) 21,169 663,436
=======================================================================
4,338,489
=======================================================================
SPECIALIZED REIT'S-1.29%
LaSalle Hotel Properties 25,434 1,104,344
- -----------------------------------------------------------------------
Universal Health Realty Income Trust 17,418 580,020
=======================================================================
1,684,364
=======================================================================
SPECIALTY CHEMICALS-1.84%
A. Schulman, Inc. 39,959 972,202
- -----------------------------------------------------------------------
H.B. Fuller Co. 48,064 1,436,633
=======================================================================
2,408,835
=======================================================================
STEEL-1.24%
Carpenter Technology Corp. 12,408 1,616,886
=======================================================================
TECHNOLOGY DISTRIBUTORS-0.84%
Agilysys, Inc. 48,668 1,095,030
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-2.36%
UAP Holding Corp. 55,125 1,661,468
- -----------------------------------------------------------------------
Williams Scotsman International Inc.(a) 60,215 1,433,719
=======================================================================
3,095,187
=======================================================================
</Table>
AIM V.I. Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
TRUCKING-1.71%
Landstar System, Inc. 20,467 $ 987,533
- -----------------------------------------------------------------------
Marten Transport, Ltd.(a) 69,767 1,256,503
=======================================================================
2,244,036
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $109,693,235) 127,172,612
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-2.81%
Liquid Assets Portfolio-Institutional
Class(d) 1,836,780 $ 1,836,780
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 1,836,781 1,836,781
=======================================================================
Total Money Market Funds (Cost
$3,673,561) 3,673,561
=======================================================================
TOTAL INVESTMENTS-100.00% (Cost $113,366,796) 130,846,173
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.00%) (432)
=======================================================================
NET ASSETS-100.00% $130,845,741
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at June 30, 2007 represented 0.00% of the Fund's
Net Assets. Security considered to be illiquid. The Fund is limited to
investing 15% of net assets in illiquid securities at the time of purchase.
(c) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June 30,
2007 represented 0.00% of the Fund's Net Assets. See Note 1A.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Small Cap Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
Investments, at value (Cost $109,693,235) $127,172,612
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $3,673,561) 3,673,561
=============================================================
Total investments (Cost $113,366,796) 130,846,173
=============================================================
Foreign currencies, at value (Cost $47) 51
- -------------------------------------------------------------
Receivables for:
Investments sold 1,290,623
- -------------------------------------------------------------
Fund shares sold 122,480
- -------------------------------------------------------------
Dividends 127,054
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 21,947
- -------------------------------------------------------------
Other assets 3,314
=============================================================
Total assets 132,411,642
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 1,384,028
- -------------------------------------------------------------
Fund shares reacquired 21,722
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 25,180
- -------------------------------------------------------------
Accrued administrative services fees 74,816
- -------------------------------------------------------------
Accrued distribution fees -- Series II 498
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,722
- -------------------------------------------------------------
Accrued transfer agent fees 1,328
- -------------------------------------------------------------
Accrued operating expenses 54,607
=============================================================
Total liabilities 1,565,901
=============================================================
Net assets applicable to shares outstanding $130,845,741
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $108,018,943
- -------------------------------------------------------------
Undistributed net investment income (loss) (222,303)
- -------------------------------------------------------------
Undistributed net realized gain 5,569,719
- -------------------------------------------------------------
Unrealized appreciation 17,479,382
=============================================================
$130,845,741
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $130,829,936
_____________________________________________________________
=============================================================
Series II $ 15,805
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 7,906,997
_____________________________________________________________
=============================================================
Series II 962.4
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 16.55
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 16.42
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 415,087
- ------------------------------------------------------------
Dividends from affiliated money market funds 93,756
============================================================
Total investment income 508,843
============================================================
EXPENSES:
Advisory fees 438,115
- ------------------------------------------------------------
Administrative services fees 159,106
- ------------------------------------------------------------
Custodian fees 11,630
- ------------------------------------------------------------
Distribution fees -- Series II 1,036
- ------------------------------------------------------------
Transfer agent fees 3,801
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 8,551
- ------------------------------------------------------------
Other 34,918
============================================================
Total expenses 657,157
============================================================
Less: Fees waived and expense offset arrangement (37,200)
============================================================
Net expenses 619,957
============================================================
Net investment income (loss) (111,114)
============================================================
REALIZED AND UNREALIZED GAIN FROM:
Net realized gain from investment securities
(includes gains from securities sold to
affiliates of $2,102,439) 4,921,347
- ------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 4,489,612
- ------------------------------------------------------------
Foreign currencies 2
============================================================
4,489,614
============================================================
Net realized and unrealized gain 9,410,961
============================================================
Net increase in net assets resulting from
operations $9,299,847
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Small Cap Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (111,114) $ (40,026)
- ------------------------------------------------------------------------------
Net realized gain 4,921,347 4,835,605
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 4,489,614 4,648,572
==============================================================================
Net increase in net assets resulting from
operations 9,299,847 9,444,151
==============================================================================
Distributions to shareholders from net
realized gains:
Series I -- (3,592,564)
- ------------------------------------------------------------------------------
Series II -- (33,971)
- ------------------------------------------------------------------------------
Decrease in net assets resulting from
distributions -- (3,626,535)
==============================================================================
Share transactions-net:
Series I 28,363,954 44,759,517
- ------------------------------------------------------------------------------
Series II (915,229) 89,165
==============================================================================
Net increase in net assets resulting from
share transactions 27,448,725 44,848,682
==============================================================================
Net increase in net assets 36,748,572 50,666,298
==============================================================================
NET ASSETS:
Beginning of period 94,097,169 43,430,871
==============================================================================
End of period (including undistributed net
investment income (loss) of $(222,303) and
$(111,189), respectively) $130,845,741 $94,097,169
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Small Cap Equity Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Small Cap Equity Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is long-term growth of capital.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Small Cap Equity Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
J. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
K. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
AIM V.I. Small Cap Equity Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of 0.75% of the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.745%
- --------------------------------------------------------------------
Next $250 million 0.73%
- --------------------------------------------------------------------
Next $500 million 0.715%
- --------------------------------------------------------------------
Next $1.5 billion 0.70%
- --------------------------------------------------------------------
Next $2.5 billion 0.685%
- --------------------------------------------------------------------
Next $2.5 billion 0.67%
- --------------------------------------------------------------------
Next $2.5 billion 0.655%
- --------------------------------------------------------------------
Over $10 billion 0.64%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse expenses to
the extent necessary to limit total annual operating expenses (excluding certain
items discussed below) of Series I shares to 1.15% and Series II shares to 1.40%
of average daily net assets, through at least April 30, 2009. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the net annual
operating expenses to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the Fund's Board
of Trustees; and (vi) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Currently, in addition to the
expense reimbursement arrangement with INVESCO PLC ("INVESCO") (formerly
"AMVESCAP PLC") described more fully below, the only expense offset arrangements
from which the Fund may benefit are in the form of credits that the Fund
receives from banks where the Fund or its transfer agent has deposit accounts in
which it holds uninvested cash. These credits are used to pay certain expenses
incurred by the Fund. To the extent that the annualized expense ratio does not
exceed the expense limitation, AIM will retain its ability to be reimbursed for
such fee waivers or reimbursements prior to the end of each fiscal year. AIM did
not waive fees and/or reimburse expenses during the period under this expense
limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $35,747.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $134,311
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
AIM V.I. Small Cap Equity Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $1,516,665 $18,055,760 $(17,735,645) $1,836,780 $46,757
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 1,516,665 18,055,760 (17,735,644) 1,836,781 46,999
=================================================================================================
Total
Investments
in
Affiliates $3,033,330 $36,111,520 $(35,471,289) $3,673,561 $93,756
_________________________________________________________________________________________________
=================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $15,062,163, which resulted in net realized gains
of $2,102,439, and securities purchases of $65,859.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $1,453.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,380 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
AIM V.I. Small Cap Equity Fund
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $53,449,455 and
$28,269,044, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $20,257,677
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,814,793)
===============================================================================
Net unrealized appreciation of investment securities $17,442,884
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $113,403,289.
</Table>
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,576,584 $ 24,885,439 4,127,247 $ 61,970,339
- ----------------------------------------------------------------------------------------------------------------------
Series II 1,274 22,185 3,739 55,902
======================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 233,132 3,592,564
- ----------------------------------------------------------------------------------------------------------------------
Series II -- -- 2,218 33,971
======================================================================================================================
Issued in connection with acquisitions:(b)
Series I 1,275,124 20,411,826 -- --
- ----------------------------------------------------------------------------------------------------------------------
Series II 12,068 191,836 -- --
======================================================================================================================
Reacquired:
Series I (1,081,705) (16,933,311) (1,398,963) (20,803,386)
- ----------------------------------------------------------------------------------------------------------------------
Series II (68,919) (1,129,250) (49) (708)
======================================================================================================================
1,714,426 $ 27,448,725 2,967,324 $ 44,848,682
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 81% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
(b) As of the open of business on May 1, 2007, the Fund acquired all the net
assets of AIM V.I. Small Cap Growth Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on December 13, 2006
and by the shareholders of AIM V.I. Small Cap Growth Fund on March 19,
2007. The acquisition was accomplished by a tax-free exchange of
1,287,192 shares of the Fund for 1,239,952 shares outstanding of AIM
V.I. Small Cap Growth Fund as of the close of business on April 30,
2007. Each class of shares of AIM V.I. Small Cap Growth Fund was
exchanged for the like class of shares of the Fund based on the relative
net asset value of AIM V.I. Small Cap Growth Fund to the net asset value
of the Fund on the close of business, April 30, 2007. AIM V.I. Small Cap
Growth Fund's net assets as of the close of business on April 30, 2007
of $20,603,661 including $2,935,720 of unrealized appreciation, were
combined with the net assets of the Fund immediately before the
acquisition of $103,924,887. The combined aggregate net assets of the
Fund immediately following the reorganization were $124,528,548.
AIM V.I. Small Cap Equity Fund
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
---------------------------------------------------------------------------
AUGUST 29, 2003
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ----------------------------------- DECEMBER 31,
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.19 $ 13.46 $ 12.45 $ 11.38 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.01)(a) (0.06)(a) (0.06)(a) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 1.38 2.37 1.07 1.13 1.41
=================================================================================================================================
Total from investment operations 1.36 2.36 1.01 1.07 1.40
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.00) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.63) -- -- (0.01)
=================================================================================================================================
Total distributions -- (0.63) -- (0.00) (0.02)
=================================================================================================================================
Net asset value, end of period $ 16.55 $ 15.19 $ 13.46 $ 12.45 $ 11.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 8.95% 17.44% 8.11% 9.41% 13.94%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $130,830 $93,243 $42,752 $25,964 $ 2,231
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.14%(c) 1.15% 1.22% 1.30% 1.32%(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.21%(c) 1.33% 1.57% 2.01% 12.86%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.21)%(c) (0.06)% (0.44)% (0.56)% (0.44)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 27% 52% 70% 156% 26%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$108,244,414.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $17,709,035 and sold of $19,249,154 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
V.I. Small Cap Growth Fund into the Fund.
