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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: 12/31/07
Item 1. Schedule of Investments.
DOMESTIC EQUITY
Large-Cap Value
AIM V.I. Basic
Balanced Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. BASIC BALANCED FUND's investment objective
determine how to vote proxies is long-term growth of capital and current income.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
Us tab, click on Required Notices and IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
then click on Proxy Voting Activity.
Next, select the Fund from the
drop-down menu. The information is UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
also available on the SEC Web site, ARE FROM A I M MANAGEMENT GROUP INC.
sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Basic Balanced Fund
Management's discussion of Fund performance Fund's short-term relative performance
will naturally be different than the
================================================================================ market and peers and have little
PERFORMANCE SUMMARY information value since we simply don't
own the same stocks.
For the year ended December 31, 2007, AIM V.I. Basic Balanced Fund, excluding
variable product issuer charges, underperformed its broad market, style-specific Our fixed income portfolio investment
and peer group indexes. process is accomplished through the use of
top-down strategies involving duration
We attribute the Fund's underperformance versus its broad market and management, yield-curve position and
style-specific indexes to below-market returns from selected investments in the sector allocation. We also use bottom-up
financials and consumer discretionary sectors. Top contributors to performance strategies involving credit analysis and
were selected investments in the energy, consumer discretionary and information selection of specific securities. By
technology sectors. combining perspectives from both the
portfolio and the security level, we seek
Your Fund's long-term performance appears later in this report. to consistently add value over time while
minimizing portfolio risk.
FUND VS. INDEXES
Market conditions and your Fund
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If
variable product issuer charges were included, returns would be lower. Most equity and fixed income markets
posted gains during 2007.(1) Beginning in
Series I Shares 2.20% July, most markets witnessed an increase
Series II Shares 1.94 in price volatility from housing-related
S&P 500 Index(triangle) (Broad Market Index) 5.49 stress and the aging of our economic
Custom Basic Balanced INDEX (square) (Style-Specific Index) 2.79 expansion. It is important to understand
Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index(triangle) that these periods of stress are healthy
(Peer Group Index) 5.64 for financial markets in general and
Lipper Balanced Funds Index(triangle) (Former Peer Group Index) 6.53 typically create opportunities for our
investment strategy in particular. We are
SOURCES: OLIPPER INC.; (square)A I M MANAGEMENT GROUP INC., LIPPER INC. hopeful that stock valuation dispersion
================================================================================ will increase as credit spreads and market
volatility return to normal levels,
How we invest ness values, partly because investors potentially creating opportunities for us
regularly overreact to negative news. to grow the portfolio's estimated
We seek to create wealth by maintaining intrinsic value at an above-average rate.
a long-term investment horizon and o Long-term investment results are a While investment results can be uneven
investing in companies that are selling function of the level and growth of during these periods of stress,
at a significant discount to their business value in the portfolio. historically these times have yielded
estimated intrinsic value--a value that attractive opportunities for future
is based on the estimated future cash Since our application of this capital growth.
flows generated by the business. The strategy is highly disciplined and
Fund's philosophy is based on key relatively unique, it is important to Aided by strong earnings and increasing
elements that we believe have extensive understand the benefits and oil prices, energy stocks extended their
empirical evidence: limitations of our process. First, the multi-year market outperformance. Drilling
investment strategy is intended to company Transocean and oil service company
o Company intrinsic values can be preserve your capital while growing it Schlumberger made significant
reasonably estimated. Importantly, this at above-market rates over the long contributions to performance during the
estimated fair business value is term. Second, our investments have year.
independent of the company's stock little in common with popular
price. benchmark indexes and most of our Apollo Group, another top contributor,
peers. And third, the provides postsecondary education programs
o Market prices are more volatile for working adults. Apollo's stock price
than busi- declined in recent years as the company
experienced decelerating enrollment and
======================================= ====================================== revenue growth. We believed the
postsecondary education industry remained
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS * healthy and that Apollo's stock price was
selling at a significant discount to
By security type 1. UnitedHealth Group Inc. 3.5% business value. Recent positive trends in
Common Stocks & Other Equity 2. Dell Inc. 2.4 student enrollment and profit margins lent
Interests 61.7% 3. Western Union Co. 2.3 support to our view.
Bonds & Notes 26.0 4. Halliburton Co. 2.2
U.S. Mortgage Backed Securities 12.8 5. Cardinal Health, Inc. 2.0 The largest detractors from performance
Preferred Stocks 3.1 6. Schlumberger Ltd. 2.0 were Citigroup, Interpublic Group and
Asset Backed Securities 2.1 7. Fannie Mae 1.9 Fannie Mae.
U.S. Government Agency Securities 1.2 8. KLA-Tencor Corp. 1.9
Municipal Obligations 0.3 9. Transocean Inc. 1.8
Money Market Funds Plus 10. Microsoft Corp. 1.8
Other Assets Less Liabilities -7.2
Total Net Assets $64.29 million
The Fund's holdings are subject to
change, and there is no assurance that Total Number of Holdings* 262
the Fund will continue to hold any
particular security.
*Excluding money market fund holdings.
======================================= ======================================
AIM V.I. Basic Balanced Fund
We were surprised by the extent of some of our financial services COUNTRY, INDUSTRY, SECURITY OR THE FUND.
Citigroup's collateralized debt obligation investments. STATEMENTS OF FACT ARE FROM SOURCES
(CDO) losses, which came at a time when the CONSIDERED RELIABLE, BUT A I M ADVISORS,
company lacked an excess capital cushion to At the close of the year, and in our INC. MAKES NO REPRESENTATION OR WARRANTY
absorb sizable losses. Citigroup also has a opinion, the difference between the AS TO THEIR COMPLETENESS OR ACCURACY.
new CEO as a result of the incident, Wall market price and the estimated intrinsic ALTHOUGH HISTORICAL PERFORMANCE IS NO
Street veteran Vikram Pandit. Earlier in value of the portfolio was above the GUARANTEE OF FUTURE RESULTS, THESE
the year, the company hired a world-class Fund's historical average, and we INSIGHTS MAY HELP YOU UNDERSTAND OUR
CFO in Gary Crittenden. We believe this believed this value content was greater INVESTMENT MANAGEMENT PHILOSOPHY.
management team will realize the potential than what was available in the broad
of Citigroup's global banking market. While there is no assurance that Bret W. Stanley
franchise--one of the best growth market value will ever reflect our [STANLEY Chartered Financial Analyst,
opportunities of any large financial estimate of the portfolio's intrinsic PHOTO] senior portfolio manager, is
company in the world, in our opinion. value, we believe this provides the best lead manager of AIM V.I.
indication that your Fund is positioned Basic Balanced Fund. He earned a B.B.A. in
Interpublic Group's stock declined as to potentially achieve its objective of finance from The University of Texas at
investors continued to express concern over long-term growth of capital. Austin and an M.S. in finance from the
the pace of the company's turnaround as University of Houston.
well as fears of the potential impact of a Context for results
slowing global economy. We remained R. Canon Coleman II
dissatisfied with the pace of improvement As managers, we know a long-term [COLEMAN Chartered Financial Analyst,
at Interpublic. However, the magnitude of investment horizon and attractive PHOTO] portfolio manager, is manager
the opportunity combined with the progress potential upside to our estimate of of AIM V.I. Basic Balanced
to date supported our continued investment. portfolio intrinsic value are critical to Fund. He earned a B.S. and an M.S. in
creating wealth. But we understand accounting from the University of Florida.
Fannie Mae has been affected by maintaining a long-term investment He also earned an M.B.A. from the Wharton
increased mortgage losses as well as horizon is a challenge. So, when you School at the University of Pennsylvania.
accounting complexities that create consider our short-term results we
volatility in regulatory capital. We encourage you to review our long-term Jan H. Friedli
believe accounting and capital standards results. We are long-term investors who [FRIEDLI Senior portfolio manager, is
required of the company are in conflict provide a portfolio that in our opinion PHOTO] co-manager of AIM V.I. Basic
with the economics of the business. We is distinct from market indexes and most Balanced Fund. He graduated
believe this situation is inconsistent with of our peers. cumlaude from Villanova University with a
sound regulatory policy and we expect it to B.S. in computer science before earning
eventually be resolved. We believe mortgage Recent studies have shown short-term an M.B.A. with honors from the University
credit losses to be manageable and believe results have little information value and of Chicago.
Fannie Mae may ultimately emerge as an even the frequent trading of stocks or mutual
more dominate player in the mortgage funds is a costly exercise--reducing Brendan D. Gau
industry. actual returns by several percentage [GAU Chartered Financial Analyst,
points per year as shareholders PHOTO] portfolio manager, is manager
The Fund's fixed income holdings made a unknowingly exchange tomorrow's winner of AIM V.I. Basic Balanced
positive contribution to performance during for tomorrow's loser.(2) In addition, a Fund. He earned a B.A. degree in
the year, but underperformed the Lehman recent Yale University study reveals half mathematics, physics and economics from
Brothers U.S. Aggregate Bond Index. Our of all mutual funds charge an active Rice University.
tactically driven short-to-neutral duration management fee for essentially a
strategy detracted from relative closet-index portfolio. While this Matthew W. Seinsheimer
performance as yields dropped more on creates smooth and innocuous short-term [SEINSHEIMER Chartered Financial Analyst,
short-term government securities (maturing relative performance, it typically leads PHOTO] senior portfolio manager, is
in two years or less) than they did on to long-term underperformance.(3) manager of AIM V.I. Basic
long-term securities (maturing in 10 or Considering these factors, your Fund is Balanced Fund. He earned a B.B.A. in
more years). doing something different and old finance from Southern Methodist
fashioned--investing for the long term University and an M.B.A. from The
Portfolio assessment and following a common-sense approach University of Texas at Austin.
that has produced a portfolio that is
We believe the single most important different from common stock market Michael J. Simon
indicator of the way AIM V.I. Basic indexes and more attractively valued, in [SIMON Chartered Financial Analyst,
Balanced Fund is positioned for potential our opinion. PHOTO] senior portfolio manager, is
success is not our historical investment manager of AIM V.I. Basic
results or popular statistical measures, Sources: (1)Lipper Inc. (2)"The Mutual Balanced Fund. He earned a B.B.A. in
but the portfolio's estimated intrinsic Fund Industry Sixty Years Later: For finance from Texas Christian University
value--the aggregate business value of the Better or Worse," Financial Analysts and an M.B.A. from the University of
portfolio based on our estimate of Journal, essay by John C. Bogle, 2005; Chicago.
intrinsic value for each individual (3)A New Measure That Predicts
holding. During the year, we believe the Performance," Martijn Cremens and Antti Assisted by the Basic Value Team and the
estimated intrinsic value of the portfolio Petajistto, Yale School of Management, Taxable Investment Grade Bond Team
grew at an attractive rate despite modest August 2006.
impairments in the business values of
THE VIEWS AND OPINIONS EXPRESSED IN =========================================
MANAGEMENT'S DISCUSSION OF FUND FOR A DISCUSSION OF THE RISKS OF
PERFORMANCE ARE THOSE OF A I M ADVISORS, INVESTING IN YOUR FUND, INDEXES USED IN
INC. THESE VIEWS AND OPINIONS ARE SUBJECT THIS REPORT AND YOUR FUND'S LONG-TERM
TO CHANGE AT ANY TIME BASED ON FACTORS PERFORMANCE, PLEASE TURN THE PAGE.
SUCH AS MARKET AND ECONOMIC CONDITIONS. =========================================
THESE VIEWS AND OPINIONS MAY NOT BE
RELIED UPON AS INVESTMENT ADVICE OR
RECOMMENDATIONS, OR AS AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS
NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET,
AIM V.I. Basic Balanced Fund
Your Fund's long-term performance
=========================================== GUARANTEE COMPARABLE FUTURE RESULTS; THROUGH INSURANCE COMPANIES ISSUING
CURRENT PERFORMANCE MAY BE LOWER OR VARIABLE PRODUCTS. YOU CANNOT PURCHASE
AVERAGE ANNUAL TOTAL RETURNS HIGHER. PLEASE CONTACT YOUR VARIABLE SHARES OF THE FUND DIRECTLY.
PRODUCT ISSUER OR FINANCIAL ADVISOR FOR PERFORMANCE FIGURES GIVEN REPRESENT THE
As of 12/31/07 THE MOST RECENT MONTH-END VARIABLE FUND AND ARE NOT INTENDED TO REFLECT
SERIES I SHARES PRODUCT PERFORMANCE. PERFORMANCE FIGURES ACTUAL VARIABLE PRODUCT VALUES. THEY DO
Inception (5/1/98) 3.63% REFLECT FUND EXPENSES, REINVESTED NOT REFLECT SALES CHARGES, EXPENSES AND
5 Years 8.28 DISTRIBUTIONS AND CHANGES IN NET ASSET FEES ASSESSED IN CONNECTION WITH A
1 Year 2.20 VALUE. INVESTMENT RETURN AND PRINCIPAL VARIABLE PRODUCT. SALES CHARGES,
SERIES II SHARES VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE EXPENSES AND FEES, WHICH ARE DETERMINED
Inception 3.38% A GAIN OR LOSS WHEN YOU SELL SHARES. BY THE VARIABLE PRODUCT ISSUERS, WILL
5 Years 8.01 VARY AND WILL LOWER THE TOTAL RETURN.
1 Year 1.94 THE NET ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END
=========================================== PROSPECTUS AS OF THE DATE OF THIS REPORT PERFORMANCE DATA AT THE FUND LEVEL,
FOR SERIES I AND SERIES II SHARES WAS EXCLUDING VARIABLE PRODUCT CHARGES, IS
SERIES II SHARES' INCEPTION DATE IS 0.91% AND 1.16%, RESPECTIVELY.(1,2) THE AVAILABLE ON THIS AIM AUTOMATED
JANUARY 24, 2002. RETURNS SINCE THAT DATE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO INFORMATION LINE, 866-702-4402. AS
ARE HISTORICAL. ALL OTHER RETURNS ARE THE SET FORTH IN THE MOST RECENT FUND MENTIONED ABOVE, FOR THE MOST RECENT
BLENDED RETURNS OF THE HISTORICAL PROSPECTUS AS OF THE DATE OF THIS REPORT MONTH-END PERFORMANCE INCLUDING
PERFORMANCE OF SERIES II SHARES SINCE THEIR FOR SERIES I AND SERIES II SHARES WAS VARIABLE PRODUCT CHARGES, PLEASE
INCEPTION AND THE RESTATED HISTORICAL 1.15% AND 1.40%, RESPECTIVELY. THE CONTACT YOUR VARIABLE PRODUCT ISSUER OR
PERFORMANCE OF SERIES I SHARES (FOR PERIODS EXPENSE RATIOS PRESENTED ABOVE MAY VARY FINANCIAL ADVISOR.
PRIOR TO INCEPTION OF SERIES II SHARES) FROM THE EXPENSE RATIOS PRESENTED IN
ADJUSTED TO REFLECT THE RULE 12B-1 FEES OTHER SECTIONS OF THIS REPORT THAT ARE HAD THE ADVISOR NOT WAIVED FEES
APPLICABLE TO SERIES II SHARES. THE BASED ON EXPENSES INCURRED DURING THE AND/OR REIMBURSED EXPENSES, PERFORMANCE
INCEPTION DATE OF SERIES I SHARES IS MAY 1, PERIOD COVERED BY THIS REPORT. WOULD HAVE BEEN LOWER.
1998.
AIM V.I. BASIC BALANCED FUND, A SERIES (1) Total annual operating expenses
THE PERFORMANCE OF THE FUND'S SERIES I PORTFOLIO OF AIM VARIABLE INSURANCE less advisory fee waivers by the
AND SERIES II SHARE CLASSES WILL DIFFER FUNDS, IS CURRENTLY OFFERED advisor in effect through at least
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. December 31, 2009. See current
prospectus for more information.
THE PERFORMANCE DATA QUOTED REPRESENT
PAST PERFORMANCE AND CANNOT (2) Total annual operating expenses
less any contractual fee waivers
and/or expense reimbursements by the
advisor in effect through at least
April 30, 2009. See current
prospectus for more information.
====================================================================================================================================
Principal risks of investing in the Fund Investing in developing countries can the following indices: 60% Russell
add additional risk, such as high rates 1000--REGISTERED TRADEMARK-- Value
Prices of equity securities change in of inflation or sharply devalued Index and 40% Lehman Brothers U.S.
response to many factors including the currencies against the U.S. dollar. Aggregate Bond Index. The Russell
historical and prospective earnings of the Transaction costs are often higher, and 1000--REGISTERED TRADEMARK-- Value Index
issuer, the value of its assets, general there may be delays in settlement measures the performance of those Russell
economic conditions, interest rates, procedures. 1000 companies with lower price-to-book
investor perceptions and market liquidity. ratios and lower forecasted growth
There is no guarantee that the values. The Russell 1000--REGISTERED
Foreign securities have additional investment techniques and risk analyses TRADEMARK-- Value Index is a
risks, including exchange rate changes, used by the Fund's portfolio managers trademark/service mark of the Frank
political and economic upheaval, the will produce the desired results. Russell Company. Russell--REGISTERED
relative lack of information, relatively TRADEMARK-- is a trademark of the Frank
low market liquidity, and the potential About indexes used in this report Russell Company.
lack of strict financial and accounting
controls and standards. The S&P 500--REGISTERED TRADEMARK-- The Lehman Brothers U.S. Aggregate
Index is a market capitalization-weighted Bond Index covers U.S. investment-grade
The value of convertible securities in index covering all major areas of the fixed-rate bonds with components for
which the Fund invests may be affected by U.S. Economy. It is not the 500 largest government and corporate securities,
market interest rates--the risk that the companies, but rather the most widely mortgage pass-throughs, and asset-backed
issuer may default on interest or principal held 500 companies chosen with respect to securities.
payments and the value of the underlying market size, liquidity, and their
common stock into which these securities industry. The Fund has elected to use the Lipper
may be converted may decline as a result. Variable Underlying Funds (VUF)
The Custom Basic Balanced Index is an Mixed-Asset Target Allocation Moderate
index created by A I M Advisors, Inc. to Funds Index as its peer group instead of
benchmark the fund. The index consists of the Lipper Balanced Funds Index. In 2006,
Lipper began publishing VUF indexes,
allowing the
Continued
AIM V.I. Basic Balanced Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment
representing a percent change in the
This chart, which is a logarithmic value of the investment. In this chart,
chart, presents the fluctuations in the each segment represents a doubling, or
value of the Fund and its indexes. We 100% change, in the value of the
believe that a logarithmic chart is more investment. In other words, the space
effective than other types of charts in between $5,000 and $10,000 is the same
illustrating changes in value during the size as the space between $10,000 and
early years shown in the chart. The $20,000.
vertical axis, the one that indicates
===================================================================================================================================
Continued from previous page
Fund to be compared with the Lipper VUF the indexes defined here, and returns reported in the Financial
Mixed-Asset Target Allocation Moderate consequently, the performance of the Fund Highlights. Additionally, the returns and
Funds Index. The Lipper VUF Mixed-Asset may deviate significantly from the net asset values shown throughout this
Target Allocation Moderate Funds Index is performance of the indexes. report are at the Fund level only and do
an equally weighted representation of the not include variable product issuer
largest variable insurance underlying funds A direct investment cannot be made in charges. If such charges were included,
in the Lipper Mixed-Asset Target Allocation an index. Unless otherwise indicated, the total returns would be lower.