AIM V.I. Small Cap Equity Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
------------------------------------------------------------------------
AUGUST 29, 2003
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------------------- DECEMBER 31,
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.10 $13.41 $12.43 $11.38 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.04)(a) (0.08)(a) (0.08)(a) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 1.36 2.36 1.06 1.13 1.41
=================================================================================================================================
Total from investment operations 1.32 2.32 0.98 1.05 1.39
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.00) (0.00)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.63) -- -- (0.01)
=================================================================================================================================
Total distributions -- (0.63) -- (0.00) (0.01)
=================================================================================================================================
Net asset value, end of period $16.42 $15.10 $13.41 $12.43 $11.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 8.74% 17.20% 7.88% 9.23% 13.88%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 16 $ 854 $ 679 $ 622 $ 569
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.39%(c) 1.40% 1.42% 1.45% 1.47%(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.46%(c) 1.58% 1.82% 2.26% 13.11%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.46)%(c) (0.31)% (0.64)% (0.71)% (0.59)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 27% 52% 70% 156% 26%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of $835,633.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $17,709,035 and sold of $19,249,154 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
V.I. Small Cap Growth into the Fund.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM
Distributors, Inc. ("ADI") (Order No. 05-1318). The WVASC makes findings of fact
that AIM and ADI entered into certain arrangements permitting market timing of
the AIM Funds and failed to disclose these arrangements in the prospectuses for
such Funds, and conclusions of law to the effect that AIM and ADI violated the
West Virginia securities laws. The WVASC orders AIM and ADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, AIM's time to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
AIM V.I. Small Cap Equity Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Small Cap Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,089.50 $5.91 $1,019.14 $5.71 1.14%
Series II 1,000.00 1,087.40 7.19 1,017.90 6.95 1.39
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Small Cap Equity Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Small Cap Equity Fund (the Fund) Committee considers each Sub-Committee's provided to the Fund by AIM under the
investment advisory agreement with A I M recommendations in making its annual Fund's advisory agreement, the performance
Advisors, Inc. (AIM). During contract recommendation to the Board whether to of AIM in providing these services, and
renewal meetings held on June 25-27, 2007, approve the continuance of each AIM Fund's the credentials and experience of the
the Board as a whole and the disinterested investment advisory agreement and officers and employees of AIM who provide
or "independent" Trustees, voting sub-advisory agreement, if applicable these services. The Board's review of the
separately, approved the continuance of (advisory agreements), for another year. qualifications of AIM to provide these
the Fund's investment advisory agreement services included the Board's
for another year, effective July 1, 2007. The independent Trustees, as mentioned consideration of AIM's portfolio and
In doing so, the Board determined that the above, are assisted in their annual product review process, various back
Fund's advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one and three calendar
Sub-Committees meet with portfolio review and negotiation between the years to the performance of funds in the
managers for their assigned funds and Trustees and AIM, that the Trustees may Fund's Lipper peer group that are not
other members of management and review focus to a greater extent on certain managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds -
strategies and limitations of these funds. deliberations and conclusions in a Small-Cap Core Index. The Board also
particular year may be based in part on reviewed the methodology used by Lipper to
In addition to their meetings their deliberations and conclusions of identify the Fund's peers. The Board noted
throughout the year, the Sub-Committees these same arrangements throughout the that the Fund's performance was comparable
meet at designated contract renewal year and in prior years. to the median performance of its peers for
meetings each year to conduct an in-depth the one year period, and below such
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF performance for the three year period. The
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION Board noted that the Fund's performance
the contract renewal process, the Trustees was above the performance of the Index for
receive comparative performance and fee The discussion below serves as a summary the one year period, and comparable to
data regarding all the AIM Funds prepared of the Senior Officer's independent such Index for the three year period. The
by an independent company, Lipper, Inc., written evaluation, as well as a Board noted that AIM made changes to the
under the direction and supervision of the discussion of the material factors and Fund's portfolio management team in 2004,
independent Senior Officer who also related conclusions that formed the basis which appear to be producing encouraging
prepares a separate analysis of this for the Board's approval of the Fund's results but need more time to be evaluated
information for the Trustees. Each advisory agreement. Unless otherwise before a conclusion can be reached that
Sub-Committee then makes recommendations stated, information set forth below is as the changes have adequately addressed the
to the Investments Committee regarding the of June 27, 2007 and does not reflect any Fund's underperformance. The Board also
performance, fees and expenses of their changes that may have occurred since that considered the steps AIM has taken over
assigned funds. The Investments Committee date, including but not limited to changes the last several years to improve the
considers each Sub-Committee's to the Fund's performance, advisory fees, quality and
recom- expense limitations and/or fee waivers.
(continued)
AIM V.I. Small Cap Equity Fund
efficiency of the services that AIM After taking account of the Fund's the Fund's advisory agreement, the Board
provides to the AIM Funds. The Board contractual advisory fee rate, as well as considered the Senior Officer's written
concluded that AIM continues to be the comparative advisory fee information evaluation.
responsive to the Board's focus on fund and the expense limitation discussed
performance. Although the independent above, the Board concluded that the Fund's G. COLLATERAL BENEFITS TO AIM AND ITS
written evaluation of the Fund's Senior advisory fees were fair and reasonable. AFFILIATES
Officer (discussed below) only considered
Fund performance through the most recent D. ECONOMIES OF SCALE AND BREAKPOINTS The Board considered various other
calendar year, the Board also reviewed benefits received by AIM and its
more recent Fund performance and this The Board considered the extent to which affiliates resulting from AIM's
review did not change their conclusions. there are economies of scale in AIM's relationship with the Fund, including the
provision of advisory services to the fees received by AIM and its affiliates
C. ADVISORY FEES AND FEE WAIVERS Fund. The Board also considered whether for their provision of administrative,
the Fund benefits from such economies of transfer agency and distribution services
The Board compared the Fund's contractual scale through contractual breakpoints in to the Fund. The Board considered the
advisory fee rate to the contractual the Fund's advisory fee schedule or performance of AIM and its affiliates in
advisory fee rates of funds in the Fund's through advisory fee waivers or expense providing these services and the
Lipper peer group that are not managed by limitations. The Board noted that the organizational structure employed by AIM
AIM, at a common asset level and as of the Fund's contractual advisory fee schedule and its affiliates to provide these
end of the past calendar year. The Board currently does not include any breakpoints services. The Board also considered that
noted that the Fund's advisory fee rate but that the amendment to the Fund's these services are provided to the Fund
was comparable to the median advisory fee contractual advisory fee schedule pursuant to written contracts which are
rate of its peers. The Board also reviewed discussed above provides for seven reviewed and approved on an annual basis
the methodology used by Lipper and noted breakpoints. Based on this information, by the Board. The Board concluded that AIM
that the contractual fee rates shown by the Board concluded that the Fund's and its affiliates were providing these
Lipper include any applicable long-term advisory fees will appropriately reflect services in a satisfactory manner and in
contractual fee waivers. The Board also economies of scale upon the Board's accordance with the terms of their
compared the Fund's contractual advisory approval of the amendment to the Fund's contracts, and were qualified to continue
fee rate to the contractual advisory fee contractual advisory fee schedule. The to provide these services to the Fund.
rates of other clients of AIM and its Board also noted that the Fund shares
affiliates with investment strategies directly in economies of scale through The Board considered the benefits
comparable to those of the Fund, including lower fees charged by third party service realized by AIM as a result of portfolio
two mutual funds advised by AIM and one providers based on the combined size of brokerage transactions executed through
mutual fund sub-advised by an AIM all of the AIM Funds and affiliates. "soft dollar" arrangements. Under these
affiliate. The Board noted that the Fund's arrangements, portfolio brokerage
rate was: (i) below the rates for the two E. PROFITABILITY AND FINANCIAL RESOURCES commissions paid by the Fund and/or other
mutual funds; and (ii) above the OF AIM funds advised by AIM are used to pay for
sub-advisory fee rate for the sub-advised research and execution services. The Board
mutual fund. The Board reviewed information from AIM noted that soft dollar arrangements shift
concerning the costs of the advisory and the payment obligation for the research
The Board noted that AIM has other services that AIM and its affiliates and executions services from AIM to the
contractually agreed to waive fees and/or provide to the Fund and the profitability funds and therefore may reduce AIM's
limit expenses of the Fund through at of AIM and its affiliates in providing expenses. The Board also noted that
least April 30, 2009 in an amount these services. The Board also reviewed research obtained through soft dollar
necessary to limit total annual operating information concerning the financial arrangements may be used by AIM in making
expenses to a specified percentage of condition of AIM and its affiliates. The investment decisions for the Fund and may
average daily net assets for each class of Board also reviewed with AIM the therefore benefit Fund shareholders. The
the Fund. The Board considered the methodology used to prepare the Board concluded that AIM's soft dollar
contractual nature of this fee waiver and profitability information. The Board arrangements were appropriate. The Board
noted that it remains in effect until at considered the overall profitability of also concluded that, based on their review
least April 30, 2009. The Board reviewed AIM, as well as the profitability of AIM and representations made by AIM, these
the Fund's effective advisory fee rate, in connection with managing the Fund. The arrangements were consistent with
after taking account of this expense Board noted that AIM continues to operate regulatory requirements.
limitation, and considered the effect this at a net profit, although increased
expense limitation would have on the expenses in recent years have reduced the The Board considered the fact that the
Fund's estimated total expenses. The Board profitability of AIM and its affiliates. Fund's uninvested cash and cash collateral
concluded that the levels of fee The Board concluded that the Fund's from any securities lending arrangements
waivers/expense limitations for the Fund advisory fees were fair and reasonable, may be invested in money market funds
were fair and reasonable. and that the level of profits realized by advised by AIM pursuant to procedures
AIM and its affiliates from providing approved by the Board. The Board noted
The Board noted that AIM has not services to the Fund was not excessive in that AIM will receive advisory fees from
proposed any advisory fee waivers for the light of the nature, quality and extent of these affiliated money market funds
Fund. However, the Board also noted that the services provided. The Board attributable to such investments, although
AIM has recommended that the Board approve considered whether AIM is financially AIM has contractually agreed to waive the
an amendment to the Fund's contractual sound and has the resources necessary to advisory fees payable by the Fund with
advisory fee schedule that would implement perform its obligations under the Fund's respect to its investment of uninvested
the contractual advisory fee waiver that advisory agreement, and concluded that AIM cash in these affiliated money market
had been formerly committed to by AIM, has the financial resources necessary to funds through at least April 30, 2009. The
which waiver provided for lower effective fulfill these obligations. Board considered the contractual nature of
fee rates at all asset levels than the this fee waiver and noted that it remains
Fund's current contractual advisory fee F. INDEPENDENT WRITTEN EVALUATION OF THE in effect until at least April 30, 2009.
schedule. The Board noted that AIM's FUND'S SENIOR OFFICER The Board concluded that the Fund's
recommendation was made in response to the investment of uninvested cash and cash
recommendation of the independent Senior The Board noted that, upon their collateral from any securities lending
Officer that AIM consider whether the direction, the Senior Officer of the Fund, arrangements in the affiliated money
advisory fee waivers for certain equity who is independent of AIM and AIM's market funds is in the best interests of
AIM Funds, including the Fund, should be affiliates, had prepared an independent the Fund and its shareholders.
simplified. The Board concluded that it written evaluation to assist the Board in
would be appropriate to approve the determining the reasonableness of the
proposed amendment to the Fund's proposed management fees of the AIM Funds,
contractual advisory fee schedule and that including the Fund. The Board noted that
it was not necessary at this time to they had relied upon the Senior Officer's
discuss with AIM whether to implement any written evaluation instead of a
fee waivers for the Fund. competitive bidding process. In
determining whether to continue
AIM V.I. Technology Fund
Semiannual Report to Shareholders o June 30, 2007
SECTOR EQUITY
Sectors
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Technology Fund
Fund performance intended to reflect actual variable
======================================================================================= product values. They do not reflect sales
PERFORMANCE SUMMARY charges, expenses and fees assessed in
connection with a variable product. Sales
FUND VS. INDEXES charges, expenses and fees, which are
determined by the variable product
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. issuers, will vary and will lower the
If variable product issuer charges were included, returns would be lower. total return.
Series I Shares 6.78% Per NASD requirements, the most recent
Series II Shares 6.69 month-end performance data at the Fund
S&P 500 Index(1) (Broad Market Index) 6.96 level, excluding variable product charges,
S&P Goldman Sachs Technology Index(2) (Style-Specific Index) 8.93 is available on the AIM automated
Lipper VUF Science & Technology Funds Category Average(1) (Peer Group Index) 10.97 information line, 866-702-4402. As
Lipper Science & Technology Funds Index(1) (Former Peer Group Index) 10.34 mentioned above, for the most recent
month-end performance including variable
Sources: (1) Lipper Inc.; (2) A I M Management Group Inc., IDC Via Factset product charges, please contact your
Research Systems Inc. variable product issuer or financial
advisor.
The unmanaged S&P 500 --REGISTERED TRADEMARK-- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance.
The S&P Goldman Sachs Technology Index (price-only) is a modified
capitalization-weighted index composed of companies involved in the technology
industry. The index is rebalanced semiannually.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Science &
Technology Funds Category Average as its peer group instead of the Lipper Science &
Technology Funds Index. In 2006, Lipper began publishing VUF indexes, allowing the Fund
to be compared with the Lipper VUF Science & Technology Funds Category Average. The
unmanaged Lipper VUF Science & Technology Funds Category Average represents the average
of all the variable insurance underlying science and technology funds tracked by Lipper
Inc. Lipper Inc. is an independent mutual fund performance monitor.
The unmanaged Lipper Science and Technology Funds Index represents an average of the
performance of the largest science and technology funds tracked by Lipper Inc.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== The performance data quoted represent
FUND PERFORMANCE past performance and cannot guarantee
As of 6/30/07 comparable future results; current
SERIES I SHARES performance may be lower or higher. Please
Inception (5/20/97) 4.16% contact your variable product issuer or
10 Years 4.21 financial advisor for the most recent
5 Years 8.15 month-end variable product performance.
1 Year 18.34 Performance figures reflect Fund expenses,
reinvested distributions and changes in
SERIES II SHARES net asset value. Investment return and
10 Years 3.94% principal value will fluctuate so that you
5 Years 7.86 may have a gain or loss when you sell
1 Year 18.15 shares.
==========================================
The total annual Fund operating expense
Series II shares' inception date is April ratio set forth in the most recent Fund
30, 2004. Returns since that date are prospectus as of the date of this report
historical. All other returns are the for Series I and Series II shares was
blended returns of the historical 1.12% and 1.37%, respectively. The expense
performance of Series II shares since ratios presented above may vary from the
their inception and the restated expense ratios presented in other sections
historical performance of Series I shares of this report that are based on expenses
(for periods prior to inception of Series incurred during the period covered by this
II shares) adjusted to reflect the Rule report.
12b-1 fees applicable to Series II shares.
The inception date of Series I shares is AIM V.I. Technology Fund, a series
May 20, 1997. portfolio of AIM Variable Insurance Funds,
is currently offered through insurance
The performance of the Fund's Series I companies issuing variable products. You
and Series II share classes will differ cannot purchase shares of the Fund
primarily due to different class expenses. directly. Performance figures given
represent the Fund and are not
AIM V.I. Technology Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Information Technology 88.2%
- ----------------------------------------------------------
Telecommunication Services 5.6
- ----------------------------------------------------------
Industrials 2.3
- ----------------------------------------------------------
Financials 1.0
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 2.9
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
DOMESTIC COMMON STOCKS-79.95%
APPLICATION SOFTWARE-8.44%
Adobe Systems Inc.(a) 128,299 $ 5,151,205
- -----------------------------------------------------------------------
Amdocs Ltd.(a) 113,618 4,524,269
- -----------------------------------------------------------------------
Autodesk, Inc.(a) 51,156 2,408,424
- -----------------------------------------------------------------------
Intuit Inc.(a) 62,743 1,887,309
=======================================================================
13,971,207
=======================================================================
COMMUNICATIONS EQUIPMENT-8.28%
Cisco Systems, Inc.(a) 183,689 5,115,739
- -----------------------------------------------------------------------
CommScope, Inc.(a) 30,501 1,779,733
- -----------------------------------------------------------------------
F5 Networks, Inc.(a) 46,809 3,772,806
- -----------------------------------------------------------------------
Harris Corp. 34,584 1,886,557
- -----------------------------------------------------------------------
OpNext, Inc.(a) 86,672 1,147,537
=======================================================================
13,702,372
=======================================================================
COMPUTER HARDWARE-7.58%
Apple, Inc.(a) 53,607 6,542,198
- -----------------------------------------------------------------------
Hewlett-Packard Co. 93,690 4,180,448
- -----------------------------------------------------------------------
NCR Corp.(a) 34,555 1,815,520
=======================================================================
12,538,166
=======================================================================
COMPUTER STORAGE & PERIPHERALS-5.46%
EMC Corp.(a) 256,080 4,635,048
- -----------------------------------------------------------------------
Network Appliance, Inc.(a) 91,269 2,665,055
- -----------------------------------------------------------------------
Seagate Technology 79,550 1,731,803
=======================================================================
9,031,906
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.53%
VeriFone Holdings, Inc.(a) 118,687 4,183,717
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.22%
Amphenol Corp.-Class A 59,070 2,105,846
- -----------------------------------------------------------------------
Itron, Inc.(a) 20,132 1,569,088
=======================================================================
3,674,934
=======================================================================
HOME ENTERTAINMENT SOFTWARE-1.59%
Activision, Inc.(a) 141,163 2,635,513
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
INTERNET SOFTWARE & SERVICES-8.52%
Digital River, Inc.(a) 77,460 $ 3,505,065
- -----------------------------------------------------------------------
eBay Inc.(a) 75,295 2,422,993
- -----------------------------------------------------------------------
Google Inc. -Class A(a) 9,104 4,764,852
- -----------------------------------------------------------------------
ValueClick, Inc.(a) 64,179 1,890,713
- -----------------------------------------------------------------------
Yahoo! Inc.(a) 55,669 1,510,300
=======================================================================
14,093,923
=======================================================================
IT CONSULTING & OTHER SERVICES-5.01%
Accenture Ltd. -Class A 138,298 5,931,601
- -----------------------------------------------------------------------
Cognizant Technology Solutions Corp.-Class
A(a) 31,510 2,366,086
=======================================================================
8,297,687
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.98%
BlueStream Ventures L.P.(a)(b)(c)(d) 3,172,500 1,618,134
=======================================================================
SEMICONDUCTOR EQUIPMENT-3.27%
FormFactor Inc.(a) 35,958 1,377,191
- -----------------------------------------------------------------------
KLA-Tencor Corp. 43,149 2,371,038
- -----------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 27,345 1,671,326
=======================================================================
5,419,555
=======================================================================
SEMICONDUCTORS-17.01%
Broadcom Corp. -Class A(a) 104,436 3,054,753
- -----------------------------------------------------------------------
Integrated Device Technology, Inc.(a) 213,848 3,265,459
- -----------------------------------------------------------------------
Intersil Corp. -Class A 135,151 4,251,850
- -----------------------------------------------------------------------
Marvell Technology Group Ltd.(a) 146,898 2,675,013
- -----------------------------------------------------------------------
National Semiconductor Corp. 135,726 3,836,974
- -----------------------------------------------------------------------
Netlogic Microsystems Inc.(a)(e) 45,974 1,463,812
- -----------------------------------------------------------------------
ON Semiconductor Corp.(a) 218,228 2,339,404
- -----------------------------------------------------------------------
Texas Instruments Inc. 111,817 4,207,674
- -----------------------------------------------------------------------
Xilinx, Inc. 114,226 3,057,830
=======================================================================
28,152,769
=======================================================================
SYSTEMS SOFTWARE-6.04%
McAfee Inc.(a) 61,571 2,167,299
- -----------------------------------------------------------------------
Microsoft Corp. 120,660 3,555,850
- -----------------------------------------------------------------------
</Table>
AIM V.I. Technology Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
SYSTEMS SOFTWARE-(CONTINUED)
Oracle Corp.(a) 132,120 $ 2,604,085
- -----------------------------------------------------------------------
Sybase, Inc.(a) 69,539 1,661,287
=======================================================================
9,988,521
=======================================================================
TECHNOLOGY DISTRIBUTORS-1.07%
Avnet, Inc.(a) 44,704 1,772,067
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.95%
American Tower Corp.-Class A(a) 76,640 3,218,880
=======================================================================
Total Domestic Common Stocks (Cost
$113,785,765) 132,299,351
=======================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-17.13%
CANADA-2.33%
Research In Motion Ltd. (Communications
Equipment)(a) 19,287 3,857,207
=======================================================================
FINLAND-1.74%
Nokia Oyj-ADR (Communications Equipment) 102,216 2,873,292
=======================================================================
HONG KONG-1.67%
China Mobile Ltd. (Wireless Telecommunication
Services) 51,121 2,755,422
=======================================================================
JAPAN-1.41%
Nintendo Co., Ltd. (Home Entertainment
Software)(f) 6,400 2,336,941
=======================================================================
MEXICO-1.94%
America Movil S.A.B. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 51,805 3,208,284
=======================================================================
SWEDEN-1.16%
Telefonaktiebolaget LM Ericsson-ADR
(Communications Equipment) 48,206 1,922,937
=======================================================================
SWITZERLAND-2.65%
STMicroelectronics N.V.-New York Shares
(Semiconductors) 228,762 4,389,943
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
TAIWAN-4.23%
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services) 306,041 $ 2,647,446
- -----------------------------------------------------------------------
Siliconware Precision Industries Co.-ADR
(Semiconductors) 178,769 1,966,459
- -----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.,
Ltd.-ADR (Semiconductors) 213,785 2,379,431
=======================================================================
6,993,336
=======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $21,351,319) 28,337,362
=======================================================================
PUT OPTIONS PURCHASED-0.00%
CANADA-0.00%
Research In Motion Ltd. (Communications
Equipment) (Cost $89,854)(a) 19,200 3,360
=======================================================================
MONEY MARKET FUNDS-2.85%
Liquid Assets Portfolio-Institutional
Class(g) 2,357,986 2,357,986
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 2,357,986 2,357,986
=======================================================================
Total Money Market Funds (Cost
$4,715,972) 4,715,972
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.93% (Cost
$139,942,910) 165,356,045
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-0.46%
Premier Portfolio-Institutional Class(g)(h) 753,875 753,875
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities on
loan) (Cost $753,875) 753,875
=======================================================================
TOTAL INVESTMENTS-100.39% (Cost $140,696,785) 166,109,920
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.39)% (637,219)
=======================================================================
NET ASSETS-100.00% $165,472,701
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) The Fund has a remaining commitment of $202,500 to purchase additional
interests in BlueStream Ventures L.P., which is subject to the terms of the
limited partnership agreement.
(c) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June 30,
2007 represented 0.98% of the Fund's Net Assets. See Note 1A.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at June 30, 2007 represented 0.98% of the Fund's
Net Assets. This security is considered to be illiquid. The Fund is limited
to investing 15% in illiquid securities at time of purchase.
(e) All or a portion of this security was out on loan at June 30, 2007.