Moderate Funds category. These funds, by index results include reinvested
portfolio practice, maintain a mix of dividends, and they do not reflect sales Industry classifications used in this
between 40%-60% equity securities, with the charges. Performance of an index of funds report are generally according to the
remainder invested in bonds, cash, and cash reflects fund expenses; performance of a Global Industry Classification Standard,
equivalents. market index does not. which was developed by and is the
exclusive property and a service mark of
The Lipper Balanced Funds Index is an Other information Morgan Stanley Capital International Inc.
equally weighted representation of the and Standard & Poor's.
largest funds in the Lipper Balanced Funds The returns shown in the management's
category. These funds have a primary discussion of Fund performance are based The Chartered Financial
objective of conserving principal by on net asset values calculated for Analyst--REGISTERED TRADEMARK--
maintaining at all times a balanced shareholder transactions. Generally (CFA--REGISTERED TRADEMARK--) designation
portfolio of both stocks and bonds. accepted accounting principles require is a globally recognized standard for
Typically, the stock/bond ratio ranges adjustments to be made to the net assets measuring the competence and integrity of
around 60%/40%. of the Fund at period end for financial investment professionals.
reporting purposes, and as such, the net
The Fund is not managed to track the asset values for shareholder transactions
performance of any particular index, and the returns based on those net asset
including values may differ from the net asset
values and
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/98, FUND DATA FROM 5/1/98
LIPPER VUF MIXED-ASSET
AIM V.I. BASIC BALANCED CUSTOM BASIC BALANCED TARGET ALLOCATION LIPPER BALANCED
DATE FUND-SERIES I SHARES S&P 500 INDEX(2) BALANCED INDEX(1) MODERATE FUNDS INDEX(2) FUNDS INDEX(2)
4/30/98 $10000 $10000 $10000 $10000
5/98 $9910 9828 9949 9888 9899
6/98 10150 10227 10059 10051 10081
7/98 10110 10119 9962 9919 9963
8/98 9681 8657 9137 8980 9105
9/98 10031 9212 9537 9306 9498
10/98 10381 9960 9961 9728 9853
11/98 10751 10564 10262 10090 10214
12/98 11303 11172 10484 10363 10591
1/99 11617 11639 10564 10500 10760
2/99 11221 11278 10400 10237 10502
3/99 11678 11729 10552 10467 10761
4/99 11830 12183 11157 10828 11113
5/99 11606 11895 11044 10658 10942
6/99 11942 12554 11222 10950 11244
7/99 11759 12164 11006 10748 11034
8/99 11647 12103 10759 10647 10918
9/99 11658 11772 10583 10559 10778
10/99 12195 12517 10965 10934 11090
11/99 12632 12771 10913 11027 11210
12/99 13484 13522 10923 11421 11541
1/00 13329 12843 10695 11117 11252
2/00 14022 12600 10270 11071 11224
3/00 14250 13832 11076 11712 11885
4/00 13453 13416 10986 11484 11668
5/00 12926 13141 11053 11329 11558
6/00 13732 13464 10842 11527 11742
7/00 13639 13254 10963 11481 11710
8/00 14445 14077 11392 11951 12233
9/00 13948 13334 11484 11636 11975
10/00 13700 13277 11684 11617 11965
11/00 12604 12231 11500 11116 11531
12/00 12916 12291 11932 11321 11817
1/01 13310 12727 12037 11581 12068
2/01 12357 11567 11878 10978 11599
3/01 11726 10835 11650 10562 11225
4/01 12326 11676 11973 11073 11696
5/01 12326 11755 12164 11137 11800
6/01 12025 11469 12020 10940 11619
7/01 11911 11356 12113 10894 11611
8/01 11311 10646 11877 10513 11281
9/01 10586 9786 11431 9980 10738
10/01 10958 9973 11467 10217 10918
11/01 11403 10738 11804 10636 11353
12/01 11440 10832 11941 10717 11435
1/02 11187 10674 11924 10616 11334
2/02 11008 10468 11982 10510 11257
3/02 11261 10861 12243 10722 11504
4/02 10839 10203 12086 10418 11227
5/02 10723 10128 12163 10406 11222
6/02 10164 9407 11786 9896 10743
7/02 9564 8674 11185 9438 10193
8/02 9637 8731 11312 9564 10297
9/02 9110 7783 10631 9039 9683
10/02 9469 8467 11084 9424 10086
11/02 9754 8965 11501 9765 10495
12/02 9485 8439 11297 9487 10213
1/03 9323 8218 11137 9346 10060
2/03 9247 8095 11020 9317 9984
3/03 9268 8173 11028 9370 10025
4/03 9723 8846 11647 9845 10567
5/03 10146 9311 12185 10254 11035
6/03 10190 9430 12266 10322 11118
7/03 10146 9597 12211 10276 11144
8/03 10320 9784 12358 10432 11332
9/03 10276 9680 12416 10458 11347
10/03 10624 10227 12826 10763 11721
11/03 10711 10317 12943 10841 11825
===================================================================================================================================
SOURCES: (1) A I M MANAGEMENT GROUP INC., LIPPER INC., (2)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
12/03 11038 10858 13474 11224 12248
1/04 11236 11057 13659 11378 12431
2/04 11458 11211 13894 11525 12601
3/04 11436 11042 13862 11459 12541
4/04 11192 10868 13515 11233 12277
5/04 11192 11017 13576 11276 12331
6/04 11435 11231 13799 11459 12524
7/04 11004 10860 13737 11255 12288
8/04 11026 10903 13959 11361 12363
9/04 11092 11021 14104 11470 12547
10/04 11181 11190 14292 11608 12682
11/04 11545 11642 14680 11910 13024
12/04 11867 12038 15029 12216 13349
1/05 11756 11745 14906 12064 13177
2/05 11879 11992 15167 12200 13364
3/05 11768 11780 15011 12037 13180
4/05 11689 11557 14931 11902 13021
5/05 11868 11924 15211 12188 13320
6/05 11969 11941 15345 12311 13416
7/05 12159 12385 15555 12552 13714
8/05 12080 12272 15594 12530 13753
9/05 12114 12371 15661 12551 13808
10/05 11968 12165 15373 12374 13591
11/05 12294 12625 15704 12618 13921
12/05 12495 12629 15820 12727 14043
1/06 12780 12964 16189 13015 14378
2/06 12769 12999 16269 13036 14360
3/06 12917 13160 16338 13119 14500
4/06 12997 13337 16575 13233 14658
5/06 12724 12954 16317 12972 14368
6/06 12622 12971 16393 12979 14359
7/06 12713 13051 16721 13085 14426
8/06 12884 13361 16991 13328 14703
9/06 13133 13705 17254 13523 14915
10/06 13429 14151 17639 13818 15263
11/06 13566 14420 17962 14068 15557
12/06 13816 14622 18162 14179 15672
1/07 13966 14843 18299 14328 15841
2/07 13874 14554 18240 14302 15780
3/07 13978 14716 18410 14397 15916
4/07 14407 15368 18858 14762 16374
5/07 14731 15904 19209 15024 16725
6/07 14639 15640 18917 14874 16569
7/07 14268 15155 18455 14619 16287
8/07 14349 15382 18669 14735 16418
9/07 14407 15957 19111 15123 16882
10/07 14720 16211 19181 15377 17179
11/07 14244 15533 18756 15024 16776
12/07 14118 15425 18669 14979 16695
===================================================================================================================================
AIM V.I. Basic Balanced Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-61.67%
ADVERTISING-3.07%
Interpublic Group of Cos., Inc. (The)(b) 106,932 $ 867,219
- -----------------------------------------------------------------------
Omnicom Group Inc. 23,229 1,104,074
=======================================================================
1,971,293
=======================================================================
AEROSPACE & DEFENSE-0.39%
Honeywell International Inc. 4,104 252,683
=======================================================================
APPAREL RETAIL-1.62%
Gap, Inc. (The) 48,807 1,038,613
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.79%
Bank of New York Mellon Corp. (The) 10,422 508,177
=======================================================================
AUTO PARTS & EQUIPMENT-0.23%
WABCO Holdings Inc. 2,948 147,665
=======================================================================
BREWERS-1.63%
Molson Coors Brewing Co.-Class B 20,312 1,048,505
=======================================================================
BUILDING PRODUCTS-0.64%
Trane, Inc. 8,845 413,150
=======================================================================
COMPUTER HARDWARE-2.42%
Dell Inc.(b) 63,486 1,556,042
=======================================================================
CONSTRUCTION MATERIALS-1.62%
Cemex S.A.B. de C.V.-ADR (Mexico)(b) 40,242 1,040,256
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.31%
Western Union Co. 61,207 1,486,106
=======================================================================
EDUCATION SERVICES-1.34%
Apollo Group, Inc.-Class A(b) 12,308 863,406
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.79%
Tyco Electronics Ltd. 13,618 505,636
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.50%
Waste Management, Inc. 9,917 323,988
=======================================================================
GENERAL MERCHANDISE STORES-1.59%
Target Corp. 20,405 1,020,250
=======================================================================
HEALTH CARE DISTRIBUTORS-2.03%
Cardinal Health, Inc. 22,655 1,308,326
=======================================================================
HEALTH CARE EQUIPMENT-1.02%
Baxter International Inc. 11,344 658,519
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
HOME IMPROVEMENT RETAIL-1.21%
Home Depot, Inc. (The) 28,824 $ 776,519
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.99%
Robert Half International, Inc. 23,456 634,250
=======================================================================
INDUSTRIAL CONGLOMERATES-2.51%
General Electric Co. 25,016 927,343
- -----------------------------------------------------------------------
Tyco International Ltd. 17,380 689,117
=======================================================================
1,616,460
=======================================================================
INDUSTRIAL MACHINERY-1.73%
Illinois Tool Works Inc. 20,730 1,109,884
=======================================================================
INSURANCE BROKERS-0.85%
Marsh & McLennan Cos., Inc. 20,643 546,420
=======================================================================
INVESTMENT BANKING & BROKERAGE-2.15%
Merrill Lynch & Co., Inc. 12,597 676,207
- -----------------------------------------------------------------------
Morgan Stanley 13,272 704,876
=======================================================================
1,381,083
=======================================================================
MANAGED HEALTH CARE-3.53%
UnitedHealth Group Inc. 38,940 2,266,308
=======================================================================
MOVIES & ENTERTAINMENT-0.97%
Walt Disney Co. (The) 19,266 621,907
=======================================================================
MULTI-LINE INSURANCE-1.53%
American International Group, Inc. 12,129 707,121
- -----------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 3,154 274,997
=======================================================================
982,118
=======================================================================
OIL & GAS DRILLING-1.84%
Transocean Inc. 8,250 1,180,988
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.12%
Halliburton Co. 36,878 1,398,045
- -----------------------------------------------------------------------
Schlumberger Ltd. 12,747 1,253,922
=======================================================================
2,651,967
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.21%
Citigroup Inc. 38,706 1,139,505
- -----------------------------------------------------------------------
JPMorgan Chase & Co. 21,249 927,519
=======================================================================
2,067,024
=======================================================================
PACKAGED FOODS & MEATS-1.20%
Unilever N.V. (Netherlands)(c) 21,186 774,243
=======================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
PHARMACEUTICALS-3.18%
Sanofi-Aventis (France)(c) 12,011 $ 1,095,784
- -----------------------------------------------------------------------
Wyeth 21,502 950,173
=======================================================================
2,045,957
=======================================================================
PROPERTY & CASUALTY INSURANCE-0.93%
ACE Ltd. 9,651 596,239
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.85%
KLA-Tencor Corp. 24,697 1,189,408
=======================================================================
SEMICONDUCTORS-0.32%
Maxim Integrated Products, Inc. 7,877 208,583
=======================================================================
SPECIALIZED FINANCE-1.19%
Moody's Corp. 21,416 764,551
=======================================================================
SYSTEMS SOFTWARE-3.56%
CA Inc. 45,644 1,138,818
- -----------------------------------------------------------------------
Microsoft Corp. 32,392 1,153,155
=======================================================================
2,291,973
=======================================================================
THRIFTS & MORTGAGE FINANCE-1.92%
Fannie Mae 30,880 1,234,582
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.89%
Sprint Nextel Corp. 43,384 569,632
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $32,573,359) 39,652,711
=======================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-26.01%
AEROSPACE & DEFENSE-0.38%
Goodrich Corp., Unsec. Unsub. Notes, 6.45%,
04/15/08(d) $ 90,000 90,129
- -----------------------------------------------------------------------
Systems 2001 Asset Trust LLC (United
Kingdom)- Series 2001, Class G, Jr. Sec.
Pass Through Ctfs., (INS-MBIA Insurance
Corp.) 6.66%,
09/15/13 (Acquired 02/09/05-10/27/05; Cost
$166,521)(d)(e)(f) 151,092 155,624
=======================================================================
245,753
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.61%
Bank of New York Institutional Capital
Trust-Series A, Trust Pfd. Capital
Securities, 7.78%, 12/01/26 (Acquired
08/15/07; Cost $363,125)(d)(f) 350,000 363,794
- -----------------------------------------------------------------------
Tokai Preferred Capital Co. LLC-Series A,
Bonds, 9.98% (Acquired 01/29/07; Cost
$26,389)(d)(f)(g) 25,000 25,553
=======================================================================
389,347
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
AUTOMOBILE MANUFACTURERS-0.57%
Daimler Finance North America LLC,
Series E,
Unsec. Gtd. Unsub. Floating Rate Medium
Term Notes,
5.44%, 10/31/08(d)(h) $ 270,000 $ 268,608
- -----------------------------------------------------------------------
Unsec. Gtd. Unsub. Global Notes,
4.05%, 06/04/08(d) 100,000 99,495
=======================================================================
368,103
=======================================================================
BROADCASTING & CABLE TV-2.36%
Clear Channel Communications Inc., Sr. Unsec.
Unsub. Global Notes, 4.63%, 01/15/08(d) 240,000 239,105
- -----------------------------------------------------------------------
Comcast Cable Communications Holdings Inc.,
Unsec. Gtd. Global Notes, 9.46%,
11/15/22(d) 167,000 208,697
- -----------------------------------------------------------------------
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12(d) 130,000 154,305
- -----------------------------------------------------------------------
Cox Communications Inc.,
Sr. Unsec. Notes,
6.40%, 08/01/08(d) 70,000 70,499
- -----------------------------------------------------------------------
Unsec. Notes,
3.88%, 10/01/08(d) 350,000 346,314
- -----------------------------------------------------------------------
Cox Enterprises, Inc.,
Notes,
4.38%, 05/01/08 (Acquired 04/25/07; Cost
$128,567)(d)(f) 130,000 129,373
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
7.88%, 09/15/10 (Acquired 05/02/07; Cost
$37,559)(d)(f) 35,000 37,370
- -----------------------------------------------------------------------
Time Warner Entertainment Co. L.P., Sr.
Unsec. Gtd. Notes, 10.15%, 05/01/12(d) 280,000 332,489
=======================================================================
1,518,152
=======================================================================
BUILDING PRODUCTS-0.16%
American Standard Inc., Sr. Unsec. Gtd.
Notes, 7.38%, 02/01/08(d) 100,000 100,053
=======================================================================
CONSUMER FINANCE-1.11%
Capital One Capital III, Jr. Gtd. Sub. Notes,
7.69%, 08/15/36(d) 50,000 40,224
- -----------------------------------------------------------------------
Ford Motor Credit Co. LLC, Sr. Unsec. Notes,
4.95%, 01/15/08(d) 310,000 309,668
- -----------------------------------------------------------------------
SLM Corp.,
Series A,
Medium Term Notes,
3.95%, 08/15/08(d) 220,000 214,236
- -----------------------------------------------------------------------
Unsec. Floating Rate Medium Term Notes,
5.04%, 04/14/08(d)(h) 150,000 148,914
=======================================================================
713,042
=======================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
DIVERSIFIED BANKS-2.01%
Bangkok Bank PCL (Hong Kong), Unsec. Sub.
Notes, 9.03%, 03/15/29 (Acquired 04/22/05;
Cost $75,121)(d)(f) $ 60,000 $ 66,233
- -----------------------------------------------------------------------
BankAmerica Institutional-Series A, Gtd.
Trust Pfd. Capital Securities, 8.07%,
12/31/26 (Acquired 09/26/06; Cost
$104,484)(d)(f) 100,000 104,097
- -----------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Jr. Unsec. Gtd. Sub. Notes, 5.92%
(Acquired 03/22/07; Cost $40,000)(d)(f)(g) 40,000 35,029
- -----------------------------------------------------------------------
Calyon (France), Gtd. Floating Rate Medium
Term Notes, 4.25%, 02/11/08 (Acquired
04/02/07; Cost $189,050)(d)(f)(h) 190,000 181,279
- -----------------------------------------------------------------------
Centura Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.85%, 06/01/27
(Acquired 05/22/03; Cost $63,272)(d)(f) 50,000 52,464
- -----------------------------------------------------------------------
First Union Institutional Capital I, Jr.
Unsec. Gtd. Sub. Trust Pfd. Capital
Securities, 8.04%, 12/01/26(d) 100,000 102,469
- -----------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series
1, Unsec. Sub. Floating Rate Euro Notes,
5.13%(d)(g)(h) 130,000 105,066
- -----------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Gtd. Sub. Second Tier Euro Bonds,
8.38%(d)(g) 30,000 30,321
- -----------------------------------------------------------------------
National Bank of Canada (Canada), Floating
Rate Euro Deb., 5.56%, 08/29/87(d)(h) 60,000 46,500
- -----------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)- Series B, Unsec. Sub. Floating
Rate Euro Notes, 5.56%(d)(g)(h) 100,000 77,071
- -----------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,
8.25%, 11/01/24(d) 50,000 57,789
- -----------------------------------------------------------------------
RBD Capital S.A. (Luxembourg), Euro Notes,
6.50%, 08/11/08(d) 100,000 99,674
- -----------------------------------------------------------------------
RBS Capital Trust III, Jr. Gtd. Sub. Trust
Pfd. Global Notes, 5.51%(d)(g) 60,000 54,399
- -----------------------------------------------------------------------
Sumitomo Mitsui Banking Corp. (Japan), Sub.
Second Tier Euro Notes, 8.15%(d)(g) 90,000 91,856
- -----------------------------------------------------------------------
Wachovia Capital Trust V, Jr. Gtd. Sub. Trust
Pfd. Capital Securities, 7.97%, 06/01/27
(Acquired 08/08/07; Cost $187,281)(d)(f) 180,000 188,044
=======================================================================
1,292,291
=======================================================================
DIVERSIFIED CHEMICALS-0.30%
Bayer Corp., Bonds, 6.20%, 02/15/08 (Acquired
08/01/06-05/24/07; Cost $190,964)(d)(f) 190,000 190,745
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.49%
Erac USA Finance Co.,
Bonds,
5.30%, 11/15/08 (Acquired 05/24/07; Cost
$54,822)(d)(f) 55,000 55,472
- -----------------------------------------------------------------------
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-(CONTINUED)
Sr. Unsec. Gtd. Notes,
7.00%, 10/15/37 (Acquired 10/10/07; Cost
$138,788)(d)(f) $ 140,000 $ 129,645
- -----------------------------------------------------------------------
Unsec. Gtd. Notes,
5.80%, 10/15/12 (Acquired 10/10/07; Cost
$129,900)(d)(f) 130,000 130,667
=======================================================================
315,784
=======================================================================
DIVERSIFIED METALS & MINING-0.09%
Reynolds Metals Co., Sr. Unsec. Unsub. Medium
Term Notes, 7.00%, 05/15/09(d) 58,000 59,373
=======================================================================
ELECTRIC UTILITIES-0.56%
Entergy Gulf States Inc., Sec. First Mortgage
Bonds, 3.60%, 06/01/08(d) 80,000 79,364
- -----------------------------------------------------------------------
Niagara Mohawk Power Corp.-Series G, Sr.
Unsec. Notes, 7.75%, 10/01/08(d) 160,000 163,400
- -----------------------------------------------------------------------
Ohio Edison Co., Sr. Unsec. Global Notes,
4.00%, 05/01/08(d) 90,000 89,617
- -----------------------------------------------------------------------
TE Products Pipeline Co., Sr. Unsec. Notes,
6.45%, 01/15/08(d) 30,000 30,014
=======================================================================
362,395
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.17%
Thomas & Betts Corp., Medium Term Notes,
6.63%, 05/07/08(d) 110,000 110,028
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.55%
Waste Management Inc.,
Sr. Unsec. Unsub. Notes,
6.50%, 11/15/08(d) 70,000 70,865
- -----------------------------------------------------------------------
Unsec. Deb.,
8.75%, 05/01/18(d) 280,000 282,663
=======================================================================
353,528
=======================================================================
GAS UTILITIES-0.06%
CenterPoint Energy Resources Corp., Sr.
Unsec. Deb., 6.50%, 02/01/08(d) 40,000 40,024
=======================================================================
HEALTH CARE DISTRIBUTORS-0.23%
Cardinal Health Inc., Unsec. Notes, 6.25%,
07/15/08(d) 150,000 150,968
=======================================================================
HOMEBUILDING-0.24%
D.R. Horton Inc., Sr. Unsec. Gtd. Notes,
5.00%, 01/15/09(d) 165,000 156,181
=======================================================================
HOUSEWARES & SPECIALTIES-0.06%
Newell Rubbermaid Inc.-Series A, Unsec.
Unsub. Putable Medium Term Notes, 6.35%,
07/15/08(d) 40,000 40,278
=======================================================================
INDUSTRIAL MACHINERY-0.11%
IDEX Corp., Sr. Unsec. Notes, 6.88%,
02/15/08(d) 70,000 70,156
=======================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
INDUSTRIAL REIT'S-0.03%
ProLogis, Sr. Unsec. Unsub. Notes, 7.10%,
04/15/08(d) $ 20,000 $ 20,092
=======================================================================
INTEGRATED OIL & GAS-0.62%
ConocoPhillips, Unsec. Deb., 7.13%,
03/15/28(d) 65,000 67,230
- -----------------------------------------------------------------------
Husky Oil Ltd. (Canada), Unsec. Sub. Yankee
Capital Securities, 8.90%, 08/15/28(d) 325,000 329,270
=======================================================================
396,500
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.91%
Southwestern Bell Telephone L.P., Sr. Unsec.
Unsub. Deb., 7.20%, 10/15/26(d) 110,000 111,894
- -----------------------------------------------------------------------
Telecom Italia Capital S.A. (Italy), Unsec.
Gtd. Unsub. Global Notes, 4.00%,
11/15/08(d) 110,000 109,159
- -----------------------------------------------------------------------
Verizon New York Inc., Sr. Unsec. Bonds,
7.00%, 12/01/33(d) 90,000 89,624
- -----------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Sr. Unsec.
Global Bonds, 4.63%, 03/15/13(d) 160,000 154,291
- -----------------------------------------------------------------------
Windstream Georgia Communications Corp.,
Unsec. Deb., 6.50%, 11/15/13(d) 117,000 118,799
=======================================================================
583,767
=======================================================================
INTERNET RETAIL-0.10%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13(d) 60,000 61,691
=======================================================================
INVESTMENT BANKING & BROKERAGE-1.08%
Bear Stearns Cos. Inc., (The), Floating Rate
Notes, 5.60%, 07/19/10(d)(h) 180,000 169,315
- -----------------------------------------------------------------------
Jefferies Group, Inc.,
Sr. Unsec. Deb.,
5.88%, 06/08/14(d) 230,000 233,910
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
6.45%, 06/08/27(d) 50,000 47,168
- -----------------------------------------------------------------------
Lehman Brothers Holdings Inc.-Series I, Sr.
Floating Rate Medium Term Notes, 4.91%,
11/24/08(d)(h) 40,000 39,420
- -----------------------------------------------------------------------
Morgan Stanley-Series F, Sr. Unsec. Medium
Term Global Notes, 5.95%, 12/28/17(d) 100,000 100,373
- -----------------------------------------------------------------------
SB Treasury Co. LLC-Series A, Jr. Sub. Trust
Pfd. Capital Securities, 9.40% (Acquired
06/29/07; Cost $103,570)(d)(f)(g) 100,000 102,333
=======================================================================
692,519
=======================================================================
LEISURE FACILITIES-0.10%
International Speedway Corp., Sr. Unsec. Gtd.
Notes, 4.20%, 04/15/09(d) 65,000 64,310
=======================================================================
LEISURE PRODUCTS-0.06%
Hasbro Inc., Sr. Unsec. Notes, 6.15%,
07/15/08(d) 40,000 39,975
=======================================================================
LIFE & HEALTH INSURANCE-0.34%
Prudential Holdings, LLC-Series B, Bonds,
(INS-Financial Security Assurance Inc.)
7.25%, 12/18/23 (Acquired
01/22/04-02/17/06; Cost $223,295)(d)(e)(f) 190,000 219,317
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
MORTGAGE REIT'S-0.45%
iStar Financial Inc.,
Sr. Unsec. Floating Rate Notes,
5.51%, 03/03/08(d)(h) $ 100,000 $ 99,650
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
7.00%, 03/15/08(d) 110,000 110,427
- -----------------------------------------------------------------------
8.75%, 08/15/08(d) 81,000 81,392
=======================================================================
291,469
=======================================================================
MULTI-UTILITIES-0.62%
Consumers Energy Co.-Series A, Sr. Unsec.
Global Notes, 6.38%, 02/01/08(d) 130,000 130,111
- -----------------------------------------------------------------------
Dominion Capital Trust I, Jr. Unsec. Gtd.
Sub. Trust Pfd. Capital Securities, 7.83%,
12/01/27(d) 140,000 145,961
- -----------------------------------------------------------------------
Dominion Resources, Inc., Sr. Unsec. Notes,
4.13%, 02/15/08(d) 40,000 39,948
- -----------------------------------------------------------------------
Midamerican Energy Holdings Co., Sr. Unsec.
Notes, 7.52%, 09/15/08(d) 80,000 81,300
=======================================================================
397,320
=======================================================================
OIL & GAS REFINING & MARKETING-0.26%
Premcor Refining Group Inc., (The), Sr.
Unsec. Global Notes, 9.50%, 02/01/13(d) 160,000 167,782
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.72%
BankAmerica Capital II-Series 2, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
8.00%, 12/15/26(d) 80,000 83,094
- -----------------------------------------------------------------------
BankAmerica Capital III, Gtd. Floating Rate
Trust Pfd. Capital Securities, 5.81%,
01/15/27(d)(h) 137,000 125,297
- -----------------------------------------------------------------------
Capmark Financial Group Inc., Sr. Unsec. Gtd.
Floating Rate Notes, 5.53%, 05/10/10
(Acquired 05/03/07; Cost $210,000)(d)(f)(h) 210,000 169,462
- -----------------------------------------------------------------------
Countrywide Home Loans, Inc.-Series L, Unsec.
Gtd. Unsub. Medium Term Global Notes,
3.25%, 05/21/08(d) 250,000 225,063
- -----------------------------------------------------------------------
Lazard Group, Sr. Unsec. Global Notes, 6.85%,
06/15/17(d) 70,000 68,285
- -----------------------------------------------------------------------
Mantis Reef Ltd. (Cayman Islands), Notes,
4.69%, 11/14/08 (Acquired
08/11/06-06/21/07; Cost $348,704)(d)(f) 355,000 356,661
- -----------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Sub.
Bonds, 9.87% (Acquired 06/16/04-07/28/05;
Cost $356,092)(d)(f)(g) 315,000 321,495
- -----------------------------------------------------------------------
NB Capital Trust II, Gtd. Sub. Trust Pfd.
Capital Securities, 7.83%, 12/15/26(d) 50,000 51,800
- -----------------------------------------------------------------------
Old Mutual Capital Funding L.P. (United
Kingdom), Gtd. Euro Bonds, 8.00%(d)(g) 130,000 130,364
- -----------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2,
Class A1, Global Bonds, 9.69%, 08/15/09(d) 196,000 201,823
- -----------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands), Sr. Notes, 9.25%, 03/15/30
(Acquired 09/22/04; Cost $169,578)(d)(f) 143,333 162,463
- -----------------------------------------------------------------------
Residential Capital LLC, Sr. Unsec. Gtd.
Unsub. Floating Rate Notes, 5.65%,
06/09/08(d)(h) 405,000 349,313
- -----------------------------------------------------------------------
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Twin Reefs Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 6.24%
(Acquired 12/07/04; Cost
$90,000)(d)(f)(g)(h)(i) $ 90,000 $ 58,574
- -----------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 5.83%
(Acquired 11/10/06; Cost
$100,118)(d)(f)(g)(h)(i) 100,000 45,125
- -----------------------------------------------------------------------
UFJ Finance Aruba AEC (Japan), Unsec. Gtd.
Sub. Euro Bonds, 8.75%(d)(g) 40,000 40,546
=======================================================================
2,389,365
=======================================================================
PACKAGED FOODS & MEATS-0.25%
General Mills Inc., Notes, 6.73%, 02/05/08(d) 160,000 160,563
=======================================================================
PAPER PACKAGING-0.25%
Sealed Air Corp., Sr. Unsec. Notes, 5.38%,
04/15/08 (Acquired 05/18/07-05/21/07; Cost
$159,675)(d)(f) 160,000 160,050
=======================================================================
PAPER PRODUCTS-0.05%
International Paper Co., Notes, 5.13%,
11/15/12(d) 30,000 29,992
=======================================================================
PROPERTY & CASUALTY INSURANCE-1.93%
Chubb Corp., Sr. Unsec. Notes, 5.47%,
08/16/08(d) 55,000 55,286
- -----------------------------------------------------------------------
CNA Financial Corp., Sr. Unsec. Unsub. Notes,
6.45%, 01/15/08(d) 185,000 185,017
- -----------------------------------------------------------------------
First American Capital Trust I, Gtd. Trust
Pfd. Capital Securities, 8.50%, 04/15/12(d) 285,000 310,904
- -----------------------------------------------------------------------
North Front Pass-Through Trust, Pass Through
Ctfs., 5.81%, 12/15/24 (Acquired 12/08/04;
Cost $100,000)(d)(f) 100,000 95,740
- -----------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec.
Gtd. Deb, 8.00%, 09/15/34 (Acquired
04/29/05-06/09/05; Cost $213,696)(d)(f) 200,000 207,066
- -----------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56% (Acquired
06/15/06; Cost $360,000)(d)(f)(g) 360,000 369,975
- -----------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia), Gtd.
Sub. Bonds, 6.80% (Acquired 04/25/07; Cost
$20,000)(d)(f)(g) 20,000 18,898
=======================================================================
1,242,886
=======================================================================
REGIONAL BANKS-1.30%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd.
Sub. Floating Rate Notes, 6.67%,
03/01/34(d)(h) 200,000 195,512
- -----------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate Trust
Pfd. Capital Securities, 5.69%,
06/01/28(d)(h) 100,000 88,177
- -----------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes,
6.05%, 06/01/17(d) 110,000 106,345
- -----------------------------------------------------------------------
TCF National Bank, Sub. Notes, 5.00%,
06/15/14(d) 60,000 60,129
- -----------------------------------------------------------------------
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12(d) 360,000 385,351
=======================================================================
835,514
=======================================================================
REINSURANCE-0.16%
Stingray Pass-Through Trust, Pass Through
Ctfs., 5.90%, 01/12/15 (Acquired
01/07/05-11/03/05; Cost $196,920)(d)(f)(i) 200,000 105,152
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
RESIDENTIAL REIT'S-0.05%
AvalonBay Communities Inc., Sr. Unsec. Medium
Term Notes, 8.25%, 07/15/08(d) $ 30,000 $ 30,456
=======================================================================
RESTAURANTS-0.23%
Darden Restaurants Inc., Sr. Unsec. Notes,
5.63%, 10/15/12(d) 50,000 50,729
- -----------------------------------------------------------------------
Yum! Brands Inc., Sr. Unsec. Notes, 7.65%,
05/15/08(d) 100,000 100,712
=======================================================================
151,441
=======================================================================
RETAIL REIT'S-0.29%
Developers Diversified Realty Corp., Sr.
Medium Term Notes, 6.63%, 01/15/08(d) 60,000 60,017
- -----------------------------------------------------------------------
National Retail Properties Inc., Sr. Unsec.
Unsub. Notes, 7.13%, 03/15/08(d) 125,000 125,140
=======================================================================
185,157
=======================================================================
SPECIALIZED FINANCE-0.52%
CIT Group Inc.,
Sr. Medium Term Notes,
4.75%, 08/15/08(d) 130,000 128,692
- -----------------------------------------------------------------------
Sr. Unsec. Floating Rate Medium Term Notes,
5.23%, 05/23/08(d)(h) 130,000 128,033
- -----------------------------------------------------------------------
Sr. Unsec. Medium Term Global Notes,
4.00%, 05/08/08(d) 80,000 79,588
=======================================================================
336,313
=======================================================================
SPECIALIZED REIT'S-0.52%
HCP Inc.,
Sr. Unsec. Floating Rate Medium Term Notes,
5.44%, 09/15/08(d)(h) 140,000 139,791
- -----------------------------------------------------------------------
Sr. Unsec. Medium Term Notes,
6.70%, 01/30/18(d) 100,000 98,232
- -----------------------------------------------------------------------
Health Care REIT Inc., Sr. Unsec. Notes,
5.88%, 05/15/15(d) 100,000 94,663
=======================================================================
332,686
=======================================================================
SPECIALTY CHEMICALS-0.09%
Valspar Corp.,
Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12(d) 25,000 25,306
- -----------------------------------------------------------------------
6.05%, 05/01/17(d) 30,000 30,947
=======================================================================
56,253
=======================================================================
THRIFTS & MORTGAGE FINANCE-0.16%
Washington Mutual, Inc., Floating Rate Ctfs.
of Deposit, 5.24%, 04/18/08(d)(h) 100,000 100,016
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-0.09%
Western Power Distribution Holdings Ltd.
(United Kingdom), Sr. Unsec. Unsub. Notes,
7.38%, 12/15/28 (Acquired 01/25/05; Cost
$56,019)(d)(f) 50,000 57,270
=======================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
TRUCKING-0.58%
Roadway Corp., Sr. Sec. Gtd. Global Notes,
8.25%, 12/01/08(d) $ 230,000 $ 232,406
- -----------------------------------------------------------------------
Stagecoach Transport Holdings PLC (United
Kingdom), Unsec. Unsub. Yankee Notes,
8.63%, 11/15/09(d) 130,000 138,966
=======================================================================
371,372
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.19%
Alamosa Delaware Inc., Sr. Gtd. Global Notes,
8.50%, 01/31/12(d) 210,000 219,017
- -----------------------------------------------------------------------
Nextel Communications, Inc.-Series D, Sr.
Gtd. Notes, 7.38%, 08/01/15(d) 250,000 247,597
- -----------------------------------------------------------------------
Sprint Nextel Corp., Unsec. Deb., 9.25%,
04/15/22(d) 140,000 166,964
- -----------------------------------------------------------------------
US Unwired Inc.-Series B, Sr. Sec. Gtd.
Second Priority Global Notes, 10.00%,
06/15/12(d) 125,000 133,113
=======================================================================
766,691
=======================================================================
Total Bonds & Notes (Cost $17,249,830) 16,722,120
=======================================================================
U.S. MORTGAGE-BACKED SECURITIES-12.79%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-3.58%
Pass Through Ctfs.,
7.00%, 06/01/15 to 06/01/32(d) 107,900 113,297
- -----------------------------------------------------------------------
6.00%, 04/01/16 to 11/01/33(d) 434,378 442,622
- -----------------------------------------------------------------------
5.50%, 10/01/18 to 02/01/37(d) 212,179 215,118
- -----------------------------------------------------------------------
7.50%, 11/01/30 to 05/01/31(d) 18,885 20,176
- -----------------------------------------------------------------------
6.50%, 05/01/32 to 08/01/32(d) 28,281 29,242
- -----------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 01/01/38(d)(j) 753,000 734,763
- -----------------------------------------------------------------------
5.50%, 01/01/38(d)(j) 100,000 99,797
- -----------------------------------------------------------------------
6.00%, 02/01/38(d)(j) 635,000 643,831
=======================================================================
2,298,846
=======================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-7.45%
Pass Through Ctfs.,
6.50%, 04/01/14 to 10/01/2035(d) 446,151 461,833
- -----------------------------------------------------------------------
7.50%, 11/01/15 to 03/01/2031(d) 100,895 108,741
- -----------------------------------------------------------------------
7.00%, 02/01/16 to 09/01/32(d) 62,026 65,161
- -----------------------------------------------------------------------
6.00%, 01/01/17 to 03/01/37(d) 6,462 6,610
- -----------------------------------------------------------------------
6.00%, 05/01/17(d) 82,655(k) 84,744
- -----------------------------------------------------------------------
5.00%, 04/01/18(d) 208,386 208,939
- -----------------------------------------------------------------------
4.50%, 11/01/18(d) 90,925 89,492
- -----------------------------------------------------------------------
5.50%, 03/01/21(d) 1,593 1,614
- -----------------------------------------------------------------------
8.00%, 08/01/21 to 12/01/23(d) 21,532 22,981
- -----------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 01/01/23 to 01/01/38(d)(j) 1,586,000 1,587,739
- -----------------------------------------------------------------------
6.00%, 01/01/23 to 01/01/38(d)(j) 1,122,000 1,140,005
- -----------------------------------------------------------------------
7.00%, 01/01/38(d)(j) 976,000 1,015,345
=======================================================================
4,793,204
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-1.76%
Pass Through Ctfs.,
7.50%, 06/15/23 to 10/15/31(d) $ 32,705 $ 34,892
- -----------------------------------------------------------------------
8.50%, 11/15/24(d) 58,602 64,018
- -----------------------------------------------------------------------
8.00%, 08/15/25(d) 10,154 10,977
- -----------------------------------------------------------------------
6.50%, 03/15/29 to 01/15/37(d) 395,746 411,440
- -----------------------------------------------------------------------
6.00%, 09/15/31 to 05/15/33(d) 267,034 274,130
- -----------------------------------------------------------------------
5.50%, 12/15/33 to 02/15/34(d) 189,308 190,801
- -----------------------------------------------------------------------
7.00%, 06/15/37(d) 136,778 143,055
=======================================================================
1,129,313
=======================================================================
Total U.S. Mortgage-Backed Securities
(Cost $8,183,286) 8,221,363
=======================================================================
<Caption>
SHARES
PREFERRED STOCKS-3.06%
LIFE & HEALTH INSURANCE-0.13%
Aegon N.V. (Netherlands), 6.38% Pfd 4,100 80,975
=======================================================================
OFFICE SERVICES & SUPPLIES-0.90%
Pitney Bowes International Holdings
Inc.,-Series D, 4.85% Pfd.(d) 6 580,276
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.87%
Auction Pass Through Trust-Series 2007-T2,
Class A1, 7.95% Floating Rate Pfd.
(Acquired 12/14/07; Cost
$600,000)(f)(h)(i)(l) 8 601,498
- -----------------------------------------------------------------------
Series 2007-T3, Class A, 8.25%, Floating
Rate Pfd. (Acquired 10/22/07; Cost
$600,000)(f)(h)(i)(l) 8 600,564
=======================================================================
1,202,062
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.16%
Telephone & Data Systems, Inc.-Series A,
7.60% Pfd 5,000 104,100
=======================================================================
Total Preferred Stocks (Cost $2,009,080) 1,967,413
=======================================================================
<Caption>
PRINCIPAL
AMOUNT
ASSET-BACKED SECURITIES-2.07%
COLLATERALIZED MORTGAGE OBLIGATIONS-0.74%
Federal Home Loan Bank-Series TQ-2015, Class
A, Pass Through Ctfs., 5.07%, 10/20/15(d) $ 107,447 109,753
- -----------------------------------------------------------------------
Option One Mortgage Securities Corp.-Series
2007-4A, Floating Rate Notes, 4.97%,
04/25/12 (Acquired 05/11/07; Cost
$57,263)(f)(h)(i)(l) 57,263 54,400
- -----------------------------------------------------------------------
Structured Asset Securities Corp.-Series
2007-OSI, Class A2, Floating Rate Pass
Through Ctfs., 4.96%, 06/25/37(d)(h) 138,494 134,291
- -----------------------------------------------------------------------
U.S. Bank N.A., Sr. Medium Term Notes, 5.92%,
05/25/12(d) 168,189 176,341
=======================================================================
474,785
=======================================================================
</Table>
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-1.33%
Citicorp Lease Pass-Through Trust-Series
1999-1, Class A2, Pass Through Ctfs.,
(Acquired 06/01/00- 01/26/06; Cost
$364,942) 8.04%, 12/15/19(d)(f) $ 325,000 $ 374,660
- -----------------------------------------------------------------------
LILACS Repackaging 2005-I-Series A, Sr. Sec.
Notes, 5.14%, 04/15/15 (Acquired 07/14/05;
Cost $484,024)(f)(i)(l) 484,024 484,774
=======================================================================
859,434
=======================================================================
Total Asset-Backed Securities (Cost
$1,314,823) 1,334,219
=======================================================================
U.S. GOVERNMENT AGENCY SECURITIES-1.24%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-0.89%
Unsec. Floating Rate Global Notes, 3.90%,
02/17/09(d)(h) 200,000 198,854
- -----------------------------------------------------------------------
Unsec. Notes, 6.25%, 03/29/22(d) 370,000 372,127
=======================================================================
570,981
=======================================================================
</Table>
<Table>
- -----------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
STUDENT LOAN MARKETING ASSOCIATION-0.35%
Medium Term Notes, 5.05%, 11/14/14(d) $ 70,000 $ 58,907
- -----------------------------------------------------------------------
Series A, Medium Term Notes, 3.63%,
03/17/08(d) 80,000 79,628
- -----------------------------------------------------------------------
Unsec. Unsub. Floating Rate Medium Term
Notes, 3.96%, 12/15/08(d)(h) 90,000 88,470
=======================================================================
227,005
=======================================================================
Total U.S. Government Agency Securities
(Cost $801,201) 797,986
=======================================================================
MUNICIPAL OBLIGATIONS-0.30%
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO,
(INS-Ambac Assurance Corp.) 4.96%,
04/01/20(d)(e) 65,000 62,626
- -----------------------------------------------------------------------
Industry (City of), California Urban
Development Agency (Project 3); Series
2003, Taxable Allocation RB, (INS-MBIA
Insurance Corp.) 6.10%, 05/01/24(d)(e) 125,000 127,693
=======================================================================
Total Municipal Obligations (Cost
$192,838) 190,319
=======================================================================
MONEY MARKET FUNDS-1.45%
Liquid Assets Portfolio-Institutional
Class(m) 464,835 464,835
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(m) 464,835 464,835
=======================================================================
Total Money Market Funds (Cost $929,670) 929,670
=======================================================================
TOTAL INVESTMENTS-108.59% (Cost $63,254,087) 69,815,801
=======================================================================
OTHER ASSETS LESS LIABILITIES-(8.59)% (5,521,148)
=======================================================================
NET ASSETS-100.00% $64,294,653
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
LILACS - Life Insurance and Life Annuities Backed Charitable Securities
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>
AIM V.I. Basic Balanced Fund
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(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 December 31, 2007 was $1,870,027,
which represented 2.91% 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 aggregate value of these securities at December 31,
2007 was $27,307,109, which represented 42.47% of the Fund's Net Assets. See
Note 1A.
(e) Principal and/or interest payments are secured by the bond insurance company
listed.
(f) 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 December 31, 2007 was $6,410,866,
which represented 9.97% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(g) Perpetual bond with no specified maturity date.
(h) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2007.
(i) 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 December 31, 2007 was
$1,950,087, which represented 3.03% of the Fund's Net Assets.
(j) Security purchased on forward commitment basis. This security is subject to
dollar roll transactions. See Note 1I.
(k) 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.