(f) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
value of this security at June 30, 2007 represented 1.41% of the Fund's Net
Assets. See Note 1A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(h) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Technology Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
Investments, at value (Cost $135,226,938)* $ 160,640,073
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $5,469,847) 5,469,847
- -------------------------------------------------------------
Total investments (Cost $140,696,785) 166,109,920
- -------------------------------------------------------------
Foreign currencies, at value (Cost $35,160) 35,680
- -------------------------------------------------------------
Receivables for:
Investments sold 209,322
- -------------------------------------------------------------
Fund shares sold 69,544
- -------------------------------------------------------------
Dividends 112,820
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 43,884
- -------------------------------------------------------------
Other assets 1,734
=============================================================
Total assets 166,582,904
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 154,029
- -------------------------------------------------------------
Trustee deferred compensation and
retirement plans 54,805
- -------------------------------------------------------------
Collateral upon return of securities loaned 753,875
- -------------------------------------------------------------
Accrued administrative services fees 109,638
- -------------------------------------------------------------
Accrued distribution fees -- Series II 91
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,810
- -------------------------------------------------------------
Accrued transfer agent fees 3,796
- -------------------------------------------------------------
Accrued operating expenses 30,159
=============================================================
Total liabilities 1,110,203
=============================================================
Net assets applicable to shares outstanding $ 165,472,701
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 619,650,049
- -------------------------------------------------------------
Undistributed net investment income (loss) (380,546)
- -------------------------------------------------------------
Undistributed net realized gain (loss) (479,209,173)
- -------------------------------------------------------------
Unrealized appreciation 25,412,371
=============================================================
$ 165,472,701
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $ 165,323,695
_____________________________________________________________
=============================================================
Series II $ 149,006
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 11,042,382
_____________________________________________________________
=============================================================
Series II 10,043
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 14.97
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 14.84
_____________________________________________________________
=============================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $768,108 were on loan
to brokers.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$60,052) $ 456,555
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$15,518) 138,342
============================================================
Total investment income 594,897
============================================================
EXPENSES:
Advisory fees 629,889
- ------------------------------------------------------------
Administrative services fees 232,206
- ------------------------------------------------------------
Custodian fees 10,124
- ------------------------------------------------------------
Distribution fees -- Series II 177
- ------------------------------------------------------------
Transfer agent fees 11,557
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 9,762
- ------------------------------------------------------------
Other 26,926
============================================================
Total expenses 920,641
============================================================
Less: Fees waived and expense offset
arrangement (4,993)
============================================================
Net expenses 915,648
============================================================
Net investment income (loss) (320,751)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
from securities sold to affiliates of
$58,581) 10,895,217
- ------------------------------------------------------------
Foreign currencies 15,032
- ------------------------------------------------------------
Option contracts written 32,351
============================================================
10,942,600
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 210,856
- ------------------------------------------------------------
Foreign currencies (6,898)
============================================================
203,958
============================================================
Net realized and unrealized gain 11,146,558
============================================================
Net increase in net assets resulting from
operations $10,825,807
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Technology Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (320,751) $ (984,658)
- ------------------------------------------------------------------------------
Net realized gain 10,942,600 21,884,080
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) 203,958 (3,764,080)
==============================================================================
Net increase in net assets resulting from
operations 10,825,807 17,135,342
==============================================================================
Share transactions-net:
Series I (18,813,786) (34,499,934)
- ------------------------------------------------------------------------------
Series II 6,057 (22,638)
==============================================================================
Net increase (decrease) in net assets
resulting from share transactions (18,807,729) (34,522,572)
==============================================================================
Net increase (decrease) in net assets (7,981,922) (17,387,230)
==============================================================================
NET ASSETS:
Beginning of period 173,454,623 190,841,853
==============================================================================
End of period (including undistributed net
investment income (loss) of $(380,546) and
$(59,795), respectively) $165,472,701 $173,454,623
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Technology Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Technology Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective is capital growth.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Technology Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- Single
Sector/Non-Diversified -- The Fund's investments are concentrated in a
comparatively narrow segment of the economy. Consequently, the Fund may
tend to be more volatile than other mutual funds, and the value of the
Fund's investments may tend to rise and fall more rapidly.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. Technology Fund
L. COVERED CALL OPTIONS WRITTEN -- The Fund may write call options. 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. Written call options are recorded
as a liability in the Statement of Assets and Liabilities. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. 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. Realized gains and losses on these contracts
are included in the Statement of Operations. A risk in writing a call
option is that the Fund gives up the opportunity for profit if the market
price of the security increases and the option is exercised.
M. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. 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, securities index, 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. Realized and unrealized gains and losses on these contracts are
included in the Statement of Operations. A risk in buying an option is that
the Fund pays a premium whether or not the option is exercised. In
addition, there can be no assurance that a liquid secondary market will
exist for any option purchased.
N. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of 0.75% of the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Next $250 million 0.74%
- -------------------------------------------------------------------
Next $500 million 0.73%
- -------------------------------------------------------------------
Next $1.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.71%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.69%
- -------------------------------------------------------------------
Over $10 billion 0.68%
__________________________________________________________________
===================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 1.30% and Series
II shares to 1.45% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. AIM did not waive fees and/or reimburse
expenses during the period under this expense limitation.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds (excluding investments made in affiliated money market funds
with cash collateral from securities loaned by the Fund). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $732.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
AIM V.I. Technology Fund
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $207,411
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $1,538,853 $19,080,458 $(18,261,325) $2,357,986 $ 61,567
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 1,538,853 19,080,458 (18,261,325) 2,357,986 61,257
=================================================================================================
Subtotal $3,077,706 $38,160,916 $(36,522,650) $4,715,972 $122,824
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class $5,333,168 $58,150,008 $(62,729,301) $ 753,875 $ 15,518
================================================================================================
Total
Investments
in
Affiliates $8,410,874 $96,310,924 $(99,251,951) $5,469,847 $138,342
________________________________________________________________________________________________
================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $1,351,803, which resulted in net realized gains
of $58,581, and securities purchases of $85,577.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $4,261.
AIM V.I. Technology Fund
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,535 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At June 30, 2007, securities with an aggregate value of $768,108 were on
loan to brokers. The loans were secured by cash collateral of $753,875 received
by the Fund and subsequently invested in an affiliated money market fund. For
the six months ended June 30, 2007, the Fund received dividends on cash
collateral investments of $15,518 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
CALL OPTION CONTRACTS
- -----------------------------------------------------------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -----------------------------------------------------------------------------------
Beginning of period 233 $ 32,351
- -----------------------------------------------------------------------------------
Expired (233) (32,351)
===================================================================================
End of period -- $ --
___________________________________________________________________________________
===================================================================================
</Table>
AIM V.I. Technology Fund
NOTE 10--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end. Capital loss carryforward is calculated
and reported as of a specific date. Results of transactions and other activity
after that date may affect the amount of capital loss carryforward actually
available for the Fund to utilize. The ability to utilize capital loss
carryforward in the future may be limited under the Internal Revenue Code and
related regulations based on the results of future transactions. The Fund had a
capital loss carryforward as of December 31, 2006 which expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2007 $ 47,350,013
- -----------------------------------------------------------------------------
December 31, 2008 256,455,919
- -----------------------------------------------------------------------------
December 31, 2009 153,547,080
- -----------------------------------------------------------------------------
December 31, 2010 33,793,499
=============================================================================
Total capital loss carryforward $491,146,511
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of April 30, 2004, the date of the
reorganization of AIM V.I. New Technology Fund and INVESCO
VIF-Telecommunications Fund into the Fund, are realized on securities held in
each fund as such date, the capital loss carryforward may be further limited
for up to five years from the date of the reorganization.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $67,107,263 and
$88,333,983, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $29,023,519
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,472,172)
===============================================================================
Net unrealized appreciation of investment securities $26,551,347
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $139,558,573.
</Table>
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 890,692 $ 12,654,984 1,867,275 $ 24,826,913
- ----------------------------------------------------------------------------------------------------------------------
Series II 726 9,983 870 10,943
======================================================================================================================
Reacquired:
Series I (2,210,169) (31,468,770) (4,533,608) (59,326,847)
- ----------------------------------------------------------------------------------------------------------------------
Series II (280) (3,926) (2,551) (33,581)
======================================================================================================================
(1,319,031) $(18,807,729) (2,668,014) $(34,522,572)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 68% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 13--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
AIM V.I. Technology Fund
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2007 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.02 $ 12.69 $ 12.42 $ 11.87 $ 8.17 $ 15.37
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.08) (0.07) (0.04)(a) (0.08) (0.00)(b)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.98 1.41 0.34 0.59 3.78 (7.20)
==========================================================================================================================
Total from investment operations 0.95 1.33 0.27 0.55 3.70 (7.20)
==========================================================================================================================
Net asset value, end of period $ 14.97 $ 14.02 $ 12.69 $ 12.42 $ 11.87 $ 8.17
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(c) 6.78% 10.48% 2.17% 4.63% 45.29% (46.84)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $165,324 $173,321 $190,700 $200,556 $171,546 $105,508
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 1.10%(d) 1.12% 1.12% 1.15% 1.10% 1.11%
==========================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.38)%(d) (0.54)% (0.60)% (0.39)%(a) (0.85)% (0.96)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(e) 41% 116% 114% 137% 89% 92%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.09) and (0.82)%, respectively.
(b) The net investment income (loss) per share was calculated after
permanent book tax differences, such as net operating losses, which were
reclassified from accumulated net investment income (loss) to paid in
capital. Had net investment income (loss) per share been calculated
using the current method, which is before reclassification of net
operating losses, net investment income (loss) per share would have been
$(0.12) for the year ended December 31, 2002, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are annualized and based on average daily net assets of
$169,219,563.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
SERIES II
---------------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.91 $12.62 $12.39 $11.09
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.12) (0.11) (0.05)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.97 1.41 0.34 1.35
=======================================================================================================================
Total from investment operations 0.93 1.29 0.23 1.30
=======================================================================================================================
Net asset value, end of period $14.84 $13.91 $12.62 $12.39
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 6.69% 10.22% 1.86% 11.72%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 149 $ 134 $ 142 $ 166
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets 1.35%(c) 1.37% 1.37% 1.40%(d)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.63)%(c) (0.79)% (0.85)% (0.64)%(a)(d)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(e) 41% 116% 114% 137%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.10) and (1.07)%, respectively.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of $142,838.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Technology Fund
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Technology Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
As a shareholder of the Fund, you incur The table below provides information about actual ending account balance or expenses
ongoing costs, including management fees; actual account values and actual expenses. you paid for the period. You may use this
distribution and/or service (12b-1) fees; You may use the information in this table, information to compare the ongoing costs
and other Fund expenses. This example is together with the amount you invested, to of investing in the Fund and other funds.
intended to help you understand your estimate the expenses that you paid over To do so, compare this 5% hypothetical
ongoing costs (in dollars) of investing in the period. Simply divide your account example with the 5% hypothetical examples
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 that appear in the shareholder reports of
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), the other funds.
funds. The example is based on an then multiply the result by the number in
investment of $1,000 invested at the the table under the heading entitled Please note that the expenses shown in
beginning of the period and held for the "Actual Expenses Paid During Period" to the table are meant to highlight your
entire period January 1, 2007, through estimate the expenses you paid on your ongoing costs. Therefore, the hypothetical
June 30, 2007. account during this period. information is useful in comparing ongoing
costs, and will not help you determine the
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON relative total costs of owning different
the examples below do not represent the PURPOSES funds.
effect of any fees or other expenses
assessed in connection with a variable The table below also provides information
product; if they did, the expenses shown about hypothetical account values and
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return of 5% per year before expenses,
which is not the Fund's actual return.