(l) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at December 31, 2007 was $1,741,236, which represented 2.71% 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. Basic Balanced Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $62,324,417) $68,886,131
- ------------------------------------------------------------
Investments in affiliated money market funds
(Cost $929,670) 929,670
============================================================
Total Investments (Cost $63,254,087) 69,815,801
============================================================
Foreign currencies, at value (Cost $11,901) 11,742
- ------------------------------------------------------------
Receivables for:
Investments sold 2,347,684
- ------------------------------------------------------------
Variation margin 16,313
- ------------------------------------------------------------
Fund shares sold 455
- ------------------------------------------------------------
Dividends and Interest 312,481
- ------------------------------------------------------------
Fund expenses absorbed 6,564
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 36,122
- ------------------------------------------------------------
Other assets 5,302
============================================================
Total assets 72,552,464
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 7,820,194
- ------------------------------------------------------------
Fund shares reacquired 25,896
- ------------------------------------------------------------
Amount due custodian 9,276
- ------------------------------------------------------------
Trustee deferred compensation and retirement
plans 43,485
- ------------------------------------------------------------
Unrealized depreciation on swap agreements 180,988
- ------------------------------------------------------------
Premiums received on swap agreements 88,353
- ------------------------------------------------------------
Accrued administrative services fees 36,934
- ------------------------------------------------------------
Accrued distribution fees -- Series II 3,380
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 625
- ------------------------------------------------------------
Accrued transfer agent fees 755
- ------------------------------------------------------------
Accrued operating expenses 47,925
============================================================
Total liabilities 8,257,811
============================================================
Net assets applicable to shares outstanding $64,294,653
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $66,687,961
- ------------------------------------------------------------
Undistributed net investment income 1,940,359
- ------------------------------------------------------------
Undistributed net realized gain (loss) (10,719,710)
- ------------------------------------------------------------
Unrealized appreciation 6,386,043
============================================================
$64,294,653
____________________________________________________________
============================================================
NET ASSETS:
Series I $59,000,129
____________________________________________________________
============================================================
Series II $ 5,294,524
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 4,996,947
____________________________________________________________
============================================================
Series II 451,418
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 11.81
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 11.73
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Interest $1,738,235
- ------------------------------------------------------------
Dividends (net of foreign withholding taxes of
$11,213) 823,664
- ------------------------------------------------------------
Dividends from affiliated money market funds 97,676
============================================================
Total investment income 2,659,575
============================================================
EXPENSES:
Advisory fees 618,637
- ------------------------------------------------------------
Administrative services fees 220,617
- ------------------------------------------------------------
Custodian fees 28,007
- ------------------------------------------------------------
Distribution fees -- Series II 13,961
- ------------------------------------------------------------
Transfer agent fees 8,899
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 19,062
- ------------------------------------------------------------
Professional services fees 49,713
- ------------------------------------------------------------
Other 29,204
============================================================
Total expenses 988,100
============================================================
Less: Fees waived and expense offset
arrangement(s) (225,010)
============================================================
Net expenses 763,090
============================================================
Net investment income 1,896,485
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains from
securities sold to affiliates of $182,570) 6,818,604
- ------------------------------------------------------------
Foreign currencies 7,667
- ------------------------------------------------------------
Futures contracts (52,871)
- ------------------------------------------------------------
Swap agreements 47,884
============================================================
6,821,284
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (6,019,721)
- ------------------------------------------------------------
Foreign currencies (264)
- ------------------------------------------------------------
Futures contracts 81,213
- ------------------------------------------------------------
Swap agreements (179,836)
============================================================
(6,118,608)
============================================================
Net realized and unrealized gain 702,676
============================================================
Net increase in net assets resulting from
operations $2,599,161
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,896,485 $ 1,993,006
- ------------------------------------------------------------------------------------------
Net realized gain 6,821,284 3,777,882
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (6,118,608) 3,408,364
==========================================================================================
Net increase in net assets resulting from operations 2,599,161 9,179,252
==========================================================================================
Distributions to shareholders from net investment income:
Series I (1,869,328) (1,595,527)
- ------------------------------------------------------------------------------------------
Series II (151,655) (98,205)
==========================================================================================
Decrease in net assets resulting from distributions (2,020,983) (1,693,732)
==========================================================================================
Share transactions-net:
Series I (25,823,599) (13,432,639)
- ------------------------------------------------------------------------------------------
Series II (549,210) (466,801)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (26,372,809) (13,899,440)
==========================================================================================
Net increase (decrease) in net assets (25,794,631) (6,413,920)
==========================================================================================
NET ASSETS:
Beginning of year 90,089,284 96,503,204
==========================================================================================
End of year (including undistributed net investment income
of $1,940,359 and $1,981,205, respectively) $ 64,294,653 $ 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
December 31, 2007
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 the issuer's 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. 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.
AIM V.I. Basic Balanced Fund
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 AND FORWARD COMMITMENT TRANSACTIONS -- The Fund may engage in
dollar roll and forward commitment transactions with respect to
mortgage-backed securities issued by GNMA, FNMA and FHLMC. These
transactions are often conducted on a to be announced ("TBA") basis. In a
TBA mortgage-backed transaction, the seller does not specify the particular
securities to be delivered. Rather, a Fund agrees to accept any security
that meets specified terms, such as an agreed upon issuer, coupon rate and
terms of the underlying mortgages. TBA mortgage-backed transactions
generally settle once a month on a specific date.
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 coupon 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.
Forward commitment transactions involve commitments by the Fund to
acquire or sell TBA mortgage-backed securities from a financial
institution, such as a bank or broker-dealer at a specified future date and
amount. The TBA mortgage-backed security is marked to market until
settlement and the unrealized appreciation or depreciation is recorded in
the statement of operations.
At the time the Fund enters into the dollar roll or forward commitment
transaction, mortgage-backed securities or other liquid assets held by the
Fund having a dollar value equal to the purchase price or in an amount
sufficient to honor the forward commitment will be segregated.
AIM V.I. Basic Balanced Fund
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.
Forward commitment transactions involve the risk that a counter-party to
the transaction may fail to complete the transaction. If this occurs, the
Fund may lose the opportunity to purchase or sell the security at the
agreed upon price. Settlement dates of forward commitment transactions may
be a month or more after entering into these transactions and as a result
the market values of the securities may vary from the purchase or sale
prices. Therefore, forward commitment transactions may increase the Fund's
overall interest rate exposure.
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.
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. 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 an upfront payment and/or 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 an upfront payment and/or a fixed
payment over the life of the agreement. 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.
AIM V.I. Basic Balanced Fund
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. Payments received or paid at the beginning of the agreement
are reflected as such on the Statement of Assets and Liabilities and may be
referred to as upfront payments. The Fund amortizes upfront payments and/or
accrues for the fixed payment stream on swap agreements on a daily basis
with the net amount, 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.
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.
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 Ltd. ("Invesco")
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.
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 year ended December 31, 2007, AIM waived advisory fees of $223,969.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $170,617
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 year ended December 31, 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 A I M
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
AIM V.I. Basic Balanced Fund
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 year ended December 31, 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 year ended December 31, 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 12/31/07 INCOME
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $1,436,490 $20,494,075 $(21,465,730) $464,835 $48,919
- --------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class 1,436,490 20,494,075 (21,465,730) 464,835 48,757
==================================================================================================
Total
Investments
in
Affiliates $2,872,980 $40,988,150 $(42,931,460) $929,670 $97,676
__________________________________________________________________________________________________
==================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $2,371,546, which resulted in net realized gains
of $182,570, 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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $1,041.
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 year ended December 31, 2007, the Fund paid legal fees of $3,781
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 is a party to 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 year ended December 31, 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 Balanced 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--FUTURES CONTRACTS
On December 31, 2007, $82,655 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 12/31/07 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 1 Mar-08/Long $ 210,250 $ 716
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 6 Mar-08/Long 661,688 2,768
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 2 Mar-08/Long 226,781 2,527
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Long Bonds 19 Mar-08/Long 2,211,125 (535)
=========================================================================================================================
Total Futures Contracts $3,309,844 $5,476
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD END
- ------------------------------------------------------------------------------
BUY/SELL
COUNTERPARTY REFERENCE ENTITY PROTECTION
- ------------------------------------------------------------------------------
Lehman Brothers Special Financing
Inc. CDX.NA.IG Sell
- ------------------------------------------------------------------------------
Lehman Brothers Special Financing
Inc. MBIA, Inc. Sell
- ------------------------------------------------------------------------------
Lehman Brothers Special Financing
Inc. Residential Inc. Capital, LLC Sell
- ------------------------------------------------------------------------------
Lehman Brothers Special Financing
Inc. Residential Inc. Capital, LLC Sell
- ------------------------------------------------------------------------------
Merrill Lynch International AMBAC Financial Group, Inc. Sell
- ------------------------------------------------------------------------------
Merrill Lynch International AMBAC Financial Group, Inc. Sell
- ------------------------------------------------------------------------------
Merrill Lynch International CIT Group Inc. Sell
- ------------------------------------------------------------------------------
Merrill Lynch International CIT Group Inc. Sell
- ------------------------------------------------------------------------------
Merrill Lynch International Lehman Brothers Holding, Inc. Sell
- ------------------------------------------------------------------------------
Merrill Lynch International Residential Capital, LLC Sell
- ------------------------------------------------------------------------------
UBS AG AMBAC Financial Group, Inc. Sell
- ------------------------------------------------------------------------------
UBS AG AMBAC Financial Group, Inc. Sell
- ------------------------------------------------------------------------------
UBS AG MBIA, Inc. Sell
- ------------------------------------------------------------------------------
UBS AG Pulte Homes, Inc. Sell
- ------------------------------------------------------------------------------
UBS AG United Parcel Service, Inc. Buy
==============================================================================
Total Credit Default Swap
Agreements
______________________________________________________________________________
==============================================================================
<Caption>
OPEN CREDIT DEFAULT OPEN CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD END
- --------------------------------- ---------------------------------------------------------
NOTIONAL UNREALIZED
(PAY)/RECEIVE EXPIRATION AMOUNT APPRECIATION
COUNTERPARTY FIXED RATE DATE (000) (DEPRECIATION)
- ---------------------------------
Lehman Brothers Special Financing
Inc. 0.75%(a) 06/20/12 2,250 $ (59,960)
- ---------------------------------
Lehman Brothers Special Financing
Inc. 1.90% 09/20/08 600 (33,227)
- ---------------------------------
Lehman Brothers Special Financing
Inc. 2.75% 09/20/08 100 (17,367)
- ---------------------------------
Lehman Brothers Special Financing
Inc. 6.80% 09/20/08 200 (30,143)
- ---------------------------------
Merrill Lynch International 2.30% 12/20/08 330 (18,540)
- ---------------------------------
Merrill Lynch International 6.75% 12/20/08 165 (2,592)
- ---------------------------------
Merrill Lynch International 2.40% 09/20/08 155 (2,494)
- ---------------------------------
Merrill Lynch International 2.50% 09/20/08 70 (1,077)
- ---------------------------------
Merrill Lynch International 0.90% 09/20/08 295 (1,467)
- ---------------------------------
Merrill Lynch International 5.00%(b) 03/20/08 300 (9,003)
- ---------------------------------
UBS AG 11.00% 12/20/08 150 3,441
- ---------------------------------
UBS AG 5.10% 12/20/08 165 (5,068)
- ---------------------------------
UBS AG 7.10% 12/20/08 180 (4,652)
- ---------------------------------
UBS AG 4.20% 12/20/08 330 (1,543)
- ---------------------------------
UBS AG (0.26)% 12/20/17 250 2,704
=================================
Total Credit Default Swap
Agreements $(180,988)
_________________________________
=================================
</Table>
(a) Unamortized premium at period end of $76,901.
(b) Unamortized premium at period end of $11,452.
AIM V.I. Basic Balanced Fund
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from ordinary income $2,020,983 $1,693,732
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
Undistributed ordinary income $ 1,799,021
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 6,360,129
- ----------------------------------------------------------------------------
Temporary book/tax differences (37,886)
- ----------------------------------------------------------------------------
Capital loss carryforward (10,514,572)
- ----------------------------------------------------------------------------
Shares of beneficial interest 66,687,961
============================================================================
Total net assets $ 64,294,653
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales, the
recognition of gains (losses) on dollar roll transactions, the realization for
tax purpose of unrealized gains (losses) on certain future contracts and credit
default swap agreements. The tax-basis net unrealized appreciation on
investments amount includes appreciation (depreciation) on foreign currencies of
$(159).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 utilized $6,868,516 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------
December 31, 2010 $10,514,572
___________________________________________________________________________
===========================================================================
</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 year ended December 31, 2007, was $37,858,379 and
$61,457,134, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 9,098,354
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,738,066)
===============================================================================
Net unrealized appreciation of investment securities $ 6,360,288
_______________________________________________________________________________
===============================================================================
</Table>
<Table>
Cost of investments for tax purposes is $63,455,513.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, paydowns on mortgage-backed securities and swap agreements, on
December 31, 2007, undistributed net investment income was increased by $83,652
and undistributed net realized gain (loss) was decreased by $83,652. This
reclassification had no effect on the net assets of the Fund.
AIM V.I. Basic Balanced Fund
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007(A) 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 982,742 $ 11,912,341 360,135 $ 4,088,599
- ----------------------------------------------------------------------------------------------------------------------
Series II 39,272 478,310 47,372 532,918
======================================================================================================================
Issued as reinvestment of dividends:
Series I 155,131 1,869,328 134,985 1,595,527
- ----------------------------------------------------------------------------------------------------------------------
Series II 12,669 151,655 8,358 98,205
======================================================================================================================
Reacquired:
Series I (3,206,335) (39,605,268) (1,679,810) (19,116,765)
- ----------------------------------------------------------------------------------------------------------------------
Series II (96,959) (1,179,175) (97,098) (1,097,924)
======================================================================================================================
(2,113,480) $(26,372,809) (1,226,058) $(13,899,440)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 71% 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following proposal.
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements") . This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Basic Balanced Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.92 $ 10.99 $ 10.59 $ 9.99 $ 8.75
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.28 0.25 0.18 0.13 0.14
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.01) 0.91 0.38 0.62 1.29
====================================================================================================================
Total from investment operations 0.27 1.16 0.56 0.75 1.43
====================================================================================================================
Less dividends from net investment income (0.38) (0.23) (0.16) (0.15) (0.19)
====================================================================================================================
Net asset value, end of period $ 11.81 $ 11.92 $ 10.99 $ 10.59 $ 9.99
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 2.20% 10.55% 5.29% 7.52% 16.36%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $59,000 $84,212 $90,633 $99,070 $97,665
____________________________________________________________________________________________________________________
====================================================================================================================
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%
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.18%(c) 1.15% 1.15% 1.12% 1.11%
====================================================================================================================
Ratio of net investment income to average net assets 2.31%(c) 2.16% 1.68% 1.24% 1.47%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 47% 44% 44% 51% 131%
____________________________________________________________________________________________________________________
====================================================================================================================
</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 based on average daily net assets of $76,900,672.
<Table>
<Caption>
SERIES II
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.84 $ 10.91 $ 10.53 $ 9.95 $ 8.73
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.25 0.22 0.15 0.10 0.12
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.01) 0.91 0.37 0.62 1.29
====================================================================================================================
Total from investment operations 0.24 1.13 0.52 0.72 1.41
====================================================================================================================
Less dividends from net investment income (0.35) (0.20) (0.14) (0.14) (0.19)
====================================================================================================================
Net asset value, end of period $ 11.73 $ 11.84 $ 10.91 $ 10.53 $ 9.95
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 1.94% 10.36% 4.91% 7.24% 16.15%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 5,295 $ 5,878 $ 5,870 $ 5,642 $ 4,133
____________________________________________________________________________________________________________________
====================================================================================================================
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%
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.43%(c) 1.40% 1.40% 1.37% 1.36%
====================================================================================================================
Ratio of net investment income to average net assets 2.06%(c) 1.91% 1.43% 0.99% 1.22%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 47% 44% 44% 51% 131%
____________________________________________________________________________________________________________________
====================================================================================================================
</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 based on average daily net assets of $5,584,256.
AIM V.I. Basic Balanced Fund
NOTE 16--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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Basic Balanced Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Basic Balanced Fund, (one
of the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
February 12, 2007
Houston, Texas
AIM V.I. Basic Balanced Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING ACCOUNT EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $964.60 $4.51 $1,020.62 $4.63 0.91%
Series II 1,000.00 963.30 5.74 1,019.36 5.90 1.16
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Basic Balanced Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received Deduction* 39.06%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Basic Balanced Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Basic Balanced Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd,;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Large-Cap Value
AIM V.I. Basic
Value Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. BASIC VALUE FUND's investment
determine how to vote proxies objective is long-term growth of capital.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
Us tab, click on Required Notices and IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
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, UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
sec.gov. 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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Basic Value Fund
Management's discussion of Fund performance limitations of our process. First, the
investment strategy is intended to preserve your
================================================================================ capital while growing it at above-market rates
PERFORMANCE SUMMARY over the long term. Second, our investments have
little in common with popular benchmark indexes
For the year ended December 31, 2007, AIM V.I. Basic Value Fund, excluding and most of our peers. And third, the Fund's
variable product issuer charges, outperformed the Russell 1000 Value Index and short-term relative performance will naturally
underperformed the S&P 500 Index and the Lipper Large-Cap Value Funds Index. be different than the market and peers and have
little information value since we simply don't
We attribute the Fund's outperformance versus its style-specific index to own the same stocks.
above-market returns from selected investments in energy, health care and
consumer discretionary. Selected investments in financials, consumer Market conditions and your Fund
discretionary and materials contributed to the Fund's underperformance versus
the broad market index. Equity markets generally posted gains during
2007.(1) Beginning in July, most financial
Your Fund's long-term performance appears later in this report. markets witnessed an increase in price volatility
from housing-related stress and the aging of our
FUND VS. INDEXES economic expansion. It is important to
understand that these periods of stress are
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If healthy for financial markets in general and
variable product issuer charges were included, returns would be lower. typically create opportunities for our
investment strategy in particular. We are
Series I Shares 1.54% hopeful that stock valuation dispersion will
Series II Shares 1.36 increase as credit spreads and market volatility
S&P 500 Index(triangle) (Broad Market Index) 5.49 return to normal levels, potentially creating
Russell 1000 Value Index(triangle) (Style-Specific Index) -0.17 opportunities for us to grow the portfolio's
Lipper VUF Large-Cap Value Funds Index(triangle) (Peer Group Index) 1.70 estimated intrinsic value at an above-average
Lipper Large-Cap Value Funds Index(triangle) (Former Peer Group Index) 2.46 rate. While investment results can be uneven
SOURCE: (taringle)LIPPER INC. during these periods of stress, historically
these times have yielded attractive
================================================================================ opportunities for future capital growth.
How we invest business value is independent of the Aided by strong earnings and increasing oil
company's stock price. prices, energy stocks extended their multi-year
We seek to create wealth by maintaining outperformance. Drilling company TRANSOCEAN and
a long-term investment horizon and o Market prices are more volatile than oil service company WEATHERFORD INTERNATIONAL
investing in companies that are selling business values, partly because made significant contributions to performance
at a significant discount to their investors regularly overreact to during the year.
estimated intrinsic value--a value that negative news.
is based on the estimated future cash WATERS CORP. was also among the top
flows generated by the business. The o Long-term investment results are a contributors to performance. The life science
Fund's philosophy is based on key function of the level and growth of instruments company continued its strong uptrend
elements that we believe have extensive business value in the portfolio. in both top and bottom line growth as new
empirical evidence: products combined with healthy fundamentals in
Since our application of this all of the company's business segments continued
o Company intrinsic values can be strategy is highly disciplined and to produce impressive results in the U.S. and
reasonably estimated. Importantly, this relatively unique, it is important to overseas.
estimated fair understand the benefits and
The largest detractors from performance were
======================================= ====================================== CITIGROUP, INTERPUBLIC GROUP and FANNIE MAE.
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS*
We were surprised by the extent of
By sector 1. UnitedHealth Group Inc. 5.5% Citigroup's collateralized debt obligation (CDO)
Financials 19.3% 2. Dell Inc. 3.6 losses, which came at a time when the company
Information Technology 17.5 3. Western Union Co. 3.6 lacked an excess capital cushion to absorb
Consumer Discretionary 16.6 4. Weatherford sizable losses. We have long been critical of
Health Care 16.3 International Ltd. 3.3 weakness in financial controls at
Industrials 11.1 5. Halliburton Co. 3.2
Energy 9.3 6. Fannie Mae 3.1
Consumer Staples 4.7 7. Waters Corp. 3.0
Materials 2.5 8. KLA-Tencor Corp. 3.0
Telecommunication Services 1.1 9. Cardinal Health, Inc. 3.0
Money Market Funds Plus 10. CA Inc. 2.9
Other Assets Less Liabilities 1.6
Total Net Assets $703.60 million
The Fund's holdings are subject to
change, and there is no assurance that Total Number of Holdings* 44
the Fund will continue to hold any
particular security.
*Excluding money market fund holdings.