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,067.80 $5.64 $1,019.34 $5.51 1.10%
Series II 1,000.00 1,066.90 6.92 1,018.10 6.76 1.35
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Technology Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Technology Fund (the Fund) investment Committee considers each Sub-Committee's provided to the Fund by AIM under the
advisory agreement with A I M Advisors, recommendations in making its annual Fund's advisory agreement, the performance
Inc. (AIM). During contract renewal recommendation to the Board whether to of AIM in providing these services, and
meetings held on June 25-27, 2007, the approve the continuance of each AIM Fund's the credentials and experience of the
Board as a whole and the disinterested or investment advisory agreement and officers and employees of AIM who provide
"independent" Trustees, voting separately, sub-advisory agreement, if applicable these services. The Board's review of the
approved the continuance of the Fund's (advisory agreements), for another year. qualifications of AIM to provide these
investment advisory agreement for another services included the Board's
year, effective July 1, 2007. In doing so, The independent Trustees, as mentioned consideration of AIM's portfolio and
the Board determined that the Fund's above, are assisted in their annual product review process, various back
advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio review and negotiation between the calendar years to the performance of funds
managers for their assigned funds and Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
other members of management and review focus to a greater extent on certain not managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds -
strategies and limitations of these funds. deliberations and conclusions in a Science & Technology Index. The Board also
particular year may be based in part on reviewed the methodology used by Lipper to
In addition to their meetings their deliberations and conclusions of identify the Fund's peers. The Board noted
throughout the year, the Sub-Committees these same arrangements throughout the that the Fund's performance was above the
meet at designated contract renewal year and in prior years. median performance of its peers for the
meetings each year to conduct an in-depth one year period, and below such
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF performance for the three and five year
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION periods. The Board noted that the Fund's
the contract renewal process, the Trustees performance was above the performance of
receive comparative performance and fee The discussion below serves as a summary the Index for the one year period, and
data regarding all the AIM Funds prepared of the Senior Officer's independent below such Index for the three and five
by an independent company, Lipper, Inc., written evaluation, as well as a year periods. The Board noted that AIM
under the direction and supervision of the discussion of the material factors and made changes to the Fund's portfolio
independent Senior Officer who also related conclusions that formed the basis management team in 2007, which need more
prepares a separate analysis of this for the Board's approval of the Fund's time to be evaluated before a conclusion
information for the Trustees. Each advisory agreement. Unless otherwise can be reached that the changes have
Sub-Committee then makes recommendations stated, information set forth below is as adequately addressed the Fund's
to the Investments Committee regarding the of June 27, 2007 and does not reflect any underperformance. The Board also
performance, fees and expenses of their changes that may have occurred since that considered the steps AIM has taken over
assigned funds. The Investments Committee date, including but not limited to changes the last several years to improve the
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, quality and efficiency of the services
expense limitations and/or fee waivers. that AIM provides to
(continued)
AIM V.I. Technology Fund
the AIM Funds. The Board concluded that fied. The Board concluded that it would be mining the reasonableness of the proposed
AIM continues to be responsive to the appropriate to approve the proposed management fees of the AIM Funds,
Board's focus on fund performance. amendment to the Fund's contractual including the Fund. The Board noted that
Although the independent written advisory fee schedule and that it was not they had relied upon the Senior Officer's
evaluation of the Fund's Senior Officer necessary at this time to discuss with AIM written evaluation instead of a
(discussed below) only considered Fund whether to implement any fee waivers for competitive bidding process. In
performance through the most recent the Fund. determining whether to continue the Fund's
calendar year, the Board also reviewed advisory agreement, the Board considered
more recent Fund performance and this After taking account of the Fund's the Senior Officer's written evaluation.
review did not change their conclusions. contractual advisory fee rate, as well as
the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
C. ADVISORY FEES AND FEE WAIVERS and the expense limitation discussed AFFILIATES
above, the Board concluded that the Fund's
The Board compared the Fund's contractual advisory fees were fair and reasonable. The Board considered various other
advisory fee rate to the contractual benefits received by AIM and its
advisory fee rates of funds in the Fund's D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
Lipper peer group that are not managed by relationship with the Fund, including the
AIM, at a common asset level and as of the The Board considered the extent to which fees received by AIM and its affiliates
end of the past calendar year. The Board there are economies of scale in AIM's for their provision of administrative,
noted that the Fund's advisory fee rate provision of advisory services to the transfer agency and distribution services
was below the median advisory fee rate of Fund. The Board also considered whether to the Fund. The Board considered the
its peers. The Board also reviewed the the Fund benefits from such economies of performance of AIM and its affiliates in
methodology used by Lipper and noted that scale through contractual breakpoints in providing these services and the
the contractual fee rates shown by Lipper the Fund's advisory fee schedule or organizational structure employed by AIM
include any applicable long-term through advisory fee waivers or expense and its affiliates to provide these
contractual fee waivers. The Board also limitations. The Board noted that the services. The Board also considered that
compared the Fund's contractual advisory Fund's contractual advisory fee schedule these services are provided to the Fund
fee rate to the contractual advisory fee currently does not include any breakpoints pursuant to written contracts which are
rates of other clients of AIM and its but that the amendment to the Fund's reviewed and approved on an annual basis
affiliates with investment strategies contractual advisory fee schedule by the Board. The Board concluded that AIM
comparable to those of the Fund, including discussed above provides for seven and its affiliates were providing these
one mutual fund advised by AIM, two breakpoints. Based on this information, services in a satisfactory manner and in
Canadian funds advised by an AIM affiliate the Board concluded that the Fund's accordance with the terms of their
and sub-advised by AIM, and three offshore advisory fees will appropriately reflect contracts, and were qualified to continue
funds advised and sub-advised by AIM economies of scale upon the Board's to provide these services to the Fund.
affiliates. The Board noted that the approval of the amendment to the Fund's
Fund's rate was: (i) above the rate for contractual advisory fee schedule. The The Board considered the benefits
the mutual fund; (ii) above the Board also noted that the Fund shares realized by AIM as a result of portfolio
sub-advisory fee rates for the two directly in economies of scale through brokerage transactions executed through
Canadian funds, although the advisory fee lower fees charged by third party service "soft dollar" arrangements. Under these
rates for such Canadian funds were above providers based on the combined size of arrangements, portfolio brokerage
the Fund's; and (iii) below the advisory all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
fee rates for two of the offshore funds funds advised by AIM are used to pay for
and comparable to the advisory fee rate E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
for the third such offshore fund. OF AIM noted that soft dollar arrangements shift
the payment obligation for the research
The Board noted that AIM has The Board reviewed information from AIM and executions services from AIM to the
contractually agreed to waive fees and/or concerning the costs of the advisory and funds and therefore may reduce AIM's
limit expenses of the Fund through at other services that AIM and its affiliates expenses. The Board also noted that
least April 30, 2009 in an amount provide to the Fund and the profitability research obtained through soft dollar
necessary to limit total annual operating of AIM and its affiliates in providing arrangements may be used by AIM in making
expenses to a specified percentage of these services. The Board also reviewed investment decisions for the Fund and may
average daily net assets for each class of information concerning the financial therefore benefit Fund shareholders. The
the Fund. The Board considered the condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
contractual nature of this fee waiver and Board also reviewed with AIM the arrangements were appropriate. The Board
noted that it remains in effect until at methodology used to prepare the also concluded that, based on their review
least April 30, 2009. The Board reviewed profitability information. The Board and representations made by AIM, these
the Fund's effective advisory fee rate, considered the overall profitability of arrangements were consistent with
after taking account of this expense AIM, as well as the profitability of AIM regulatory requirements.
limitation, and considered the effect this in connection with managing the Fund. The
expense limitation would have on the Board noted that AIM continues to operate The Board considered the fact that the
Fund's estimated total expenses. The Board at a net profit, although increased Fund's uninvested cash and cash collateral
concluded that the levels of fee expenses in recent years have reduced the from any securities lending arrangements
waivers/expense limitations for the Fund profitability of AIM and its affiliates. may be invested in money market funds
were fair and reasonable. The Board concluded that the Fund's advised by AIM pursuant to procedures
advisory fees were fair and reasonable, approved by the Board. The Board noted
The Board noted that AIM has not and that the level of profits realized by that AIM will receive advisory fees from
proposed any advisory fee waivers for the AIM and its affiliates from providing these affiliated money market funds
Fund. However, the Board also noted that services to the Fund was not excessive in attributable to such investments, although
AIM has recommended that the Board approve light of the nature, quality and extent of AIM has contractually agreed to waive the
an amendment to the Fund's contractual the services provided. The Board advisory fees payable by the Fund with
advisory fee schedule that would implement considered whether AIM is financially respect to its investment of uninvested
the contractual advisory fee waiver that sound and has the resources necessary to cash in these affiliated money market
had been formerly committed to by AIM, perform its obligations under the Fund's funds through at least April 30, 2009. The
which waiver provided for lower effective advisory agreement, and concluded that AIM Board considered the contractual nature of
fee rates at all asset levels than the has the financial resources necessary to this fee waiver and noted that it remains
Fund's current contractual advisory fee fulfill these obligations. in effect until at least April 30, 2009.
schedule. The Board noted that AIM's The Board concluded that the Fund's
recommendation was made in response to the F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
recommendation of the independent Senior FUND'S SENIOR OFFICER collateral from any securities lending
Officer that AIM consider whether the arrangements in the affiliated money
advisory fee waivers for certain equity The Board noted that, upon their market funds is in the best interests of
AIM Funds, including the Fund, should be direction, the Senior Officer of the Fund, the Fund and its shareholders.
simpli- who is independent of AIM and AIM's
affiliates, had prepared an independent
written evaluation to assist the Board in
deter-
AIM V.I. Utilities Fund
Semiannual Report to Shareholders o June 30, 2007
SECTOR EQUITY
Sector
The Fund provides a complete list of its holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Fund's semiannual and annual reports to shareholders. For the first and
third quarters, the Fund files the lists with the Securities and Exchange
Commission (SEC) on Form N-Q. The Fund's Form N-Q filings are available on the
SEC Web site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by
electronic request at the following E-mail address: publicinfo@sec.gov. The SEC
file numbers for the Fund are 811-07452 and 033-57340. The Fund's most recent
portfolio holdings, as filed on Form N-Q, have also been made available to
insurance companies issuing variable annuity contracts and variable life
insurance policies ("variable products") that invest in the Fund.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, from our Client Services department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio
securities during the 12 months ended June 30, 2007, is available at our Web
site. Go to AIMinvestments.com, access the About Us tab, click on Required
Notices and then click on Proxy Voting Activity. Next, select the Fund from the
drop-down menu. The information is also available on the SEC Web site, sec.gov.
[AIM INVESTMENTS LOGO] Unless otherwise noted, all data in this
- -- REGISTERED TRADEMARK -- report are from A I M Management Group Inc.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENTLY EFFECTIVE FUND PROSPECTUS
AND VARIABLE PRODUCT PROSPECTUS, WHICH
CONTAIN MORE COMPLETE INFORMATION,
INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ EACH CAREFULLY BEFORE
INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. Utilities Fund
Fund performance given represent the Fund and are not
======================================================================================= intended to reflect actual variable
PERFORMANCE SUMMARY product values. They do not reflect sales
charges, expenses and fees assessed in
FUND VS. INDEXES connection with a variable product. Sales
charges, expenses and fees, which are
Cumulative total returns, 12/31/06-6/30/07, excluding variable product issuer charges. determined by the variable product
If variable product issuer charges were included, returns would be lower. issuers, will vary and will lower the
total return.
Series I Shares 12.76%
Series II Shares 12.55 Per NASD requirements, the most recent
S&P 500 Index(1) (Broad Market Index) 6.96 month-end performance data at the Fund
Lipper VUF Utility Funds Category Average(1) (Peer Group Index) 13.67 level, excluding variable product charges,
Lipper Utility Funds Index(1) (Former Peer Group Index) 11.16 is available on this AIM automated
information line, 866-702-4402. As
Source: (1) Lipper Inc. mentioned above, for the most recent
month-end performance including variable
The unmanaged S&P 500 --REGISTERED TRADEMARK-- Index is an index of common stocks product charges, please contact your
frequently used as a general measure of U.S. stock market performance. variable product issuer or financial
advisor.
The Fund has elected to use the Lipper Variable Underlying Funds (VUF) Utility Funds
Category Average as its peer group instead of the Lipper Utility Funds Index. In 2006, (1) Total annual operating expenses less
Lipper began publishing VUF indexes, allowing the Fund to be compared with the Lipper any contractual fee waivers and/or
VUF Utility Funds Category Average. The unmanaged Lipper VUF Utility Funds Category expense reimbursement by the advisor
Average represents the average of all the variable insurance underlying Utility Funds in effect through at least April 30,
tracked by Lipper Inc. Lipper Inc. is an independent mutual fund performance monitor. 2009. See current prospectus for more
information.
The unmanaged Lipper Utility Funds Index represents an average of the largest
utility funds tracked by Lipper Inc., an independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== guarantee comparable future results;
FUND PERFORMANCE current performance may be lower or
As of 6/30/07 higher. Please contact your variable
SERIES I SHARES product issuer or financial advisor for
Inception (12/30/94) 9.44% the most recent month-end variable product
10 Years 8.95 performance. Performance figures reflect
5 Years 17.67 Fund expenses, reinvested distributions
1 Year 31.38 and changes in net asset value. Investment
return and principal value will fluctuate
SERIES II SHARES so that you may have a gain or loss when
10 Years 8.68% you sell shares.
5 Years 17.38
1 Year 31.01 The net annual Fund operating expense
========================================== ratio set forth in the most recent Fund
prospectus as of the date of this report
Series II shares' inception date is April for Series I and Series II shares was
30, 2004. Returns since that date are 0.93% and 1.18%, respectively.(1) The total
historical. All other returns are the annual Fund operating expense ratio set
blended returns of the historical forth in the most recent Fund prospectus
performance of Series II shares since as of the date of this report for Series I
their inception and the restated and Series II shares was 0.96% and 1.21%,
historical performance of Series I shares respectively. The expense ratios presented
(for periods prior to inception of Series above may vary from the expense ratios
II shares) adjusted to reflect the Rule presented in other sections of this report
12b-1 fees applicable to Series II shares. that are based on expenses incurred during
The inception date of Series I shares is the period covered by this report.
December 30, 1994.
AIM V.I. Utilities Fund, a series
The performance of the Fund's Series I portfolio of AIM Variable Insurance Funds,
and Series II share classes will differ is currently offered through insurance
primarily due to different class expenses. companies issuing variable products. You
cannot purchase shares of the Fund
The performance data quoted represent directly. Performance figures
past performance and cannot
AIM V.I. Utilities Fund
PORTFOLIO COMPOSITION*
By industry, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ----------------------------------------------------------
Electric Utilities 37.6%
- ----------------------------------------------------------
Multi-Utilities 20.5
- ----------------------------------------------------------
Integrated Telecommunication Services 12.6
- ----------------------------------------------------------
Gas Utilities 10.5
- ----------------------------------------------------------
Oil & Gas Storage & Transportation 9.7
- ----------------------------------------------------------
Independent Power Producers & Energy Traders 7.4
- ----------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 1.7
__________________________________________________________
==========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS-98.26%
ELECTRIC UTILITIES-37.55%
Duke Energy Corp. 362,000 $ 6,624,600
- -----------------------------------------------------------------------
E.ON A.G. (Germany)(a) 24,000 4,032,709
- -----------------------------------------------------------------------
Edison International 124,000 6,958,880
- -----------------------------------------------------------------------
Enel S.p.A. (Italy)(a) 189,000 2,035,711
- -----------------------------------------------------------------------
Entergy Corp. 62,000 6,655,700
- -----------------------------------------------------------------------
Exelon Corp. 104,000 7,550,400
- -----------------------------------------------------------------------
FirstEnergy Corp. 71,000 4,595,830
- -----------------------------------------------------------------------
FPL Group, Inc. 103,000 5,844,220
- -----------------------------------------------------------------------
Pepco Holdings, Inc. 140,000 3,948,000
- -----------------------------------------------------------------------
Portland General Electric Co. 81,818 2,245,086
- -----------------------------------------------------------------------
PPL Corp. 116,000 5,427,640
- -----------------------------------------------------------------------
Southern Co. 139,000 4,766,310
=======================================================================
60,685,086
=======================================================================
GAS UTILITIES-10.50%
AGL Resources Inc. 88,000 3,562,240
- -----------------------------------------------------------------------
Equitable Resources, Inc. 100,000 4,956,000
- -----------------------------------------------------------------------
Questar Corp. 160,000 8,456,000
=======================================================================
16,974,240
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-7.40%
Constellation Energy Group 40,000 3,486,800
- -----------------------------------------------------------------------
NRG Energy, Inc.(b) 204,000 8,480,280
=======================================================================
11,967,080
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-12.59%
Alaska Communications Systems Group Inc. 300,000 4,752,000
- -----------------------------------------------------------------------
AT&T Inc. 240,000 9,960,000
- -----------------------------------------------------------------------
Verizon Communications Inc. 137,000 5,640,290
=======================================================================
20,352,290
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MULTI-UTILITIES-20.52%
Ameren Corp. 35,000 $ 1,715,350
- -----------------------------------------------------------------------
CMS Energy Corp. 215,000 3,698,000
- -----------------------------------------------------------------------
Dominion Resources, Inc. 50,000 4,315,500
- -----------------------------------------------------------------------
National Grid PLC (United Kingdom)(a) 220,000 3,249,019
- -----------------------------------------------------------------------
OGE Energy Corp. 29,000 1,062,850
- -----------------------------------------------------------------------
PG&E Corp. 103,000 4,665,900
- -----------------------------------------------------------------------
PNM Resources Inc. 20,000 555,800
- -----------------------------------------------------------------------
SCANA Corp. 27,000 1,033,830
- -----------------------------------------------------------------------
Sempra Energy 110,000 6,515,300
- -----------------------------------------------------------------------
Veolia Environnement (France)(a) 42,000 3,282,641
- -----------------------------------------------------------------------
Xcel Energy, Inc. 150,000 3,070,500
=======================================================================
33,164,690
=======================================================================
OIL & GAS STORAGE & TRANSPORTATION-9.70%
El Paso Corp. 325,000 5,599,750
- -----------------------------------------------------------------------
Spectra Energy Corp. 153,000 3,971,880
- -----------------------------------------------------------------------
Williams Cos., Inc. (The) 193,000 6,102,660
=======================================================================
15,674,290
=======================================================================
Total Common Stocks (Cost $111,851,327) 158,817,676
=======================================================================
MONEY MARKET FUNDS-1.70%
Liquid Assets Portfolio-Institutional
Class(c) 1,370,619 1,370,619
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 1,370,619 1,370,619
=======================================================================
Total Money Market Funds (Cost
$2,741,238) 2,741,238
=======================================================================
TOTAL INVESTMENTS-99.96% (Cost $114,592,565) 161,558,914
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.04% 64,367
=======================================================================
NET ASSETS-100.00% $161,623,281
_______________________________________________________________________
=======================================================================
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at June 30, 2007 was $12,600,080, which
represented 7.80% of the Fund's Net Assets. See Note 1A.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Utilities Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $111,851,327) $158,817,676
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $2,741,238) 2,741,238
=============================================================
Total investments (Cost $114,592,565) 161,558,914
=============================================================
Foreign currencies, at value (Cost $131,857) 126,633
=============================================================
Receivables for:
Investments sold 1,550,788
- -------------------------------------------------------------
Fund shares sold 27,129
- -------------------------------------------------------------
Dividends 451,155
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 46,480
- -------------------------------------------------------------
Other assets 2,173
=============================================================
Total assets 163,763,272
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 1,950,862
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 54,189
- -------------------------------------------------------------
Accrued administrative services fees 103,208
- -------------------------------------------------------------
Accrued distribution fees-Series II 1,886
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,832
- -------------------------------------------------------------
Accrued transfer agent fees 1,598
- -------------------------------------------------------------
Accrued operating expenses 24,416
=============================================================
Total liabilities 2,139,991
=============================================================
Net assets applicable to shares outstanding $161,623,281
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 96,277,597
- -------------------------------------------------------------
Undistributed net investment income 4,505,820
- -------------------------------------------------------------
Undistributed net realized gain 13,861,929
- -------------------------------------------------------------
Unrealized appreciation 46,977,935
=============================================================
$161,623,281
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $158,566,747
_____________________________________________________________
=============================================================
Series II $ 3,056,534
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,624,994
_____________________________________________________________
=============================================================
Series II 128,579
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 23.93
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 23.77
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$40,190) $ 2,268,761
- ------------------------------------------------------------
Dividends from affiliated money market funds 133,314
============================================================
Total investment income 2,402,075
============================================================
EXPENSES:
Advisory fees 465,554
- ------------------------------------------------------------
Administrative services fees 203,138
- ------------------------------------------------------------
Custodian fees 6,434
- ------------------------------------------------------------
Distribution fees-Series II 3,466
- ------------------------------------------------------------
Transfer agent fees 9,042
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 10,729
- ------------------------------------------------------------
Other 29,250
============================================================
Total expenses 727,613
============================================================
Less: Fees waived and expense offset
arrangements (3,116)
============================================================
Net expenses 724,497
============================================================
Net investment income 1,677,578
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 9,291,681
- ------------------------------------------------------------
Foreign currencies (13,331)
============================================================
9,278,350
============================================================
Change in net unrealized appreciation of:
Investment securities 7,155,037
- ------------------------------------------------------------
Foreign currencies 8,883
============================================================
7,163,920
============================================================
Net realized and unrealized gain 16,442,270
============================================================
Net increase in net assets resulting from
operations $18,119,848
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Utilities Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,677,578 $ 2,903,361
- ------------------------------------------------------------------------------
Net realized gain 9,278,350 8,810,025
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 7,163,920 16,338,522
==============================================================================
Net increase in net assets resulting from
operations 18,119,848 28,051,908
==============================================================================
Distributions to shareholders from net
investment income:
Series I -- (4,313,053)
- ------------------------------------------------------------------------------
Series II -- (75,912)
==============================================================================
Total distributions from net investment
income -- (4,388,965)
==============================================================================
Distributions to shareholders from net
realized gains:
Series I -- (2,662,863)
- ------------------------------------------------------------------------------
Series II -- (47,944)
==============================================================================
Total distributions from net realized
gains -- (2,710,807)
==============================================================================
Decrease in net assets resulting from
distributions -- (7,099,772)
==============================================================================
Share transactions-net:
Series I 1,682,679 4,313,312
- ------------------------------------------------------------------------------
Series II 279,418 1,371,296
==============================================================================
Net increase in net assets resulting from
share transactions 1,962,097 5,684,608
==============================================================================
Net increase in net assets 20,081,945 26,636,744
==============================================================================
NET ASSETS:
Beginning of period 141,541,336 114,904,592
==============================================================================
End of period (including undistributed net
investment income of $4,505,820 and
$2,828,242, respectively) $161,623,281 $141,541,336
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Utilities Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Utilities Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware statutory trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twenty
separate portfolios, (each constituting a "Fund"). The Fund currently offers two
classes of shares, Series I and Series II, both of which are offered to
insurance company separate accounts funding variable annuity contracts and
variable life insurance policies ("variable products"). Matters affecting each
Fund or class will be voted on exclusively by the shareholders of such Fund or
class. Current Securities and Exchange Commission ("SEC") guidance, however,
requires participating insurance companies offering separate accounts to vote
shares proportionally in accordance with the instructions of the contract owners
whose investments are funded by shares of each Fund or class. 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's investment objective are capital growth and current income.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. Futures contracts are valued at the final
settlement price set by an exchange on which they are principally traded.