======================================= ======================================
AIM V.I. Basic Value Fund
Citigroup but chose to tolerate the risk intrinsic value, we believe this provides of fact are from sources considered
because of a global banking franchise that, the best indication that your Fund is reliable, but A I M Advisors, Inc. makes
in our opinion, has among the best growth positioned to potentially achieve its no representation or warranty as to their
opportunities of any large financial objective of long-term growth of capital. completeness or accuracy. Although
company in the world and because the historical performance is no guarantee of
company hired a world-class chief financial Context for Results future results, these insights may help
officer earlier in the year. We met with you understand our investment management
the chief financial officer shortly after As managers, we know a long-term philosophy.
he was hired and were impressed with his investment horizon and attractive
plans to bring financial discipline to potential upside to our estimate of Bret W. Stanley
Citigroup. The environment simply became portfolio intrinsic value are critical to [STANLEY Chartered Financial Analyst,
hostile before he could act at Citigroup. creating wealth. But we understand PHOTO] senior portfolio manager, is
We believe Citigroup is a unique maintaining a long-term investment lead manager of AIM V.I.
opportunity. horizon is a challenge. So, when you Basic Value Fund. He began his investment
consider our short-term results we career in 1988. Mr. Stanley earned a
Interpublic Group's stock declined as encourage you to review our long-term B.B.A. in finance from The University of
investors continued to express their results. We are long-term investors who Texas at Austin and an M.S. in finance
concern over the pace of the company's provide a portfolio that in our opinion from the University of Houston.
turnaround as well as fears of the is distinct from market indexes and most
potential impact of a slowing global of our peers. R. Canon Coleman II
economy. We remained dissatisfied with the [COLEMAN Chartered Financial Analyst,
pace of improvement at Interpublic. Recent studies have shown short-term PHOTO] portfolio manager, is manager
However, the magnitude of the opportunity results have little information value and of AIM V.I. Basic Value Fund.
combined with the progress to date the frequent trading of stocks or mutual He began his investment career in 1996
supported our continued investment. funds is a costly exercise--reducing and joined AIM in 2000. Mr. Coleman
actual returns by several percentage earned a B.S. and an M.S. in accounting
Fannie Mae has been impacted by points per year as shareholders from the University of Florida. He also
increased mortgage losses as well as unknowingly exchange tomorrow's winner earned an M.B.A. from the Wharton School
accounting complexities that create for tomorrow's loser.(2) In addition, a at the University of Pennsylvania.
volatility in regulatory capital. We recent Yale University study reveals half
believe accounting and capital standards of all mutual funds charge an active Matthew W. Seinsheimer
required of the company are in conflict management fee for essentially a [SEINSHEIMER Chartered Financial Analyst,
with the economics of the business. We closet-index portfolio.(3) While this PHOTO] senior portfolio manager, is
believe this situation is inconsistent with strategy creates smooth and innocuous manager of AIM V.I. Basic
sound regulatory policy, and we expect it short-term relative performance, it Value Fund. He began his investment
to eventually be resolved. We believe typically leads to long-term career in 1992 and joined AIM in 1998. He
mortgage credit losses to be manageable and underperformance. Considering these earned a B.B.A. in finance from Southern
believe Fannie Mae may ultimately emerge as factors, your Fund is doing something Methodist University and an M.B.A. from
an even more dominate player in the different and old fashioned--investing The University of Texas at Austin.
mortgage industry. for the long term and following a
common-sense approach that has produced a Michael J. Simon
Portfolio assessment portfolio that is different from common [SIMON Chartered Financial Analyst,
stock market indexes and more PHOTO] senior portfolio manager, is
We believe the single most important attractively valued, in our opinion. manager of AIM V.I. Basic
indicator of the way AIM V.I. Basic Value Value Fund. He began his investment
Fund is positioned for potential success is We remain optimistic about AIM V.I. career in 1989 and joined AIM in 2001.
not our historical investment results or Basic Value Fund's portfolio. We thank Mr. Simon earned a B.B.A. in finance from
popular statistical measures, but the you for your investment and for sharing Texas Christian University and an M.B.A.
portfolio's estimated intrinsic value--the our long-term horizon. from the University of Chicago.
aggregate business value of the portfolio
based on our estimate of intrinsic value Sources: (1)Lipper Inc.; (2)"The Mutual Assisted by the Basic Value Team
for each individual holding. During the Fund Industry Sixty Years Later: For
year, we believe the estimated intrinsic Better or Worse," Financial Analysts ==========================================
value of the portfolio grew at an Journal, essay by John C. Bogle, 2005; FOR A DISCUSSION OF THE RISKS OF
attractive rate despite modest impairments (3)"How Active is Your Fund Manager: A INVESTING IN YOUR FUND, INDEXES USED IN
in the business values of some of our New Measure That Predicts Performance," THIS REPORT AND YOUR FUND'S LONG-TERM
financial services investments. Martijn Cremens and Antti Petajistto, PERFORMANCE, PLEASE TURN THE PAGE.
Yale School of Management, August 2006. ==========================================
At the close of the year, and in our
opinion, the difference between the market The views and opinions expressed in
price and the estimated intrinsic value of management's discussion of Fund
the portfolio was above the Fund's performance are those of A I M Advisors,
historical average, and we believed this Inc. These views and opinions are subject
value content was greater than what was to change at any time based on factors
available in the broad market. While there such as market and economic conditions.
is no assurance that market value will ever These views and opinions may not be
reflect our estimate of the portfolio's relied upon as investment advice or
recommendations, or as an offer for a
particular security. The information is
not a complete analysis of every aspect
of any market, country, industry,
security or the Fund. Statements
AIM V.I. Basic Value Fund
Your Fund's long-term performance
=========================================== EXPENSES, REINVESTED DISTRIBUTIONS AND REFLECT ACTUAL VARIABLE PRODUCT VALUES.
AVERAGE ANNUAL TOTAL RETURNS CHANGES IN NET ASSET VALUE. INVESTMENT THEY DO NOT REFLECT SALES CHARGES,
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE EXPENSES AND FEES ASSESSED IN CONNECTION
As of 12/31/07 SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN WITH A VARIABLE PRODUCT. SALES CHARGES,
YOU SELL SHARES. EXPENSES AND FEES, WHICH ARE DETERMINED
SERIES I SHARES BY THE VARIABLE PRODUCT ISSUERS, WILL
Inception (9/10/01) 5.97% THE TOTAL ANNUAL FUND OPERATING VARY AND WILL LOWER THE TOTAL RETURN.
5 Years 12.52 EXPENSE RATIO SET FORTH IN THE MOST
1 Year 1.54 RECENT FUND PROSPECTUS AS OF THE DATE OF THE MOST RECENT MONTH-END PERFORMANCE
THIS REPORT FOR SERIES I AND SERIES II DATA AT THE FUND LEVEL, EXCLUDING
SERIES II SHARES SHARES WAS 0.97% AND 1.22%, RESPECTIVELY. VARIABLE PRODUCT CHARGES, IS AVAILABLE ON
Inception (9/10/01) 5.72% THE EXPENSE RATIOS PRESENTED ABOVE MAY THIS AIM AUTOMATED INFORMATION LINE,
5 Years 12.26 VARY FROM THE EXPENSE RATIOS PRESENTED IN 866-702-4402. AS MENTIONED ABOVE, FOR THE
1 Year 1.36 OTHER SECTIONS OF THIS REPORT THAT ARE MOST RECENT MONTH-END PERFORMANCE
=========================================== BASED ON EXPENSES INCURRED DURING THE INCLUDING VARIABLE PRODUCT CHARGES,
PERIOD COVERED BY THIS REPORT. PLEASE CONTACT YOUR VARIABLE PRODUCT
THE PERFORMANCE OF THE FUND'S SERIES I AND ISSUER OR FINANCIAL ADVISOR.
SERIES II SHARE CLASSES WILL DIFFER AIM V.I. BASIC VALUE FUND, A SERIES
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. 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
FINANCIAL ADVISOR FOR THE MOST RECENT
MONTH-END VARIABLE PRODUCT PERFORMANCE.
PERFORMANCE FIGURES REFLECT FUND
===================================================================================================================================
Principal risks of investing in the Fund party risk--the risk that the other party VARIABLE UNDERLYING FUNDS (VUF) LARGE-CAP
will not complete the transaction with VALUE FUNDS INDEX as its peer group
Prices of equity securities change in the Fund. instead of the Lipper Large Cap Value
response to many factors including the Funds Index. In 2006, Lipper began
historical and prospective earnings of the Investing in developing countries can publishing VUF indexes, allowing the Fund
issuer, the value of its assets, general add additional risk, such as high rates to be compared with the Lipper VUF
economic conditions, interest rates, of inflation or sharply devalued Large-Cap Value Funds Index. The
investor perceptions and market liquidity. currencies against the U.S. dollar. unmanaged Lipper VUF Large-Cap Value
Transaction costs are often higher, and Funds Index is an equally weighted
Foreign securities have additional there may be delays in settlement representation of the largest variable
risks, including exchange rate changes, procedures. insurance underlying funds in the Lipper
political and economic upheaval, the Large-Cap Value Funds category. These
relative lack of information, relatively The prices of securities held by the funds typically have a below-average
low market liquidity, and the potential Fund may decline in response to market price-to-earnings ratio, price-to-book
lack of strict financial and accounting risks. ratio, and three-year sales-per-share
controls and standards. growth value, compared to the S&P
About indexes used in this report 500--REGISTERED TRADEMARK-- Index.
There is no guarantee that the
investment techniques and risk analyses The S&P 500--REGISTERED TRADEMARK-- INDEX The LIPPER LARGE-CAP VALUE FUNDS INDEX
used by the Fund's portfolio managers will is a market capitalization-weighted index is an equally weighted representation of
produce the desired results. covering all major areas of the U.S. the largest funds in the Lipper Large-Cap
economy. It is not the 500 largest Value Funds category. These funds
The Fund invests in "value" stocks, companies, but rather the most widely typically have a below-average
which can continue to be inexpensive for held 500 companies chosen with respect to price-to-earnings ratio, price-to-book
long periods of time and may never realize market size, liquidity, and their ratio, and three-year sales-per-share
their full value. industry. growth value, compared to the S&P
500--REGISTERED TRADEMARK-- Index.
The Fund may use enhanced investment The Russell 1000--REGISTERED
techniques such as leveraging and TRADEMARK-- VALUE INDEX measures the The Fund is not managed to track the
derivatives. Leveraging entails risks such performance of those Russell 1000 performance of any particular index,
as magnifying changes in the value of the companies with lower price-to-book ratios including the indexes defined here, and
portfolio's securities. Derivatives are and lower forecasted growth values. The consequently, the performance of the Fund
subject to counter- Russell 1000 Value Index is a may deviate
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
Continued
AIM V.I. Basic Value Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment
representing a percent change in the
This chart, which is a logarithmic value of the investment. In this chart,
chart, presents the fluctuations in the each segment represents a doubling, or
value of the Fund and its indexes. We 100% change, in the value of the
believe that a logarithmic chart is more investment. In other words, the space
effective than other types of charts in between $5,000 and $10,000 is the same
illustrating changes in value during the size as the space between $10,000 and
early years shown in the chart. The $20,000.
vertical axis, the one that indicates
===================================================================================================================================
Continued from previous page
significantly from the performance of the Other information level only and do not include variable
indexes. product issuer charges. If such charges
The returns shown in the management's were included, the total returns would be
A direct investment cannot be made in an discussion of Fund performance are based lower.
index. Unless otherwise indicated, index on net asset values calculated for
results include reinvested dividends, and shareholder transactions. Generally Industry classifications used in this
they do not reflect sales charges. accepted accounting principles require report are generally according to the
Performance of an index of funds reflects adjustments to be made to the net assets Global Industry Classification Standard,
fund expenses; performance of a market of the Fund at period end for financial which was developed by and is the
index does not. reporting purposes, and as such, the net exclusive property and a service mark of
asset values for shareholder transactions Morgan Stanley Capital International Inc.
and the returns based on those net asset and Standard & Poor's.
values may differ from the net asset
values and returns reported in the The Chartered Financial
Financial Highlights. Additionally, the Analyst--REGISTERED TRADEMARK--
returns and net asset values shown (CFA--REGISTERED TRADEMARK--) designation
throughout this report are at the Fund is a globally recognized standard for
measuring the competence and integrity of
investment professionals.
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 8/31/01, FUND DATA FROM 9/10/01
LIPPER
AIM V.I. BASIC VALUE AIM V.I. BASIC VALUE S&P 500 RUSSELL 1000 LIPPER VUF LARGE-CAP LARGE-CAP VALUE
DATE FUND-SERIES I SHARES FUND-SERIES II SHARES INDEX(1) VALUE INDEX(1) VALUE FUNDS INDEX(1) FUNDS INDEX(1)
8/31/01 $10000 $10000 $10000 $10000
9/01 $ 9210 9210 9193 9296 9151 9220
10/01 9270 9270 9368 9216 9269 9280
11/01 9950 9950 10086 9752 9870 9875
12/01 10263 10258 10175 9982 10054 10024
1/02 10183 10178 10026 9905 9868 9839
2/02 9992 9987 9833 9921 9771 9784
3/02 10723 10717 10203 10390 10255 10216
4/02 10342 10337 9585 10034 9784 9781
5/02 10292 10287 9514 10084 9779 9794
6/02 9281 9267 8837 9505 9066 9111
7/02 8289 8276 8148 8621 8289 8324
8/02 8430 8426 8201 8687 8331 8380
9/02 7418 7406 7311 7721 7368 7411
10/02 7888 7876 7954 8293 7921 7955
11/02 8509 8497 8421 8815 8447 8454
12/02 7988 7966 7927 8432 8044 8051
1/03 7808 7786 7720 8228 7847 7860
2/03 7528 7506 7604 8009 7643 7663
3/03 7497 7476 7677 8022 7668 7658
4/03 8168 8147 8309 8728 8308 8305
5/03 9008 8978 8747 9292 8887 8816
6/03 9038 9007 8858 9408 9005 8917
7/03 9308 9277 9015 9548 9158 9041
8/03 9628 9597 9190 9697 9296 9194
9/03 9428 9397 9093 9602 9217 9090
10/03 9898 9857 9607 10190 9698 9592
11/03 10089 10048 9691 10328 9793 9710
12/03 10673 10618 10199 10964 10389 10306
1/04 10833 10779 10387 11157 10596 10462
2/04 11053 10998 10531 11396 10830 10682
3/04 11013 10959 10372 11297 10669 10555
4/04 10863 10799 10209 11021 10473 10360
5/04 10963 10899 10349 11133 10517 10436
6/04 11234 11170 10550 11396 10767 10665
7/04 10623 10559 10201 11235 10502 10409
8/04 10553 10489 10242 11395 10581 10484
9/04 10682 10610 10353 11572 10728 10608
10/04 10873 10799 10511 11764 10871 10721
11/04 11443 11370 10936 12359 11355 11187
12/04 11854 11770 11308 12773 11724 11542
1/05 11644 11559 11033 12546 11473 11318
2/05 11895 11800 11265 12962 11790 11636
3/05 11675 11579 11066 12784 11583 11446
4/05 11404 11309 10856 12555 11367 11220
5/05 11624 11530 11201 12857 11640 11482
6/05 11834 11740 11217 12998 11695 11599
7/05 12225 12120 11634 13374 12047 11977
8/05 12034 11930 11528 13316 11980 11925
9/05 12145 12039 11621 13503 12071 12040
10/05 11834 11719 11427 13160 11927 11789
11/05 12294 12180 11859 13593 12310 12194
12/05 12534 12409 11863 13674 12363 12264
1/06 12980 12854 12177 14205 12692 12622
2/06 12919 12794 12210 14292 12732 12645
3/06 13162 13027 12362 14485 12871 12805
4/06 13244 13107 12528 14853 13162 13123
5/06 12788 12651 12168 14478 12852 12802
6/06 12656 12520 12184 14571 12883 12812
7/06 12616 12480 12259 14925 13090 13008
8/06 12829 12692 12551 15175 13320 13247
9/06 13164 13015 12874 15477 13627 13556
10/06 13589 13431 13293 15984 14034 13959
11/06 13792 13633 13546 16349 14239 14200
12/06 14190 14015 13736 16716 14572 14507
1/07 14392 14217 13943 16929 14793 14693
2/07 14115 13941 13671 16665 14524 14431
3/07 14254 14079 13824 16923 14705 14615
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
4/07 14902 14704 14436 17549 15325 15241
5/07 15422 15223 14939 18181 15890 15803
6/07 15285 15076 14691 17757 15627 15561
7/07 14562 14378 14236 16936 14975 14937
8/07 14700 14504 14449 17125 15143 15114
9/07 14806 14600 14989 17713 15592 15592
10/07 15295 15088 15227 17715 15715 15715
11/07 14562 14347 14591 16850 15054 15039
12/07 14413 14205 14490 16687 14820 14864
===================================================================================================================================
AIM V.I. Basic Value Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.38%
ADVERTISING-4.89%
Interpublic Group of Cos., Inc. (The)(b)(c) 1,968,306 $ 15,962,962
- -----------------------------------------------------------------------
Omnicom Group Inc. 388,161 18,449,292
=======================================================================
34,412,254
=======================================================================
APPAREL RETAIL-2.60%
Gap, Inc. (The) 859,597 18,292,224
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.26%
Bank of New York Mellon Corp. (The) 182,425 8,895,043
=======================================================================
AUTO PARTS & EQUIPMENT-0.66%
WABCO Holdings Inc. 93,184 4,667,587
=======================================================================
BREWERS-2.73%
Molson Coors Brewing Co.-Class B 372,390 19,222,772
=======================================================================
BUILDING PRODUCTS-1.87%
Trane, Inc. 282,821 13,210,569
=======================================================================
COMPUTER HARDWARE-3.63%
Dell Inc.(c) 1,040,859 25,511,454
=======================================================================
CONSTRUCTION MATERIALS-2.52%
Cemex S.A.B. de C.V.-ADR (Mexico)(c) 686,668 17,750,368
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.55%
Western Union Co. 1,028,218 24,965,133
=======================================================================
EDUCATION SERVICES-2.14%
Apollo Group, Inc.-Class A(c) 214,318 15,034,408
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-1.19%
Tyco Electronics Ltd. 224,665 8,341,811
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.89%
Waste Management, Inc. 192,559 6,290,903
=======================================================================
GENERAL MERCHANDISE STORES-2.48%
Target Corp. 349,503 17,475,150
=======================================================================
HEALTH CARE DISTRIBUTORS-2.96%
Cardinal Health, Inc. 360,296 20,807,094
=======================================================================
HOME IMPROVEMENT RETAIL-1.93%
Home Depot, Inc. (The) 503,695 13,569,543
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.57%
Robert Half International, Inc. 409,370 11,069,365
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
INDUSTRIAL CONGLOMERATES-3.97%
General Electric Co. 437,153 $ 16,205,262
- -----------------------------------------------------------------------
Tyco International Ltd. 295,469 11,715,346
=======================================================================
27,920,608
=======================================================================
INDUSTRIAL MACHINERY-2.76%
Illinois Tool Works Inc. 362,247 19,394,704
=======================================================================
INSURANCE BROKERS-1.34%
Marsh & McLennan Cos., Inc. 355,436 9,408,391
=======================================================================
INVESTMENT BANKING & BROKERAGE-3.44%
Merrill Lynch & Co., Inc. 220,464 11,834,508
- -----------------------------------------------------------------------
Morgan Stanley 232,683 12,357,794
=======================================================================
24,192,302
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-3.02%
Waters Corp.(c) 268,723 21,247,928
=======================================================================
MANAGED HEALTH CARE-5.54%
UnitedHealth Group Inc. 669,728 38,978,170
=======================================================================
MOVIES & ENTERTAINMENT-1.55%
Walt Disney Co. (The) 337,079 10,880,910
=======================================================================
MULTI-LINE INSURANCE-1.77%
American International Group, Inc. 213,718 12,459,759
=======================================================================
OIL & GAS DRILLING-2.69%
Transocean Inc. 132,400 18,953,060
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-6.56%
Halliburton Co. 601,680 22,809,689
- -----------------------------------------------------------------------
Weatherford International Ltd.(c) 339,893 23,316,660
=======================================================================
46,126,349
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-5.23%
Citigroup Inc. 680,897 20,045,608
- -----------------------------------------------------------------------
JPMorgan Chase & Co. 383,285 16,730,390
=======================================================================
36,775,998
=======================================================================
PACKAGED FOODS & MEATS-1.94%
Unilever N.V. (Netherlands)(d) 373,112 13,635,383
=======================================================================
PHARMACEUTICALS-4.79%
Sanofi-Aventis (France)(b)(d) 198,027 18,066,332
- -----------------------------------------------------------------------
Wyeth 353,422 15,617,718
=======================================================================
33,684,050
=======================================================================
PROPERTY & CASUALTY INSURANCE-1.29%
ACE Ltd. 146,874 9,073,876
=======================================================================
</Table>
AIM V.I. Basic Value Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-3.01%
KLA-Tencor Corp. 439,836 $ 21,182,502
=======================================================================
SEMICONDUCTORS-0.52%
Maxim Integrated Products, Inc. 138,388 3,664,514
=======================================================================
SPECIALIZED CONSUMER SERVICES-0.37%
H&R Block, Inc. 141,911 2,635,287
=======================================================================
SPECIALIZED FINANCE-1.91%
Moody's Corp. 376,892 13,455,044
=======================================================================
SYSTEMS SOFTWARE-5.63%
CA Inc. 805,406 20,094,879
- -----------------------------------------------------------------------
Microsoft Corp. 548,093 19,512,111
=======================================================================
39,606,990
=======================================================================
THRIFTS & MORTGAGE FINANCE-3.08%
Fannie Mae 542,081 21,672,398
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.10%
Sprint Nextel Corp. 591,571 7,767,327
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $539,038,510) 692,231,228
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-1.12%
Liquid Assets Portfolio-Institutional
Class(e) 3,946,473 $ 3,946,473
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 3,946,473 3,946,473
=======================================================================
Total Money Market Funds (Cost
$7,892,946) 7,892,946
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.50% (Cost
$546,931,456) 700,124,174
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-0.58%
Liquid Assets Portfolio-Institutional Class
(Cost $4,082,818)(e)(f) 4,082,818 4,082,818
=======================================================================
TOTAL INVESTMENTS-100.08% (Cost $551,014,274) 704,206,992
- -----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.08)% (604,778)
- -----------------------------------------------------------------------
NET ASSETS-100.00% $703,602,214
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) All or a portion of this security was out on loan at December 31, 2007.
(c) Non-income producing security.
(d) 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 December 31, 2007 was $31,701,715,
which represented 4.51% 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.
(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. Basic Value Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $539,038,510)* $692,231,228
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $11,975,764) 11,975,764
=============================================================
Total investments (Cost $551,014,274) 704,206,992
=============================================================
Foreign currencies, at value (Cost $643) 636
- -------------------------------------------------------------
Receivables for:
Investments sold 9,393,263
- -------------------------------------------------------------
Fund shares sold 202,869
- -------------------------------------------------------------
Dividends 665,159
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 27,048
=============================================================
Total assets 714,495,967
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 5,659,886
- -------------------------------------------------------------
Fund shares reacquired 367,867
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 75,937
- -------------------------------------------------------------
Collateral upon return of securities loaned 4,082,818
- -------------------------------------------------------------
Accrued administrative services fees 461,850
- -------------------------------------------------------------
Accrued distribution fees -- Series II 198,877
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,267
- -------------------------------------------------------------
Accrued transfer agent fees 4,081
- -------------------------------------------------------------
Accrued operating expenses 41,170
=============================================================
Total liabilities 10,893,753
=============================================================
Net assets applicable to shares outstanding $703,602,214
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $459,223,489
- -------------------------------------------------------------
Undistributed net investment income 3,285,259
- -------------------------------------------------------------
Undistributed net realized gain 87,900,755
- -------------------------------------------------------------
Unrealized appreciation 153,192,711
=============================================================
$703,602,214
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $399,974,266
_____________________________________________________________
=============================================================
Series II $303,627,948
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 31,410,699
_____________________________________________________________
=============================================================
Series II 24,063,169
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 12.73
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 12.62
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $3,878,475 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$154,673) $11,003,628
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$15,654) 831,420
- ------------------------------------------------------------
Interest 2,670
============================================================
Total investment income 11,837,718
============================================================
EXPENSES:
Advisory fees 5,531,737
- ------------------------------------------------------------
Administrative services fees 2,159,538
- ------------------------------------------------------------
Custodian fees 34,779
- ------------------------------------------------------------
Distribution fees -- Series II 832,130
- ------------------------------------------------------------
Transfer agent fees 32,606
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 40,347
- ------------------------------------------------------------
Other 67,470
============================================================
Total expenses 8,698,607
============================================================
Less: Fees waived and expense offset
arrangement(s) (216,077)
============================================================
Net expenses 8,482,530
============================================================
Net investment income 3,355,188
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$584,727) 90,855,894
- ------------------------------------------------------------
Foreign currencies (10,482)
============================================================
90,845,412
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (79,568,239)
- ------------------------------------------------------------
Foreign currencies (1,358)
============================================================
(79,569,597)
============================================================
Net realized and unrealized gain 11,275,815
============================================================
Net increase in net assets resulting from
operations $14,631,003
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,355,188 $ 3,567,406
- -------------------------------------------------------------------------------------------
Net realized gain 90,845,412 40,034,739
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (79,569,597) 57,602,074
===========================================================================================
Net increase in net assets resulting from operations 14,631,003 101,204,219
===========================================================================================
Distributions to shareholders from net investment income:
Series I (2,486,739) (1,857,288)
- -------------------------------------------------------------------------------------------
Series II (1,064,477) (415,065)
===========================================================================================
Total distributions from net investment income (3,551,216) (2,272,353)
===========================================================================================
Distributions to shareholders from net realized gains:
Series I (23,181,770) (20,535,697)
- -------------------------------------------------------------------------------------------
Series II (17,896,086) (14,423,526)
===========================================================================================
Total distributions from net realized gains (41,077,856) (34,959,223)
===========================================================================================
Decrease in net assets resulting from distributions (44,629,072) (37,231,576)
===========================================================================================
Share transactions-net:
Series I (72,884,455) (34,896,912)
- -------------------------------------------------------------------------------------------
Series II (22,324,644) (50,991,677)
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (95,209,099) (85,888,589)
===========================================================================================
Net increase (decrease) in net assets (125,207,168) (21,915,946)
===========================================================================================
NET ASSETS:
Beginning of year 828,809,382 850,725,328
===========================================================================================
End of year (including undistributed net investment income
of $3,285,259 and $3,491,769, respectively) $ 703,602,214 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 annual rate of the Fund's average daily net assets as follows:
<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 Ltd. ("Invesco")
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. 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 year ended December 31, 2007, AIM waived advisory fees of $207,306.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$193,601 for accounting and fund administrative services and reimbursed
$1,965,937 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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 6,586,888 $101,103,984 $(103,744,399) $3,946,473 $408,341
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 6,586,888 101,103,984 (103,744,399) 3,946,473 407,425
=================================================================================================
Subtotal $13,173,776 $202,207,968 $(207,488,798) $7,892,946 $815,766
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $218,491,873 $(214,409,055) $ 4,082,818 $ 15,654
=================================================================================================
Total
Investments
in
Affiliates $13,173,776 $420,699,841 $(421,897,853) $11,975,764 $831,420
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $1,893,124, which resulted in net realized gains
of $584,727, and securities purchases of $448,548.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are 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 year ended
December 31, 2007, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $8,771.
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 year ended December 31, 2007, the Fund paid legal fees of $6,031
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 SEC, 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
AIM V.I. Basic Value Fund
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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $3,878,475 were
on loan to brokers. The loans were secured by cash collateral of $4,082,818
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $15,654 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 3,968,116 $ 4,476,018
- ----------------------------------------------------------------------------------------
Long-term capital gain 40,660,956 32,755,558
========================================================================================
Total distributions $44,629,072 $37,231,576
________________________________________________________________________________________
========================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 12,254,747
- ----------------------------------------------------------------------------
Undistributed long-term gain 81,865,935
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 150,329,786
- ----------------------------------------------------------------------------
Temporary book/tax differences (71,743)
- ----------------------------------------------------------------------------
Shares of beneficial interest 459,223,489
============================================================================
Total net assets $703,602,214
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies of $7.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
AIM V.I. Basic Value 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 year ended December 31, 2007 was $193,941,952 and
$332,946,557, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $188,127,843
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (37,798,050)
==============================================================================
Net unrealized appreciation of investment securities $150,329,793
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $553,877,199.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, on December 31, 2007, undistributed net investment income was
decreased by $10,482 and undistributed net realized gain was increased by
$10,482. This reclassification had no effect on the net assets of the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
2007(a) 2006
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,186,578 $ 16,337,122 1,696,765 $ 21,715,334
- -------------------------------------------------------------------------------------------------------------------------
Series II 3,442,657 47,498,968 7,249,058 88,895,732
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,956,442 25,668,509 1,691,639 22,363,469
- -------------------------------------------------------------------------------------------------------------------------
Series II 1,458,505 18,960,563 1,131,836 14,838,368
=========================================================================================================================
Reacquired:
Series I (8,375,086) (114,890,086) (6,148,598) (78,975,715)
- -------------------------------------------------------------------------------------------------------------------------
Series II (6,480,533) (88,784,175) (12,371,865) (154,725,777)
=========================================================================================================================
(6,811,437) $ (95,209,099) (6,751,165) $ (85,888,589)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 64% 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--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s):
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Basic Value 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
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.35 $ 12.37 $ 11.84 $ 10.66 $ 7.98
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07(a) 0.07(a) 0.05 0.02 0.00
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.17 1.54 0.63 1.16 2.68
=========================================================================================================================
Total from investment operations 0.24 1.61 0.68 1.18 2.68
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.08) (0.05) (0.01) -- (0.00)
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.78) (0.58) (0.14) -- --
=========================================================================================================================
Total distributions (0.86) (0.63) (0.15) -- (0.00)
=========================================================================================================================
Net asset value, end of period $ 12.73 $ 13.35 $ 12.37 $ 11.84 $ 10.66
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 1.62% 13.12% 5.74% 11.07% 33.63%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $399,974 $489,352 $487,332 $496,837 $309,384
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.96%(c) 0.97% 0.97% 1.02% 1.04%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.99%(c) 1.02% 1.02% 1.02% 1.04%
=========================================================================================================================
Ratio of net investment income to average net assets 0.52%(c) 0.54% 0.38% 0.17% 0.01%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 25% 15% 16% 14% 18%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 based on average daily net assets of $465,413,650.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.24 $ 12.26 $ 11.76 $ 10.61 $ 7.96
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) 0.04(a) 0.02 (0.01) (0.02)
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.16 1.54 0.62 1.16 2.67
=========================================================================================================================
Total from investment operations 0.20 1.58 0.64 1.15 2.65
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.04) (0.02) -- -- (0.00)
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.78) (0.58) (0.14) -- --
=========================================================================================================================
Total distributions (0.82) (0.60) (0.14) -- (0.00)
=========================================================================================================================
Net asset value, end of period $ 12.62 $ 13.24 $ 12.26 $ 11.76 $ 10.61
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 1.36% 12.94% 5.43% 10.84% 33.29%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $303,628 $339,457 $363,393 $353,605 $253,877
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.21%(c) 1.22% 1.22% 1.27% 1.29%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.24%(c) 1.27% 1.27% 1.27% 1.29%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.27%(c) 0.29% 0.13% (0.08)% (0.24)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 25% 15% 16% 14% 18%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 based on average daily net assets of $332,852,037.
AIM V.I. Basic Value 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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Basic Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Basic Value Fund, (one of
the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Basic Value Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $942.80 $4.70 $1,020.37 $4.89 0.96%
Series II 1,000.00 942.50 5.92 1,019.11 6.16 1.21
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Basic Value Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
<Table>
FEDERAL AND STATE INCOME TAX
Long-Term Capital Gain Dividends $40,660,956
Corporate Dividends Received
Deduction* 99.95%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Basic Value Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Basic Value Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Large-Cap Growth
AIM V.I. Capital Appreciation Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. CAPITAL APPRECIATION FUND's investment
the AIM Web site, AIMinvestments.com. On objective is growth of capital.
the home page, scroll down and click on
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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
to AIMinvestments.com, access the About Us IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
tab, click on Required Notices and then
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu. UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT ARE
The information is also available on the FROM A I M MANAGEMENT GROUP INC.
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Capital Appreciation Fund
Management's discussion of Fund performance seeks to develop a comprehensive
======================================================================================= understanding of the specific growth
PERFORMANCE SUMMARY drivers, as well as the sustainability of
that growth and the valuation reflected in
For the year ended December 31, 2007, and excluding variable product issuer charges, the current share price. To determine the
AIM V.I. Capital Appreciation Fund produced double-digit returns, outperforming the presence of these strong fundamentals, we
broad market as represented by the S&P 500 Index and performing in line with its analyze factors including consensus
style-specific index, the Russell 1000 Growth Index. earnings estimates, the competitive
landscape, industry themes and valuation
The Fund outperformed the S&P 500 Index largely due to strong stock selection across metrics. We believe stocks that make it
several sectors. The Fund performed in line with the Russell 1000 Growth Index, with through our extensive analysis have the
outperformance in several sectors offset by underperformance in other sectors. greatest probability of capital
appreciation.
Your Fund's long-term performance appears later in this report.
We construct the portfolio using a
FUND VS. INDEXES bottom-up strategy, focusing on stocks
rather than industries or sectors. While
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If there are no formal sector guidelines or
variable product issuer charges were included, returns would be lower. constraints, internal controls and
proprietary software help us monitor risk
Series I Shares 12.01% levels and sector concentration.
Series II Shares 11.73
S&P 500 Index(triangle) (Broad Market Index) 5.49 We believe disciplined sell decisions are
Russell 1000 Growth Index(triangle) (Style-Specific Index) 11.81 integral to successful investing, so we
Lipper VUF Multi-Cap Growth Funds Category Average(triangle) (Peer Group) 12.67 consider selling stocks based on:
Lipper Multi-Cap Growth Funds Index(triangle) (Former Peer Group Index) 12.79
o Deteriorating business fundamentals.
SOURCE: (triangle)LIPPER INC.
======================================================================================= o Disappointing earnings.
How we invest o Earnings--focus on companies o Excessive valuations.
exhibiting strong growth in earnings,
We believe a growth investment strategy is revenue and cash flows o A more attractive opportunity in another
an essential component of a diversified security.
portfolio. Our investment process combines o Quality--focus on companies with
quantitative and fundamental analysis to sustainable earnings growth; focus on Market conditions and your Fund
uncover companies exhibiting long-term, companies with management teams that
sustainable earnings and cash flow growth profitably reinvest shareholder cash flow Despite high market volatility late in the
that is not yet reflected in investor year, major U.S. equity market indexes
expectations or equity valuations. o Valuation--focus on highly profitable finished the year in positive territory.
companies that are attractively valued (1) In the first part of the year, strong
Our quantitative model ranks companies given their growth potential over our time economic growth, favorable corporate
based on factors we have found to be horizon earnings and increased merger and
highly correlated with outperformance in acquisition activity drove equity markets
the growth universe, including: Stocks that are ranked highest by our higher. However, concerns about the credit
quantitative model are the focus of our markets, continued weakness in housing and
fundamental research. Our fundamental rising oil prices weighed heavily on
analysis investor sentiment during much of the
second half of the year.
In this environment, large-and mid-cap
stocks(1) generally outperformed small-cap
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Aerospace & Defense 9.7% 1. Apple Inc. 3.6%
2. Computer Hardware 6.9 2. Google Inc.-Class A 3.3
Information Technology 29.2% 3. Pharmaceuticals 5.5 3. Merck & Co. Inc. 2.6
Industrials 19.4 4. Internet Software & Services 5.2 4. Dell Inc. 2.5
Health Care 18.4 5. Biotechnology 4.2 5. Amazon.com, Inc. 2.5
Consumer Discretionary 10.1 6. Cisco Systems, Inc. 2.5
Energy 7.2 Total Net Assets $1.44 billion 7. McDermott International, Inc. 2.4
Financials 6.1 8. Precision Castparts Corp. 2.4
Materials 4.0 Total Number of Holdings* 78 9. Sprint AeroSystems Holdings Inc.-
Consumer Staples 2.3 Class A 2.1
Telecommunication Services 1.5 10. Grant Prideco, Inc. 2.1
Money Market Funds Plus
Other Assets Less Liabilities 1.8
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
* Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Capital Appreciation Fund
stocks. Additionally, growth stocks sales of personal computers. Apple fact are from sources considered reliable,
generally outperformed value stocks.(1) remained a large Fund holding. but A I M Advisors, Inc. makes no
With the exception of the financials, representation or warranty as to their
consumer discretionary and Underperformance versus the Russell completeness or accuracy. Although
telecommunication services sectors, 1000 Growth Index was concentrated in the historical performance is no guarantee of
positive performance was broad among financials and consumer discretionary future results, these insights may help
Russell 1000 Growth Index sectors with the sectors. Many financials stocks faced you understand our investment management
best returns found in the materials, selling pressure late in the year due to philosophy.
energy and utilities sectors.(1) concerns about the extent of potential
subprime loan defaults and the related Lanny H. Sachnowitz
The Fund benefited from positive credit crisis. Underperformance in this [SACHNOWITZ Senior portfolio manager,
absolute performance in seven of 10 market sector was driven by both stock selection PHOTO] is lead manager of AIM V.I.
sectors, with the highest positive impact and an overweight position. Key detractors Capital Appreciation Fund.
on performance coming from holdings in the included The BLACKSTONE GROUP, MERRILL He joined AIM in 1987. Mr. Sachnowitz
industrials, information technology (IT) LYNCH and CB RICHARD ELLIS. We sold our earned a B.S. in finance from the
and energy sectors. The Fund outperformed position in all three stocks due to University of Southern California and an
the Russell 1000 Growth Index in three deteriorating fundamentals. M.B.A. from the University of Houston.
sectors: industrials, telecommunication
services and energy. The industrials Underperformance in the consumer Kirk L. Anderson
sector benefited from a broad-based rally discretionary sector was driven by both [ANDERSON Portfolio manager, is
during much of the year. The Fund stock selection and an overweight PHOTO] manager of AIM V.I. Capital
outperformed the Russell 1000 Growth Index position, as many consumer-related stocks Appreciation Fund. He
in this sector primarily due to strong struggled in the second half of the year. joined AIM in 1994. Mr. Anderson earned a
stock selection. Two of the Fund's top Within this sector, one of the leading B.A. in political science from Texas A&M
five contributors to performance during detractors from Fund performance was J.C. University and an M.S. in finance from the
the year came from the industrials sector: PENNEY. After posting strong performance University of Houston.
engineering and construction firm during much of the year, this department
MCDERMOTT INTERNATIONAL and aerospace and store operator lowered its earnings James G. Birdsall
defense holding PRECISION CASTPARTS. Both guidance in early October, citing [BIRDSALL Portfolio manager, is
holdings were up over 100% during the year disappointing sales during the month of PHOTO] manager of AIM V.I.
due to strong global demand for their September. Luxury goods maker Coach and Capital Appreciation Fund.
products and services. discount store operator Family Dollar He has been associated with AIM since
Stores were also key detractors from 1995. Mr. Birdsall earned his B.B.A. with
Outperformance in the telecommunication performance. While we sold J.C. Penney and a concentration in finance from Stephen F.
services sector was also driven by stock Family Dollar Stores, we continued to own Austin State University before earning his
selection. In this sector, two of the Coach. M.B.A. with a concentration in finance and
Fund's foreign wireless holdings made key international business from the University
contributions to performance: CHINA MOBILE Our investment process led us to reduce of St. Thomas.
and AMERICA MOVIL. These two companies our exposure to the financials and
have been successful in rolling out consumer discretionary sectors. Proceeds Robert J. Lloyd
wireless service to expanding markets in from these sales were invested primarily [LLOYD Chartered Financial
China and Latin America, respectively. in a number of attractive opportunities in PHOTO] Analyst, portfolio manager,
the IT and industrials sectors. All is manager of AIM V.I.
Many companies in the energy sector changes to the Fund were based on our Capital Appreciation Fund. He joined AIM
continued to benefit from higher oil bottom-up stock selection process of in 2000. He served eight years in the U.S.
prices and the ongoing modernization and identifying high quality growth companies Navy as a Naval Flight Officer flying the
expansion of the global energy trading at what we believed were S-3B Viking. Mr. Lloyd earned a B.B.A.
infrastructure. Within this sector, the attractive valuations. from the University of Notre Dame and an
Fund benefited from solid stock selection. M.B.A. from the University of Chicago.
Fund holding NATIONAL OILWELL VARCO was We are pleased to have provided positive
among the top five contributors to overall returns for our investors for the year by Assisted by the Large/Multi-Cap Growth
Fund performance. This company benefited focusing on attractively priced stocks of Team
from strong revenue and earnings growth large-, mid- and small-cap companies with
driven by solid demand for the capital potentially sustainable earnings, revenue Effective February 4, 2008, after the
equipment it manufactures. Other holdings and cash flow growth. We thank you for your close of the reporting period, Robert
in the energy sector that had meaningful commitment to AIM V.I. Capital Appreciation Lloyd became lead manager of the Fund, and
contributions to Fund performance included Fund. Ryan Amerman was added to the portfolio
CAMERON INTERNATIONAL, VALERO ENERGY and management team. Lanny Sachnowitz, Kirk
OCCIDENTAL PETROLEUM. Source: (1)Lipper Inc. Anderson and Gabe Birdsall left the team.
Long-time Fund holding Apple was the The views and opinions expressed in ==========================================
top contributor to performance during the management's discussion of Fund FOR A DISCUSSION OF THE RISKS OF INVESTING
year, with a return greater than 100%. The performance are those of A I M Advisors, IN YOUR FUND, INDEXES USED IN THIS REPORT
company benefited from the introduction of Inc. These views and opinions are subject AND YOUR FUND'S LONG-TERM PERFORMANCE,
the iPhone--TRADEMARK-- as well as to change at any time based on factors PLEASE TURN THE PAGE.
stronger than expected such as market and economic conditions. ==========================================
These views and opinions may not be relied
upon as investment advice or
recommendations, or as an offer for a
particular security. The information is
not a complete analysis of every aspect of
any market, country, industry, security or
the Fund. Statements of
AIM V.I. Capital Appreciation Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE OF THE FUND'S SERIES I BASED ON EXPENSES INCURRED DURING THE
AND SERIES II SHARE CLASSES WILL DIFFER PERIOD COVERED BY THIS REPORT.
AVERAGE ANNUAL TOTAL RETURNS PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
AIM V.I. CAPITAL APPRECIATION FUND, A
As of 12/31/07 THE PERFORMANCE DATA QUOTED REPRESENT SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
PAST PERFORMANCE AND CANNOT GUARANTEE FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES COMPARABLE FUTURE RESULTS; CURRENT INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/5/93) 9.01% PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 4.79 CONTACT YOUR VARIABLE PRODUCT ISSUER OR THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years 12.35 FINANCIAL ADVISOR FOR THE MOST RECENT GIVEN REPRESENT THE FUND AND ARE NOT
1 Year 12.01 MONTH-END VARIABLE PRODUCT PERFORMANCE. INTENDED TO REFLECT ACTUAL VARIABLE
PERFORMANCE FIGURES REFLECT FUND EXPENSES, PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES REINVESTED DISTRIBUTIONS AND CHANGES IN CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years 4.53% NET ASSET VALUE. INVESTMENT RETURN AND CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years 12.06 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year 11.73 MAY HAVE A GAIN OR LOSS WHEN YOU SELL DETERMINED BY THE VARIABLE PRODUCT
SHARES. ISSUERS, WILL VARY AND WILL LOWER THE
========================================== TOTAL RETURN.
THE TOTAL ANNUAL FUND OPERATING EXPENSE
SERIES II SHARES' INCEPTION DATE IS AUGUST RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END PERFORMANCE
21, 2001. RETURNS SINCE THAT DATE ARE PROSPECTUS AS OF THE DATE OF THIS REPORT DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
HISTORICAL. ALL OTHER RETURNS ARE THE FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
BLENDED RETURNS OF THE HISTORICAL 0.91% AND 1.16%, RESPECTIVELY. THE EXPENSE AUTOMATED INFORMATION LINE, 866-702-4402.