Listed options are valued at the mean between the last bid and the ask
prices from the exchange on which they are principally traded. Options not
listed on an exchange are valued by an independent source at the mean
between the last bid and ask prices. For purposes of determining net asset
value per share, futures and option contracts generally are valued 15
minutes after the close of the customary trading session of the New York
Stock Exchange ("NYSE").
Investments in open-end and closed-end registered investment companies
that do not trade on an exchange are valued at the end of day net asset
value per share. Investments in open-end and closed-end registered
investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading
session on the exchange where the security is principally traded.
Debt obligations (including convertible bonds) and unlisted equities are
fair valued using an evaluated quote provided by an independent pricing
service. Evaluated quotes 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 specific securities, dividend rate, yield, quality,
type of issue, coupon rate, maturity, individual trading characteristics
and other market data. Short-term obligations, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
Valuations 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.
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 on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
AIM V.I. Utilities Fund
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid to separate accounts of participating insurance
companies annually and recorded on ex-dividend date.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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 including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. RISKS INVOLVED IN INVESTING IN THE FUND -- Single
Sector/Non-Diversified -- The Fund's investments are concentrated in a
comparatively narrow segment of the economy. Consequently, the Fund may
tend to be more volatile than other mutual funds, and the value of the
Fund's investments may tend to rise and fall more rapidly.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
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 (net of foreign
taxes withheld on disposition) 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 the 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. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
K. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. Realized and
unrealized gains and losses on these contracts are included in the
Statement of Operations. The Fund could be exposed to risk, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities,
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
AIM V.I. Utilities Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of 0.60% of the
Fund's average daily net assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Series I shares to 0.93% and Series
II shares to 1.18% of average daily net assets, through at least April 30, 2009.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with INVESCO PLC ("INVESCO")
(formerly "AMVESCAP PLC") described more fully below, the only expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund. To the extent that the annualized expense
ratio does not exceed the expense limitation, AIM will retain its ability to be
reimbursed for such fee waivers or reimbursements prior to the end of each
fiscal year.
Further, effective July 1, 2007, AIM has contractually agreed through at
least April 30, 2009 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $2,935.
At the request of the Trustees of the Trust, INVESCO agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM a fee for costs incurred in
providing accounting services and fund administrative services to the Fund and
to reimburse AIM for administrative services fees paid to insurance companies
that have agreed to provide services to the participants of separate accounts.
These administrative services provided by the insurance companies may include,
among other things: the printing of prospectuses, financial reports and proxy
statements and the delivery of the same to existing participants; the
maintenance of master accounts; the facilitation of purchases and redemptions
requested by the participants; and the servicing of participants' accounts.
Pursuant to such agreement, for the six months ended June 30, 2007, AIM was paid
$24,795 for accounting and fund administrative services and reimbursed $178,343
for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
AIS a fee for providing transfer agency and shareholder services to the Fund and
reimburse AIS for certain expenses incurred by AIS in the course of providing
such services. For the six months ended June 30, 2007, expenses incurred under
the agreement are shown in the Statement of Operations as transfer agent fees.
The Trust has entered into a master distribution agreement with AIM
Distributors, Inc. ("ADI") to serve as the distributor for the Fund. The Trust
has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Series II shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Series II shares. Of the Plan payments, up to 0.25% of the average daily net
assets of the Series II shares may be paid to insurance companies who furnish
continuing personal shareholder services to customers who purchase and own
Series II shares of the Fund. For the six months ended June 30, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $3,563,271 $19,940,669 $(22,133,321) $1,370,619 $ 66,822
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 3,563,271 19,940,669 (22,133,321) 1,370,619 66,492
=================================================================================================================================
Total Investments in Affiliates $7,126,542 $39,881,338 $(44,266,642) $2,741,238 $133,314
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the six months ended
June 30, 2007, the Fund received credits from this arrangement, which resulted
in the reduction of the Fund's total expenses of $181.
AIM V.I. Utilities Fund
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to certain Trustees and Officers of the Fund. Trustees have
the option to defer compensation payable by the Fund, and "Trustees' and
Officer's Fees and Benefits" also include amounts accrued by the Fund to fund
such deferred compensation amounts. Those Trustees who defer compensation have
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested. Finally, certain current Trustees are eligible to
participate in a retirement plan that provides for benefits to be paid upon
retirement to Trustees over a period of time based on the number of years of
service. The Fund may have certain former Trustees who also participate in a
retirement plan and receive benefits under such plan. "Trustees' and Officer's
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the six months ended June 30, 2007, the Fund paid legal fees of
$2,480 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund participates in an uncommitted unsecured revolving credit facility
with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the
lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 2007, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $2,758,928
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2007 was $38,889,828 and
$30,943,254, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $47,500,266
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (640,222)
===============================================================================
Net unrealized appreciation of investment securities $46,860,044
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $114,698,870.
</Table>
AIM V.I. Utilities Fund
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,625,499 $37,830,294 2,859,050 $55,911,823
- --------------------------------------------------------------------------------------------------------------------
Series II 18,635 424,540 71,923 1,371,458
====================================================================================================================
Issued as reinvestment of dividends:
Series I -- -- 329,053 6,975,916
- --------------------------------------------------------------------------------------------------------------------
Series II -- -- 5,876 123,856
====================================================================================================================
Reacquired:
Series I (1,550,462) (36,147,615) (3,038,761) (58,574,427)
- --------------------------------------------------------------------------------------------------------------------
Series II (6,637) (145,122) (6,299) (124,018)
====================================================================================================================
87,035 $ 1,962,097 220,842 $ 5,684,608
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 59% of
the outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with
these entities whereby these entities sell units of interest in separate
accounts funding variable products that are invested in the Fund. The
Fund, AIM and/or AIM affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services
to the Fund, AIM and or AIM affiliates including but not limited to
services such as, securities brokerage, third party record keeping and
account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record
by these entities are also owned beneficially.
NOTE 10--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.23 $ 17.83 $ 15.61 $ 12.95 $ 11.16 $ 14.08
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.25(a) 0.47(a) 0.42(a) 0.42(a) 0.33(a) 0.19
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.45 4.06 2.21 2.57 1.60 (3.05)
=================================================================================================================================
Total from investment operations 2.70 4.53 2.63 2.99 1.93 (2.86)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.70) (0.41) (0.33) (0.14) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.43) -- -- -- --
=================================================================================================================================
Total distributions -- (1.13) (0.41) (0.33) (0.14) (0.06)
=================================================================================================================================
Net asset value, end of period $ 23.93 $ 21.23 $ 17.83 $ 15.61 $ 12.95 $ 11.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 12.72% 25.46% 16.83% 23.65% 17.38% (20.32)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $158,567 $139,080 $114,104 $159,554 $62,510 $31,204
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 0.93%(c) 0.93% 0.93% 1.01% 1.08% 1.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.93%(c) 0.96% 0.96% 1.01% 1.08% 1.15%
=================================================================================================================================
Ratio of net investment income to average
net assets 2.17%(c) 2.40% 2.49% 3.09% 2.84% 2.59%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 20% 38% 49% 52% 58% 102%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$153,675,014.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Utilities Fund
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
---------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $21.12 $17.76 $15.57 $12.63
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.22 0.42 0.38 0.26
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.43 4.06 2.20 2.68
=================================================================================================================
Total from investment operations 2.65 4.48 2.58 2.94
=================================================================================================================
Less distributions:
Dividends from net investment income -- (0.69) (0.39) --
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.43) -- --
=================================================================================================================
Total distributions -- (1.12) (0.39) --
=================================================================================================================
Net asset value, end of period $23.77 $21.12 $17.76 $15.57
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 12.55% 25.25% 16.55% 23.28%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,057 $2,462 $ 801 $ 602
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.18%(c) 1.18% 1.18% 1.28%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.18%(c) 1.21% 1.21% 1.28%(d)
=================================================================================================================
Ratio of net investment income to average net assets 1.92%(c) 2.15% 2.24% 2.82%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 20% 38% 49% 52%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Total returns are not annualized for periods
less than one year and do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(c) Ratios are annualized and based on average daily net assets of
$2,795,704.
(d) Annualized
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("ADI") (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI
entered into certain arrangements permitting market timing of the AIM Funds and
failed to disclose these arrangements in the prospectuses for such Funds, and
conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM, ADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
AIM V.I. Utilities Fund
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in INVESCO PLC's 401(k) plan. Based on orders issued by the MDL
Court, all claims asserted against the AIM Funds that have been transferred to
the MDL Court have been dismissed, although certain Funds remain nominal
defendants in the Consolidated Amended Fund Derivative Complaint. On September
15, 2006, the MDL Court granted the INVESCO defendants' motion to dismiss the
Amended Class Action Complaint for Violations of ERISA and dismissed such
Complaint. The plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
AIM V.I. Utilities Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE ACTUAL EXPENSES of 5% per year before expenses, which is
not the Fund's actual return.
As a shareholder of the Fund, you incur The table below provides information about
ongoing costs, including management fees; actual account values and actual expenses. The hypothetical account values and
distribution and/or service (12b-1) fees; You may use the information in this table, expenses may not be used to estimate the
and other Fund expenses. This example is together with the amount you invested, to actual ending account balance or expenses
intended to help you understand your estimate the expenses that you paid over you paid for the period. You may use this
ongoing costs (in dollars) of investing in the period. Simply divide your account information to compare the ongoing costs
the Fund and to compare these costs with value by $1,000 (for example, an $8,600 of investing in the Fund and other funds.
ongoing costs of investing in other mutual account value divided by $1,000 = 8.6), To do so, compare this 5% hypothetical
funds. The example is based on an then multiply the result by the number in example with the 5% hypothetical examples
investment of $1,000 invested at the the table under the heading entitled that appear in the shareholder reports of
beginning of the period and held for the "Actual Expenses Paid During Period" to the other funds.
entire period January 1, 2007, through estimate the expenses you paid on your
June 30, 2007. account during this period. Please note that the expenses shown in
the table are meant to highlight your
The actual and hypothetical expenses in HYPOTHETICAL EXAMPLE FOR COMPARISON ongoing costs. Therefore, the hypothetical
the examples below do not represent the PURPOSES information is useful in comparing ongoing
effect of any fees or other expenses costs, and will not help you determine the
assessed in connection with a variable The table below also provides information relative total costs of owning different
product; if they did, the expenses shown about hypothetical account values and funds.