PERFORMANCE OF SERIES II SHARES SINCE RATIOS PRESENTED ABOVE MAY VARY FROM THE AS MENTIONED ABOVE, FOR THE MOST RECENT
THEIR INCEPTION AND THE RESTATED EXPENSE RATIOS PRESENTED IN OTHER SECTIONS MONTH-END PERFORMANCE INCLUDING VARIABLE
HISTORICAL PERFORMANCE OF SERIES I SHARES OF THIS REPORT THAT ARE PRODUCT CHARGES, PLEASE CONTACT YOUR
(FOR PERIODS PRIOR TO INCEPTION OF SERIES VARIABLE PRODUCT ISSUER OR FINANCIAL
II SHARES) ADJUSTED TO REFLECT THE RULE ADVISOR.
12B-1 FEES APPLICABLE TO SERIES II SHARES.
THE INCEPTION DATE OF SERIES I SHARES IS
MAY 5, 1993.
====================================================================================================================================
Principal risks of investing in the Fund desired results. Company.
Investing in developing countries can add Investing in a fund that invests in The Fund has elected to use the LIPPER
additional risk, such as high rates of smaller companies involves risks not VARIABLE UNDERLYING FUNDS (VUF) MULTI-CAP
inflation or sharply devalued currencies associated with investing in more GROWTH FUNDS CATEGORY AVERAGE as its peer
against the U.S. dollar. Transaction costs established companies, such as business group instead of the Lipper Multi-Cap
are often higher, and there may be delays risk, stock price fluctuations and Growth Funds Index. In 2006, Lipper began
in settlement procedures. illiquidity. publishing VUF indexes, allowing the Fund
to be compared with the Lipper VUF
Prices of equity securities change in About indexes used in this report Multi-Cap Growth Funds Category Average.
response to many factors including the The unmanaged Lipper VUF Multi-Cap Growth
historical and prospective earnings of the The S&P 500--REGISTERED TRADEMARK-- Index Funds Category Average represents the
issuer, the value of its assets, general is a market capitalization-weighted index average of all the variable insurance
economic conditions, interest rates, covering all major areas of the U.S. underlying multi-cap growth funds tracked
investor perceptions and market liquidity. economy. It is not the 500 largest by Lipper Inc. These funds typically have
companies, but rather the most widely held an above-average price-to-earnings ratio,
Foreign securities have additional 500 companies chosen with respect to price-to-book ratio, and three-year
risks, including exchange rate changes, market size, liquidity, and their sales-per-share growth value, compared to
political and economic upheaval, the industry. the S&P SuperComposite 1500 Index.
relative lack of information, relatively
low market liquidity, and the potential The Russell 1000--REGISTERED The LIPPER MULTI-CAP GROWTH FUNDS Index
lack of strict financial and accounting TRADEMARK-- Growth Index measures the is an equally weighted representation of
controls and standards. performance of those Russell 1000 the largest funds in the Lipper Multi-Cap
companies with higher price-to-book ratios Growth Funds category. These funds
There is no guarantee that the and higher forecasted growth values. The typically have an above-average
investment techniques and risk analyses Russell 1000 Growth Index is a trademark/ price-to-earnings
used by the Fund's portfolio managers will service mark of the Frank Russell Company.
produce the Russell--REGISTERED TRADEMARK-- is a
trademark of the Frank Russell
Continued
AIM V.I. Capital Appreciation Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic chart, investment. In this chart, each segment
presents the fluctuations in the value of represents a doubling, or 100% change, in
the Fund and its indexes. We believe that the value of the investment. In other
a logarithmic chart is more effective than words, the space between $5,000 and
other types of charts in illustrating $10,000 is the same size as the space
changes in value during the early years between $10,000 and $20,000, and so on.
shown in the chart. The vertical axis, the
one that indicates
====================================================================================================================================
Continued from previous page
ratio, price-to-book ratio, and three-year Other information level only and do not include variable
sales-per-share growth value, compared to product issuer charges. If such charges
the S&P SuperComposite 1500 Index. The returns shown in the management's were included, the total returns would be
discussion of Fund performance are based lower.
The Fund is not managed to track the on net asset values calculated for
performance of any particular index, shareholder transactions. Generally Industry classifications used in this
including the indexes defined here, and accepted accounting principles require report are generally according to the
consequently, the performance of the Fund adjustments to be made to the net assets Global Industry Classification Standard,
may deviate significantly from the of the Fund at period end for financial which was developed by and is the
performance of the indexes. reporting purposes, and as such, the net exclusive property and a service mark of
asset values for shareholder transactions Morgan Stanley Capital International Inc.
A direct investment cannot be made in and the returns based on those net asset and Standard & Poor's.
an index. Unless otherwise indicated, values may differ from the net asset
index results include reinvested values and returns reported in the The Chartered Financial
dividends, and they do not reflect sales Financial Highlights. Additionally, the Analyst--REGISTERED TRADEMARK--
charges. Performance of an index of funds returns and net asset values shown (CFA--REGISTERED TRADEMARK--) designation
reflects fund expenses; performance of a throughout this report are at the Fund is a globally recognized standard for
market index does not. measuring the competence and integrity of
investment professionals.
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/93, FUND DATA FROM 5/5/93
AIM V.I. CAPITAL LIPPER VUF MULTI-CAP
APPRECIATION FUND- RUSSELL 1000 GROWTH GROWTH FUNDS CATEGORY LIPPER MULTI-CAP
DATE SERIES I SHARES S&P 500 INDEX(1) INDEX(1) AVERAGE(1) GROWTH FUNDS INDEX(1)
4/30/93 $10000 $10000 $10000 $10000
5/93 $10320 10267 10350 10488 10544
6/93 10200 10297 10256 10575 10645
7/93 10390 10255 10072 10547 10648
8/93 10990 10644 10486 11131 11184
9/93 11370 10562 10409 11423 11422
10/93 11440 10780 10698 11533 11555
11/93 11261 10678 10626 11195 11206
12/93 11950 10807 10809 11564 11583
1/94 12590 11174 11060 11929 11968
2/94 12831 10871 10857 11836 11776
3/94 11820 10398 10332 11189 11144
4/94 11940 10531 10380 11156 11154
5/94 11770 10703 10537 11116 11119
6/94 11099 10441 10225 10662 10657
7/94 11378 10784 10575 10936 10962
8/94 12209 11225 11163 11615 11570
9/94 12239 10950 11012 11507 11391
10/94 12620 11196 11271 11759 11614
11/94 12070 10789 10910 11344 11161
12/94 12249 10949 11092 11521 11256
1/95 12098 11232 11330 11530 11253
2/95 12750 11670 11804 12014 11708
3/95 13343 12013 12149 12438 12089
4/95 13624 12367 12414 12677 12336
5/95 13996 12860 12846 13028 12658
6/95 15101 13159 13342 13873 13428
7/95 16537 13595 13897 14833 14286
8/95 16677 13629 13912 15083 14404
9/95 17259 14204 14553 15541 14801
10/95 16888 14153 14563 15361 14613
11/95 17089 14773 15129 15895 15099
12/95 16621 15058 15216 15928 15052
1/96 16772 15570 15725 16235 15280
2/96 17666 15715 16013 16727 15730
3/96 17647 15866 16033 16884 15823
4/96 18732 16100 16455 17620 16526
5/96 19324 16514 17030 18053 16980
6/96 18601 16577 17053 17640 16615
7/96 17005 15845 16054 16287 15411
8/96 17980 16180 16468 16985 16087
9/96 19346 17090 17667 18064 17131
10/96 19035 17561 17774 17975 17091
11/96 19979 18887 19108 18917 18066
12/96 19547 18513 18734 18604 17739
1/97 20403 19669 20048 19534 18590
2/97 19559 19824 19913 18883 18077
3/97 18362 19011 18835 17866 17144
4/97 18694 20144 20086 18232 17688
5/97 20535 21376 21535 19763 19188
6/97 21180 22326 22397 20459 19908
7/97 23353 24102 24378 22356 21741
8/97 23082 22753 22951 21909 21146
9/97 24190 23998 24080 23254 22484
10/97 22649 23198 23190 22294 21490
11/97 22398 24271 24175 22344 21626
12/97 22192 24687 24446 22472 21810
1/98 21764 24960 25177 22564 21905
2/98 23814 26759 27071 24497 23728
3/98 24609 28129 28150 25639 24885
4/98 25222 28417 28540 25877 25173
5/98 24069 27929 27730 24960 24217
6/98 25039 29063 29428 26296 25461
7/98 24163 28755 29234 25681 24841
8/98 19683 24601 24846 21134 20242
9/98 21346 26178 26755 22741 21701
10/98 22388 28304 28905 23963 22922
11/98 23736 30019 31104 25734 24517
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
12/98 26480 31748 33909 28630 27218
1/99 26954 33075 35900 30250 28891
2/99 25250 32047 34260 28558 27385
3/99 26386 33329 36064 30107 28944
4/99 27228 34620 36110 30853 29647
5/99 27114 33803 35000 30373 29074
6/99 29006 35674 37452 32380 31108
7/99 28156 34565 36262 31563 30407
8/99 28018 34394 36854 31315 30103
9/99 28206 33452 36080 31319 29930
10/99 30257 35568 38805 33411 32039
11/99 32853 36291 40898 36190 34608
12/99 38300 38425 45152 42012 39834
1/00 37645 36495 43035 40417 39430
2/00 42576 35805 45139 45280 45734
3/00 43619 39305 48369 46424 45554
4/00 40283 38123 46068 42863 41735
5/00 37874 37342 43748 40073 38920
6/00 41456 38261 47064 43688 42780
7/00 41046 37664 45102 42596 41437
8/00 46439 40002 49185 47055 45925
9/00 43834 37891 44533 44396 43135
10/00 40854 37730 42425 41758 40630
11/00 33124 34757 36172 35219 33975
12/00 34124 34928 35027 35609 35033
1/01 35783 36166 37447 36745 35743
2/01 30229 32871 31090 30954 30511
3/01 26910 30790 27706 27471 27241
4/01 29588 33180 31211 30827 30567
5/01 29289 33403 30751 30668 30402
6/01 28759 32590 30039 30245 29861
7/01 27675 32269 29288 28683 28249
8/01 25306 30251 26893 26270 25811
9/01 22120 27809 24208 22810 21975
10/01 23391 28339 25478 24285 23548
11/01 25738 30512 27926 26754 25816
12/01 26180 30780 27873 27148 26218
1/02 25722 30331 27381 26440 25478
2/02 24624 29746 26245 25032 23896
3/02 26119 30865 27152 26397 25321
4/02 24611 28994 24936 24822 23783
5/02 24154 28781 24333 24203 23093
6/02 22465 26732 22082 22051 20940
7/02 20417 24649 20868 20092 18973
8/02 20368 24810 20931 20050 18829
9/02 18789 22116 18759 18425 17369
10/02 20465 24061 20480 19862 18696
11/02 21296 25476 21593 21002 19866
12/02 19801 23980 20101 19560 18399
1/03 19270 23353 19613 19278 18095
2/03 19185 23002 19523 19111 17972
3/03 19450 23225 19887 19434 18258
4/03 20751 25137 21357 20914 19592
5/03 21777 26460 22423 22341 21032
6/03 22053 26798 22732 22597 21275
7/03 22874 27271 23297 23265 21935
8/03 23740 27801 23877 24116 22812
9/03 22945 27507 23621 23591 22372
10/03 24583 29062 24948 25265 23957
11/03 25102 29318 25209 25655 24394
12/03 25644 30854 26081 26264 24909
1/04 26114 31420 26614 26870 25531
2/04 26320 31857 26783 27075 25868
3/04 25875 31376 26286 26846 25790
4/04 25068 30885 25980 26094 24925
5/04 25587 31308 26465 26725 25513
6/04 26178 31916 26795 27323 26060
7/04 24563 30860 25281 25513 24220
8/04 24140 30984 25156 25174 23879
9/04 24852 31319 25395 26071 24800
10/04 25466 31798 25791 26597 25333
11/04 26622 33084 26678 28038 26697
12/04 27346 34209 27724 29105 27715
1/05 26575 33376 26800 28162 26715
2/05 27093 34077 27085 28518 27017
3/05 26430 33475 26591 27971 26446
4/05 25489 32840 26085 27054 25476
5/05 26669 33884 27347 28639 27043
6/05 26730 33933 27246 28904 27189
7/05 28118 35194 28578 30409 28796
===================================================================================================================================
===================================================================================================================================
[MOUNTAIN CHART]
8/05 28092 34873 28210 30235 28659
9/05 28876 35155 28340 30786 29121
10/05 28382 34569 28064 30342 28590
11/05 29540 35875 29275 31847 30119
12/05 29762 35888 29183 32044 30244
1/06 31208 36838 29696 33489 31805
2/06 30812 36938 29649 32895 31277
3/06 31536 37398 30086 33557 31987
4/06 31728 37899 30045 33707 32238
5/06 29859 36810 29027 31823 30353
6/06 29653 36859 28912 31772 30285
7/06 28666 37086 28362 30769 29365
8/06 29294 37967 29247 31564 30095
9/06 30211 38945 30050 32294 30786
10/06 30851 40213 31107 33563 32052
11/06 31564 40977 31724 34614 33037
12/06 31643 41552 31831 34562 33029
1/07 32136 42179 32650 35325 33799
2/07 31532 41357 32036 34724 33242
3/07 32112 41819 32210 35026 33526
4/07 33512 43670 33726 36580 34915
5/07 35191 45193 34939 38070 36429
6/07 34699 44442 34418 37735 36108
7/07 33866 43066 33884 36937 35359
8/07 34492 43711 34424 37479 35709
9/07 36183 45344 35866 39483 37619
10/07 37547 46065 37087 41172 39202
11/07 35771 44138 35721 38969 37298
12/07 35407 43833 35592 38831 37252
===================================================================================================================================
AIM V.I. Capital Appreciation Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
COMMON STOCKS-88.27%
AEROSPACE & DEFENSE-9.66%
Boeing Co. (The) 123,571 $ 10,807,520
- --------------------------------------------------------------------------
General Dynamics Corp. 282,292 25,121,165
- --------------------------------------------------------------------------
Honeywell International Inc. 253,075 15,581,828
- --------------------------------------------------------------------------
Precision Castparts Corp. 248,058 34,405,644
- --------------------------------------------------------------------------
Spirit AeroSystems Holdings Inc.-Class A(b) 873,232 30,126,504
- --------------------------------------------------------------------------
United Technologies Corp. 295,309 22,602,951
==========================================================================
138,645,612
==========================================================================
APPAREL RETAIL-1.10%
Aeropostale, Inc.(b) 595,480 15,780,220
==========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.14%
Coach, Inc.(b) 535,444 16,373,877
==========================================================================
APPLICATION SOFTWARE-3.54%
Adobe Systems Inc.(b) 485,857 20,760,670
- --------------------------------------------------------------------------
Amdocs Ltd.(b) 429,885 14,818,136
- --------------------------------------------------------------------------
Autodesk, Inc.(b) 306,241 15,238,552
==========================================================================
50,817,358
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.55%
Ameriprise Financial, Inc. 397,016 21,879,552
- --------------------------------------------------------------------------
Waddell & Reed Financial, Inc.-Class A 407,476 14,705,809
==========================================================================
36,585,361
==========================================================================
AUTO PARTS & EQUIPMENT-0.50%
BorgWarner, Inc. 149,570 7,240,684
==========================================================================
BIOTECHNOLOGY-4.24%
Biogen Idec Inc.(b) 199,528 11,357,134
- --------------------------------------------------------------------------
Celgene Corp.(b) 161,601 7,467,582
- --------------------------------------------------------------------------
Genzyme Corp.(b) 209,065 15,562,798
- --------------------------------------------------------------------------
Gilead Sciences, Inc.(b) 576,796 26,538,384
==========================================================================
60,925,898
==========================================================================
COMMUNICATIONS EQUIPMENT-2.48%
Cisco Systems, Inc.(b) 1,314,191 35,575,150
==========================================================================
COMPUTER HARDWARE-6.90%
Apple Inc.(b) 261,783 51,853,977
- --------------------------------------------------------------------------
Dell Inc.(b) 1,484,520 36,385,585
- --------------------------------------------------------------------------
Hewlett-Packard Co. 213,926 10,798,984
==========================================================================
99,038,546
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
CONSTRUCTION & ENGINEERING-3.01%
Chicago Bridge & Iron Co. N.V.-New York
Shares 297,997 $ 18,010,939
- --------------------------------------------------------------------------
Foster Wheeler Ltd.(b) 162,275 25,155,870
==========================================================================
43,166,809
==========================================================================
CONSUMER ELECTRONICS-0.81%
Garmin Ltd. 119,896 11,629,912
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.26%
VeriFone Holdings, Inc.(b)(c) 159,317 3,704,120
==========================================================================
DIVERSIFIED METALS & MINING-0.37%
Titanium Metals Corp.(c) 198,205 5,242,522
==========================================================================
DRUG RETAIL-0.48%
Longs Drug Stores Corp. 145,560 6,841,320
==========================================================================
EDUCATION SERVICES-1.78%
Apollo Group, Inc.-Class A(b) 363,626 25,508,364
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.71%
Emerson Electric Co. 432,425 24,501,200
==========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.50%
Amphenol Corp.-Class A 465,796 21,598,960
==========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.66%
Trimble Navigation Ltd.(b) 313,819 9,489,887
==========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.90%
Monsanto Co. 158,868 17,743,967
- --------------------------------------------------------------------------
Mosaic Co. (The)(b) 101,175 9,544,849
==========================================================================
27,288,816
==========================================================================
FOOTWEAR-0.70%
Crocs, Inc.(b)(c) 274,157 10,091,719
==========================================================================
HEALTH CARE DISTRIBUTORS-1.33%
McKesson Corp. 291,790 19,115,163
==========================================================================
HEALTH CARE FACILITIES-1.00%
VCA Antech, Inc.(b) 325,686 14,405,092
==========================================================================
HEALTH CARE SERVICES-1.38%
Express Scripts, Inc.(b) 268,328 19,587,944
- --------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(b) 3,652 248,884
==========================================================================
19,836,828
==========================================================================
HOME ENTERTAINMENT SOFTWARE-1.32%
Electronic Arts Inc.(b)(c) 323,294 18,883,603
==========================================================================
</Table>
AIM V.I. Capital Appreciation Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-1.35%
Clorox Co. (The) 96,842 $ 6,311,193
- --------------------------------------------------------------------------
Colgate-Palmolive Co. 168,307 13,121,214
==========================================================================
19,432,407
==========================================================================
INDUSTRIAL CONGLOMERATES-2.43%
McDermott International, Inc.(b) 589,856 34,819,200
==========================================================================
INTEGRATED OIL & GAS-1.44%
Occidental Petroleum Corp. 269,243 20,729,019
==========================================================================
INTERNET RETAIL-2.97%
Amazon.com, Inc.(b) 384,734 35,641,758
- --------------------------------------------------------------------------
Expedia, Inc.(b) 221,995 7,019,482
==========================================================================
42,661,240
==========================================================================
INTERNET SOFTWARE & SERVICES-5.20%
eBay Inc.(b) 820,116 27,219,650
- --------------------------------------------------------------------------
Google Inc.-Class A(b) 68,572 47,416,167
==========================================================================
74,635,817
==========================================================================
INVESTMENT BANKING & BROKERAGE-1.88%
Goldman Sachs Group, Inc. (The) 101,042 21,729,082
- --------------------------------------------------------------------------
optionsXpress Holdings Inc. 156,726 5,300,473
==========================================================================
27,029,555
==========================================================================
IT CONSULTING & OTHER SERVICES-1.41%
Accenture Ltd.-Class A 563,718 20,310,760
==========================================================================
LIFE SCIENCES TOOLS & SERVICES-2.34%
Applera Corp.-Applied Biosystems Group 430,016 14,586,143
- --------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(b) 265,456 15,311,502
- --------------------------------------------------------------------------
Varian Inc.(b) 57,208 3,735,682
==========================================================================
33,633,327
==========================================================================
MANAGED HEALTH CARE-2.55%
Health Net Inc.(b) 567,566 27,413,438
- --------------------------------------------------------------------------
UnitedHealth Group Inc. 158,841 9,244,546
==========================================================================
36,657,984
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.91%
Cameron International Corp.(b) 240,834 11,591,340
- --------------------------------------------------------------------------
Grant Prideco, Inc.(b) 541,012 30,031,576
- --------------------------------------------------------------------------
National-Oilwell Varco Inc.(b) 197,517 14,509,599
==========================================================================
56,132,515
==========================================================================
OIL & GAS REFINING & MARKETING-1.81%
Valero Energy Corp. 371,620 26,024,549
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
OTHER DIVERSIFIED FINANCIAL SERVICES-1.49%
JPMorgan Chase & Co. 490,982 $ 21,431,364
==========================================================================
PHARMACEUTICALS-3.62%
Merck & Co. Inc. 635,177 36,910,135
- --------------------------------------------------------------------------
Schering-Plough Corp. 565,487 15,064,574
==========================================================================
51,974,709
==========================================================================
SEMICONDUCTORS-1.42%
Texas Instruments Inc. 609,354 20,352,424
==========================================================================
SOFT DRINKS-0.49%
Hansen Natural Corp.(b) 158,756 7,031,303
==========================================================================
SPECIALIZED FINANCE-0.17%
Nasdaq Stock Market Inc.(b) 49,711 2,460,197
==========================================================================
SPECIALTY STORES-0.62%
PetSmart, Inc. 379,871 8,938,365
==========================================================================
SYSTEMS SOFTWARE-2.85%
MICROS Systems, Inc.(b) 177,552 12,457,048
- --------------------------------------------------------------------------
Microsoft Corp. 798,410 28,423,396
==========================================================================
40,880,444
==========================================================================
Total Common Stocks (Cost $982,075,563) 1,267,422,200
==========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-9.91%
CANADA-1.68%
Research In Motion Ltd. (Communications
Equipment)(b) 212,917 24,144,788
==========================================================================
HONG KONG-0.97%
China Mobile Ltd. (Wireless Telecommunication
Services)(d) 805,961 13,967,188
==========================================================================
ISRAEL-0.81%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 250,198 11,629,203
==========================================================================
JAPAN-1.19%
Komatsu Ltd. (Construction & Farm Machinery &
Heavy Trucks)(d) 632,388 17,139,948
==========================================================================
MEXICO-1.01%
America Movil S.A.B de C.V.-Series L-ADR
(Wireless Telecommunication Services) 114,247 7,013,623
- --------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 316,107 7,513,864
==========================================================================
14,527,487
==========================================================================
SWITZERLAND-3.17%
ABB Ltd. (Heavy Electrical Equipment) 716,014 20,607,355
- --------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(d) 97,990 24,835,124
==========================================================================
45,442,479
==========================================================================
</Table>
AIM V.I. Capital Appreciation Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
UNITED KINGDOM-1.08%
Shire PLC (Pharmaceuticals) (Acquired
2/20/2007 Cost $815,441)(d)(e) 38,893 $ 891,867
- --------------------------------------------------------------------------
Shire PLC (Pharmaceuticals)(d) 636,282 14,590,774
==========================================================================
15,482,641
==========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $86,228,496) 142,333,734
==========================================================================
MONEY MARKET FUNDS-1.93%
Liquid Assets Portfolio-Institutional
Class(f) 13,864,605 13,864,605
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 13,864,605 13,864,605
==========================================================================
Total Money Market Funds (Cost
$27,729,210) 27,729,210
==========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.11% (Cost
$1,096,033,269) 1,437,485,144
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-1.72%
Liquid Assets Portfolio-Institutional Class
(Cost $24,710,670)(f)(g) 24,710,670 $ 24,710,670
==========================================================================
TOTAL INVESTMENTS-101.83% (Cost
$1,120,743,939) 1,462,195,814
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(1.83)% (26,224,710)
- --------------------------------------------------------------------------
NET ASSETS-100.00% $1,435,971,104
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(c) All or a portion of this security was out on loan at December 31, 2007.