would be higher while the ending account hypothetical expenses based on the Fund's
values shown would be lower. actual expense ratio and an assumed rate
of return
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Series I $1,000.00 $1,127.60 $4.91 $1,020.18 $4.66 0.93%
Series II 1,000.00 1,125.50 6.22 1,018.94 5.91 1.18
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense
ratio and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIM V.I. Utilities Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Variable Insurance Funds is required under recommendations regarding the performance, PROVIDED BY AIM
the Investment Company Act of 1940 to fees and expenses of the AIM Funds to the
approve annually the renewal of the AIM full Board. Moreover, the Investments The Board reviewed the advisory services
V.I. Utilities Fund (the Fund) investment Committee considers each Sub-Committee's provided to the Fund by AIM under the
advisory agreement with A I M Advisors, recommendations in making its annual Fund's advisory agreement, the performance
Inc. (AIM). During contract renewal recommendation to the Board whether to of AIM in providing these services, and
meetings held on June 25-27, 2007, the approve the continuance of each AIM Fund's the credentials and experience of the
Board as a whole and the disinterested or investment advisory agreement and officers and employees of AIM who provide
"independent" Trustees, voting separately, sub-advisory agreement, if applicable these services. The Board's review of the
approved the continuance of the Fund's (advisory agreements), for another year. qualifications of AIM to provide these
investment advisory agreement for another services included the Board's
year, effective July 1, 2007. In doing so, The independent Trustees, as mentioned consideration of AIM's portfolio and
the Board determined that the Fund's above, are assisted in their annual product review process, various back
advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio review and negotiation between the calendar years to the performance of funds
managers for their assigned funds and Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
other members of management and review focus to a greater extent on certain not managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Variable Annuity Underlying Funds -
strategies and limitations of these funds. deliberations and conclusions in a Utility Index. The Board also reviewed the
particular year may be based in part on methodology used by Lipper to identify the
In addition to their meetings their deliberations and conclusions of Fund's peers. The Board noted that the
throughout the year, the Sub-Committees these same arrangements throughout the Fund's performance was comparable to the
meet at designated contract renewal year and in prior years. median performance of its peers for the
meetings each year to conduct an in-depth one, three and five year periods. The
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF Board noted that the Fund's performance
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION was comparable to the performance of the
the contract renewal process, the Trustees Index for the one, three and five year
receive comparative performance and fee The discussion below serves as a summary periods. The Board also considered the
data regarding all the AIM Funds prepared of the Senior Officer's independent steps AIM has taken over the last several
by an independent company, Lipper, Inc., written evaluation, as well as a years to improve the quality and
under the direction and supervision of the discussion of the material factors and efficiency of the services that AIM
independent Senior Officer who also related conclusions that formed the basis provides to the AIM Funds. The Board
prepares a separate analysis of this for the Board's approval of the Fund's concluded that AIM continues to be
information for the Trustees. Each advisory agreement. Unless otherwise responsive to the Board's focus on fund
Sub-Committee then makes recommendations stated, information set forth below is as performance. Although the independent
to the Investments Committee regarding the of June 27, 2007 and does not reflect any written evaluation of the Fund's Senior
performance, fees and expenses of their changes that may have occurred since that Officer (discussed below) only considered
assigned funds. The Investments Committee date, including but not limited to changes Fund performance through the most recent
considers each Sub-Committee's to the Fund's performance, advisory fees, calendar year, the Board also reviewed
recom- expense limitations and/or fee waivers. more
(continued)
AIM V.I. Utilities Fund
recent Fund performance and this review E. PROFITABILITY AND FINANCIAL RESOURCES payment obligation for the research and
did not change their conclusions. OF AIM executions services from AIM to the funds
and therefore may reduce AIM's expenses.
C. ADVISORY FEES AND FEE WAIVERS The Board reviewed information from AIM The Board also noted that research
concerning the costs of the advisory and obtained through soft dollar arrangements
The Board compared the Fund's contractual other services that AIM and its affiliates may be used by AIM in making investment
advisory fee rate to the contractual provide to the Fund and the profitability decisions for the Fund and may therefore
advisory fee rates of funds in the Fund's of AIM and its affiliates in providing benefit Fund shareholders. The Board
Lipper peer group that are not managed by these services. The Board also reviewed concluded that AIM's soft dollar
AIM, at a common asset level and as of the information concerning the financial arrangements were appropriate. The Board
end of the past calendar year. The Board condition of AIM and its affiliates. The also concluded that, based on their review
noted that the Fund's advisory fee rate Board also reviewed with AIM the and representations made by AIM, these
was below the median advisory fee rate of methodology used to prepare the arrangements were consistent with
its peers. The Board also reviewed the profitability information. The Board regulatory requirements.
methodology used by Lipper and noted that considered the overall profitability of
the contractual fee rates shown by Lipper AIM, as well as the profitability of AIM The Board considered the fact that the
include any applicable long-term in connection with managing the Fund. The Fund's uninvested cash and cash collateral
contractual fee waivers. The Board also Board noted that AIM continues to operate from any securities lending arrangements
compared the Fund's contractual advisory at a net profit, although increased may be invested in money market funds
fee rate to the contractual advisory fee expenses in recent years have reduced the advised by AIM pursuant to procedures
rates of other clients of AIM and its profitability of AIM and its affiliates. approved by the Board. The Board noted
affiliates with investment strategies The Board concluded that the Fund's that AIM will receive advisory fees from
comparable to those of the Fund, including advisory fees were fair and reasonable, these affiliated money market funds
one mutual fund advised by AIM. The Board and that the level of profits realized by attributable to such investments, although
noted that the Fund's rate was below the AIM and its affiliates from providing AIM has contractually agreed to waive the
rate for the mutual fund. services to the Fund was not excessive in advisory fees payable by the Fund with
light of the nature, quality and extent of respect to its investment of uninvested
The Board noted that AIM has the services provided. The Board cash in these affiliated money market
contractually agreed to waive fees and/or considered whether AIM is financially funds through at least April 30, 2009. The
limit expenses of the Fund through at sound and has the resources necessary to Board considered the contractual nature of
least April 30, 2009 in an amount perform its obligations under the Fund's this fee waiver and noted that it remains
necessary to limit total annual operating advisory agreement, and concluded that AIM in effect until at least April 30, 2009.
expenses to a specified percentage of has the financial resources necessary to The Board concluded that the Fund's
average daily net assets for each class of fulfill these obligations. investment of uninvested cash and cash
the Fund. The Board considered the collateral from any securities lending
contractual nature of this fee waiver and F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
noted that it remains in effect until at FUND'S SENIOR OFFICER market funds is in the best interests of
least April 30, 2009. The Board reviewed the Fund and its shareholders.
the Fund's effective advisory fee rate, The Board noted that, upon their
after taking account of this expense direction, the Senior Officer of the Fund,
limitation, and considered the effect this who is independent of AIM and AIM's
expense limitation would have on the affiliates, had prepared an independent
Fund's estimated total expenses. The Board written evaluation to assist the Board in
concluded that the levels of fee determining the reasonableness of the
waivers/expense limitations for the Fund proposed management fees of the AIM Funds,
were fair and reasonable. including the Fund. The Board noted that
they had relied upon the Senior Officer's
After taking account of the Fund's written evaluation instead of a
contractual advisory fee rate, as well as competitive bidding process. In
the comparative advisory fee information determining whether to continue the Fund's
and the expense limitation discussed advisory agreement, the Board considered
above, the Board concluded that the Fund's the Senior Officer's written evaluation.
advisory fees were fair and reasonable.
G. COLLATERAL BENEFITS TO AIM AND ITS
D. ECONOMIES OF SCALE AND BREAKPOINTS AFFILIATES
The Board considered the extent to which The Board considered various other
there are economies of scale in AIM's benefits received by AIM and its
provision of advisory services to the affiliates resulting from AIM's
Fund. The Board also considered whether relationship with the Fund, including the
the Fund benefits from such economies of fees received by AIM and its affiliates
scale through contractual breakpoints in for their provision of administrative,
the Fund's advisory fee schedule or transfer agency and distribution services
through advisory fee waivers or expense to the Fund. The Board considered the
limitations. The Board noted that the performance of AIM and its affiliates in
Fund's contractual advisory fee schedule providing these services and the
does not include any breakpoints. The organizational structure employed by AIM
Board considered whether it would be and its affiliates to provide these
appropriate to add advisory fee services. The Board also considered that
breakpoints for the Fund or whether, due these services are provided to the Fund
to the nature of the Fund and the advisory pursuant to written contracts which are
fee structures of comparable funds, it was reviewed and approved on an annual basis
reasonable to structure the advisory fee by the Board. The Board concluded that AIM
without breakpoints. Based on this review, and its affiliates were providing these
the Board concluded that it was not services in a satisfactory manner and in
necessary to add breakpoints to the Fund's accordance with the terms of their
advisory fee schedule. Based on this contracts, and were qualified to continue
information, the Board concluded that, to provide these services to the Fund.
absent breakpoints, the Fund's contractual
advisory fees remain constant and do not The Board considered the benefits
reflect economies of scale. The Board also realized by AIM as a result of portfolio
noted that the Fund shares directly in brokerage transactions executed through
economies of scale through lower fees "soft dollar" arrangements. Under these
charged by third party service providers arrangements, portfolio brokerage
based on the combined size of all of the commissions paid by the Fund and/or other
AIM Funds and affiliates. funds advised by AIM are used to pay for
research and execution services. The Board
noted that soft dollar arrangements shift
the
ITEM 2. CODE OF ETHICS.
There were no amendments to the Code of Ethics (the "Code") that
applies to the Registrant's Principal Executive Officer ("PEO")
and Principal Financial Officer ("PFO") during the period covered
by the report. The Registrant did not grant any waivers, including
implicit waivers, from any provisions of the Code to the PEO or
PFO during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investments in securities of unaffiliated issuers is included as
part of the reports to stockholders filed under Item 1 of this
Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) As of June 14, 2007, an evaluation was performed under the
supervision and with the participation of the officers of the
Registrant, including the Principal Executive Officer ("PEO") and
Principal Financial Officer ("PFO"), to assess the effectiveness
of the Registrant's disclosure controls and procedures, as that
term is defined in Rule 30a-3(c) under the Investment Company Act
of 1940 (the "Act"), as amended. Based on that evaluation, the
Registrant's officers, including the PEO and PFO, concluded that,
as of June 14, 2007, the Registrant's disclosure controls and
procedures were reasonably designed to ensure: (1) that
information required to be disclosed by the Registrant on Form
N-CSR is recorded,
processed, summarized and reported within the time periods
specified by the rules and forms of the Securities and Exchange
Commission; and (2) that material information relating to the
Registrant is made known to the PEO and PFO as appropriate to
allow timely decisions regarding required disclosure.
(b) There have been no changes in the Registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the
Act) that occurred during the second fiscal quarter of the period
covered by the report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
12(a)(1) Not applicable.
12(a)(2) Certifications of principal executive officer and principal
financial officer as required by Rule 30a-2(a) under the
Investment Company Act of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal
financial officer as required by Rule 30a-2(b) under the
Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM Variable Insurance Funds
By:/s/ Philip A. Taylor
--------------------------------------------------
Philip A. Taylor
Principal Executive Officer
Date: August 23, 2007
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By:/s/ Philip A. Taylor
--------------------------------------------------
Philip A. Taylor
Principal Executive Officer
Date: August 23, 2007
By:/s/ Sidney M. Dilgren
--------------------------------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: August 23, 2007
EXHIBIT INDEX
12(a)(1) Not applicable.
12(a)(2) Certifications of principal executive officer and principal
financial officer as required by Rule 30a-2(a) under the
Investment Company Act of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal
financial officer as required by Rule 30a-2(b) under the
Investment Company Act of 1940.