(d) 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 December 31, 2007 was $71,424,901,
which represented 4.97% 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 December 31, 2007 represented 0.06% of the
Fund's Net Assets. Unless otherwise indicated, this security is not
considered to be illiquid.
(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. Capital Appreciation Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (cost $1,068,304,059)* $1,409,755,934
- ------------------------------------------------------------
Investments in affiliated money market funds
(cost $52,439,880) 52,439,880
============================================================
Total investments (Cost $1,120,743,939) 1,462,195,814
============================================================
Foreign currencies, at value (cost $938,191) 938,540
- ------------------------------------------------------------
Receivables for:
Investments sold 9,501,613
- ------------------------------------------------------------
Fund shares sold 67,423
- ------------------------------------------------------------
Dividends 488,584
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 177,427
- ------------------------------------------------------------
Other assets 388
============================================================
Total assets 1,473,369,789
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 9,428,279
- ------------------------------------------------------------
Fund shares reacquired 1,751,493
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 313,471
- ------------------------------------------------------------
Collateral upon return of securities
loaned 24,710,670
- ------------------------------------------------------------
Accrued administrative services fees 866,772
- ------------------------------------------------------------
Accrued distribution fees -- Series II 226,268
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 902
- ------------------------------------------------------------
Accrued transfer agent fees 12,591
- ------------------------------------------------------------
Accrued operating expenses 88,239
============================================================
Total liabilities 37,398,685
============================================================
Net assets applicable to shares outstanding $1,435,971,104
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,334,682,644
- ------------------------------------------------------------
Undistributed net investment income (loss) (284,803)
- ------------------------------------------------------------
Undistributed net realized gain (loss) (239,878,961)
- ------------------------------------------------------------
Unrealized appreciation 341,452,224
============================================================
$1,435,971,104
____________________________________________________________
============================================================
NET ASSETS:
Series I $1,086,677,361
____________________________________________________________
============================================================
Series II $ 349,293,743
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 37,003,483
____________________________________________________________
============================================================
Series II 12,067,376
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 29.37
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 28.95
____________________________________________________________
============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $23,777,175 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $197,942) $ 12,881,758
- -----------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$66,088) 965,338
- -----------------------------------------------------------
Interest 16,981
===========================================================
Total investment income 13,864,077
===========================================================
EXPENSES:
Advisory fees 9,237,386
- -----------------------------------------------------------
Administrative services fees 3,878,399
- -----------------------------------------------------------
Custodian fees 89,212
- -----------------------------------------------------------
Distribution fees-Series II 917,494
- -----------------------------------------------------------
Transfer agent fees 63,939
- -----------------------------------------------------------
Trustees' and officer's fees and benefits 60,008
- -----------------------------------------------------------
Other 84,786
===========================================================
Total expenses 14,331,224
===========================================================
Less: Fees waived and expense offset
arrangement(s) (13,496)
===========================================================
Net expenses 14,317,728
===========================================================
Net investment income (loss) (453,651)
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
(losses) from securities sold to
affiliates of $(912,971)) 83,964,933
- -----------------------------------------------------------
Foreign currencies 233,896
===========================================================
84,198,829
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 90,263,993
- -----------------------------------------------------------
Foreign currencies (1,054)
===========================================================
90,262,939
===========================================================
Net realized and unrealized gain 174,461,768
===========================================================
Net increase in net assets resulting from
operations $174,008,117
___________________________________________________________
===========================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (453,651) $ (49,797)
- ----------------------------------------------------------------------------------------------
Net realized gain 84,198,829 155,963,183
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) 90,262,939 (94,510,673)
==============================================================================================
Net increase in net assets resulting from operations 174,008,117 61,402,713
==============================================================================================
Distributions to shareholders from net investment
income -- Series I -- (692,340)
==============================================================================================
Share transactions-net:
Series l (250,049,373) 337,314,470
- ----------------------------------------------------------------------------------------------
Series ll (63,863,071) 15,761,962
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (313,912,444) 353,076,432
==============================================================================================
Net increase (decrease) in net assets (139,904,327) 413,786,805
==============================================================================================
NET ASSETS:
Beginning of year 1,575,875,431 1,162,088,626
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(284,803) and $(321,756), respectively) $1,435,971,104 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 Ltd. ("Invesco")
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. 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 year ended December 31, 2007, AIM waived advisory fees of $11,476.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$357,435 for accounting and fund administrative services and reimbursed
$3,520,964 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 year ended December 31, 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 A I M
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 year ended December 31, 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. Capital Appreciation 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $10,033,388 $235,514,895 $(231,683,678) $13,864,605 $450,054
- -------------------------------------------------------------------------------------------------
Premier
Portfolio
-- Institutional
Class 10,033,388 235,514,895 (231,683,678) 13,864,605 449,196
=================================================================================================
Subtotal $20,066,776 $471,029,790 $(463,367,356) $27,729,210 $899,250
_________________________________________________________________________________________________
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $24,258,490 $321,048,840 $(320,596,660) $24,710,670 $ 66,088
=================================================================================================
Total
Investments
in
Affiliates $44,325,266 $792,078,630 $(783,964,016) $52,439,880 $965,338
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $6,881,340, which resulted in net realized gains
(losses) of $(912,971), and securities purchases of $6,038,628.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $2,020.
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 year ended December 31, 2007, the Fund paid legal fees of $8,264
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. Capital Appreciation Fund
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the SEC, 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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $23,777,175 were
on loan to brokers. The loans were secured by cash collateral of $24,710,670
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $66,088 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------
Distributions paid from ordinary income $ -- $692,340
________________________________________________________________________________
================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ------------------------------------------------------------------------------
Net unrealized appreciation -- investments $ 334,897,801
- ------------------------------------------------------------------------------
Temporary book/tax differences (284,803)
- ------------------------------------------------------------------------------
Capital loss carryforward (233,324,538)
- ------------------------------------------------------------------------------
Shares of beneficial interest 1,334,682,644
==============================================================================
Total net assets $1,435,971,104
______________________________________________________________________________
==============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the deferral of losses on certain straddle transactions. The tax-basis net
unrealized appreciation on investments amount includes appreciation on foreign
currencies of $349.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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
AIM V.I. Capital Appreciation Fund
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, 2007 to utilizing $189,887,985 of capital loss carryforward in the fiscal
year ended December 31, 2008.
The Fund utilized $71,222,562 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $ 32,326,216
- -----------------------------------------------------------------------------
December 31, 2010 144,685,370
- -----------------------------------------------------------------------------
December 31, 2011 56,312,952
=============================================================================
Total capital loss carryforward $233,324,538
_____________________________________________________________________________
=============================================================================
</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 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 the 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 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 realized gains of $11,904,147 to the Fund for
book purposes. Such gains are not recognized for federal income tax purposes.
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 year ended December 31, 2007 was $1,057,638,933 and
$1,361,444,934, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $366,725,159
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (31,827,707)
==============================================================================
Net unrealized appreciation of investment securities $334,897,452
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,127,298,362.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, expired capital loss carryforward, redemption-in-kind adjustments
and net operating losses, on December 31, 2007, undistributed net investment
income (loss) was increased by $490,604, undistributed net realized gain (loss)
was decreased by $8,096,183 and shares of beneficial interest increased by
$7,605,579. This reclassification had no effect on the net assets of the Fund.
AIM V.I. Capital Appreciation Fund
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2007(A) 2006
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,435,959 $ 69,086,990 5,977,566 $ 149,575,490
- --------------------------------------------------------------------------------------------------------------------------
Series II 1,121,588 30,704,269 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 (11,374,631) (319,136,363) (11,438,432) (285,157,727)
- --------------------------------------------------------------------------------------------------------------------------
Series II (3,386,840) (94,567,340) (3,482,328) (83,377,563)
==========================================================================================================================
(11,203,924) $(313,912,444) 13,038,059 $ 353,076,432
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) There are entities that are 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 assets 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
acquisitions were 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 on 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 the net
assets of the Fund immediately before the acquisition were
$1,269,556,120. The combined aggregate net assets of the Fund subsequent
to 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. Demographics 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 on 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 subsequent
to the reorganizations were $1,563,508,561.
NOTE 13--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following proposal.
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Capital Appreciation 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
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.22 $ 24.67 $ 22.69 $ 21.28 $ 16.43
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01 0.01 0.03 0.02(a) (0.04)(b)
- -----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.14 1.55 1.97 1.39 4.89
=============================================================================================================================
Total from investment operations 3.15 1.56 2.00 1.41 4.85
=============================================================================================================================
Less dividends from net investment income -- (0.01) (0.02) -- --
=============================================================================================================================
Net asset value, end of period $ 29.37 $ 26.22 $ 24.67 $ 22.69 $ 21.28
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(c) 12.01% 6.34% 8.79% 6.62% 29.52%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,086,677 $1,204,559 $822,899 $886,990 $938,820
=============================================================================================================================
Ratio of expenses to average net assets 0.88%(d) 0.91% 0.89% 0.91% 0.85%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.03%(d) 0.06% 0.11% 0.09%(a) (0.23)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 71% 120% 97% 74% 61%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</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 $(0.04) 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 do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(d) Ratios are based on average daily net assets of $1,151,733,266.
<Table>
<Caption>
SERIES II
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.91 $ 24.43 $ 22.50 $ 21.16 $ 16.38
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.05) (0.03) (0.02)(a) (0.09)(b)
- ------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.11 1.53 1.96 1.36 4.87
========================================================================================================================
Total from investment operations 3.04 1.48 1.93 1.34 4.78
========================================================================================================================
Net asset value, end of period $ 28.95 $ 25.91 $ 24.43 $ 22.50 $ 21.16
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c) 11.73% 6.06% 8.58% 6.33% 29.18%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $349,294 $371,316 $339,190 $136,982 $70,466
========================================================================================================================
Ratio of expenses to average net assets 1.13%(d) 1.16% 1.14% 1.16% 1.10%
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.22)%(d) (0.19)% (0.14)% (0.16)%(a) (0.48)%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 71% 120% 97% 74% 61%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(d) Ratios are based on average daily net assets of $366,997,682.
AIM V.I. Capital Appreciation 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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Capital Appreciation Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Capital Appreciation Fund
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Capital Appreciation Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
ENDING ENDING
BEGINNING ACCOUNT EXPENSES ACCOUNT EXPENSES ANNUALIZED
ACCOUNT VALUE VALUE PAID DURING VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,021.60 $ 4.54 $1,020.72 $4.53 0.89%
Series II 1,000.00 1,020.10 5.80 1,019.46 5.80 1.14
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Capital Appreciation Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Capital Appreciation Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Mid-Cap Growth
AIM V.I. Capital
Development Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. CAPITAL DEVELOPMENT FUND's investment
procedures that the Fund uses to determine objective is long-term growth of capital.
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 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 Unless otherwise stated, information presented in this report
tab, click on Required Notices and then is as of December 31, 2007, and is based on total net assets.
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu. Unless otherwise noted, all data in this report
The information is also available on the are from A I M Management Group Inc.
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Capital Development Fund
Management's discussion of Fund performance Risk management plays an important role
in portfolio construction, as our target
======================================================================================= portfolio attempts to limit volatility and
PERFORMANCE SUMMARY downside risk. We seek to accomplish this
goal by investing in sectors, industries
For the fiscal year ended December 31, 2007, AIM V.I. Capital Development Fund had and companies with attractive fundamental
double-digit returns and performed in line with its style-specific benchmark, the prospects. We limit the Fund's sector
Russell Midcap Growth Index. exposure and also seek to minimize
stock-specific risk by building a
The Fund outperformed the broad market as represented by the S&P 500 Index, largely diversified portfolio of 100 to 120
due to solid stock selection across sectors. The Fund performed in line with the holdings with an approximate weight of 1%
Russell Midcap Growth Index as outperformance in several sectors was offset by at the time of purchase.
underperformance in other sectors.
We consider selling a stock for any of
FUND VS. INDEXES the following reasons:
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If o The stock is overvalued based on our
variable product issuer charges were included, returns would be lower. analysis.
Series I Shares 10.84% o A change in fundamental metrics
Series II Shares 10.55 indicates potential problems.
S&P 500 Index(triangle) (Broad Market Index) 5.49
Russell Midcap Growth Index Index(triangle) (Style-Specific Index) 11.43 o A change in market capitalization--if a
Lipper VUF Mid-Cap Growth Funds Index(triangle) (Peer Group Index) 18.39 stock grows and moves into the large-cap
Lipper Mid-Cap Growth Funds Index(triangle) (Former Peer Group Index) 21.41 range.
Sources: (triangle)Lipper Inc.
======================================================================================= o A better stock candidate with higher
potential return is found.
How we invest o Earnings--focus on companies exhibiting
strong growth in earnings, revenue and Market conditions and your Fund
We believe a growth investment strategy is cash flows
an essential component of a diversified Despite high market volatility late in the
portfolio. o Quality--focus on companies with year, major U.S. equity markets finished
sustainable earnings growth and management 2007 in positive territory.(1) In the
Our investment process combines teams that profitably reinvest shareholder first part of the year, strong economic
quantitative and fundamental analysis to cash flow growth, favorable corporate earnings and
uncover companies exhibiting long-term, increased merger and acquisition activity
sustainable earnings and cash flow growth o Valuation--focus on companies that are drove equity markets. However, concerns
that is not yet reflected by the stock's attractively valued given their growth about the credit markets, continued
market price. potential weakness in housing and rising oil prices
weighed heavily on investor sentiment
Our quantitative model ranks companies Stocks that are ranked highest by our during much of the second half of the
based on factors we have found to be quantitative model are the focus of our year.
highly correlated with outperformance in fundamental research efforts. Our
the mid-cap growth universe, including: fundamental analysis focuses on In this environment, mid- and large-cap
identifying both industries and companies stocks generally outperformed small-cap
with strong drivers of growth. stocks.(1) Additionally, growth stocks
generally outperformed value stocks.(1)
Positive perform-
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Oil & Gas Equipment & Services 5.0% 1. Foster Wheeler Ltd. 2.0%
Information Technology 18.2% 2. Health Care Equipment 4.9 2. Aeropostale, Inc. 1.5
Consumer Discretionary 17.9 3. Aerospace & Defense 4.5 3. Precision Castparts Corp. 1.4
Industrials 15.9 4. Semiconductors 4.1 4. Solera Holdings Inc. 1.4
Health Care 15.1 5. Application Software 3.6 5. Potash Corp. Of Saskatchewan Inc. 1.4
Energy 11.3 6. Owens-Illinois, Inc. 1.3
Financials 7.8 Total Net Assets $340.59 million 7. Corrections Corp. Of America 1.3
Materials 5.8 8. Joy Global Inc. 1.3
Telecommunication Services 2.8 Total Number of Holdings* 112 9. Humana Inc. 1.2
Consumer Staples 2.2 10. MF Global Ltd. 1.2
Utilities 0.7
Money Market Funds Plus Other
Assets Less Liabilities 2.3
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Capital Development Fund
ance was broad among Russell Midcap Growth underperformance was the result of both Paul Rasplicka
Index sectors, with the best returns found stock selection and an overweight [RASPLICKA Chartered Financial
in the energy, materials and industrials position. Many financials stocks had weak PHOTO] Analyst, senior portfolio
sectors.(1) performance due to concerns about the manager, is lead manager of
extent of potential sub-prime loan AIM V.I. Capital Development Fund. Mr.
The Fund benefited from positive defaults and the related credit crisis. Rasplicka has been associated with the
absolute performance in seven of 10 Within this sector, key detractors to advisor and/or its affiliates since 1994.
economic sectors, with the highest performance included REIT holding RAIT He began his investment career in 1982 as
positive impact on performance coming from Financial Trust, real estate management an equity research analyst. A native of
holdings in the industrials, energy and services provider MERUELO MADDUX Denver, Mr. Rasplicka is a magna cum laude
health care sectors. On a relative basis, PROPERTIES and insurance provider Security graduate of the University of Colorado in
the Fund outperformed the Russell Midcap Capital Assurance. While we sold RAIT Boulder with a B.S. in business
Growth Index in six of 10 sectors, with Financial Trust and SECURITY CAPITAL administration. He earned an M.B.A. from
the widest margin of outperformance in the ASSURANCE, we continued to own Meruelo the University of Chicago. He is a
industrials, consumer discretionary and Maddux Properties at the close of the Chartered Investment Counselor.
materials sectors. fiscal year.
Karl Farmer
The industrials sector rallied during In the information technology (IT) [FARMER Chartered Financial
much of 2007, and the Fund benefited from sector, underperformance was driven PHOTO] Analyst, portfolio
solid stock selection and overweight primarily by stock selection in manager, is manager of AIM
positions in two communications equipment holdings. V.I. Capital Development Fund. He began
industries-construction/engineering and Examples of key detractors included his investment career in 1993 and joined
aerospace and defense. The top contributor COMMSCOPE AND COMVERSE TECHNOLOGIES. Both AIM in 1998. Mr. Farmer is a magna cum
to overall Fund performance during the holdings were sold due to deteriorating laude graduate from Texas A&M University,
year was FOSTER WHEELER, a company that fundamentals. Stock selection in IT where he earned a B.S. in economics. He
designs and builds power generating services holdings also contributed to subsequently earned his M.B.A. in finance
facilities. PRECISION CASTPARTS, a leading underperformance. from The Wharton School at the University
manufacturer of casting, forgings and of Pennsylvania.
fasteners for the aerospace and During the reporting period, the most
defense/industrials and automotive significant changes to portfolio [TENNANT Warren Tennant
industries, was the second highest positioning included additions to the PHOTO] Chartered Financial
contributor to Fund performance during the materials and energy sectors, and Analyst, portfolio manager,
period. Both holdings benefited from solid reductions in the telecommunication is manager of AIM V.I.
growth in revenue, earnings and cash flow services, financials and health care Capital Development Fund. Mr. Tennant
during the year. sectors. All changes to the Fund were worked as an internal auditor in the
based on our bottom-up stock selection energy industry and as a senior equity
While Fund performance in the consumer process of identifying high quality growth analyst at AIM before assuming his current
discretionary sector was basically flat companies trading at what we believe are position in 2007. He earned both his
during the fiscal year, the Fund attractive valuations. B.B.A. in finance and his M.B.A. from The
outperformed the Russell Midcap Growth University of Texas at Austin.
Index in this sector primarily due to We are pleased to have provided
stock selection and underweight positions positive returns for our investors for the Assisted by the Mid Cap Growth Team
in multiline and specialty retail stocks. fiscal year by focusing on what we (formerly known as Mid Cap Growth/GARP
Many retail stocks faced selling pressure believed were attractively priced stocks Team)
during the year, as investors feared that of mid-cap companies with sustainable
consumers would finally begin to slow revenue, earnings and cash flow growth. We Effective February 4, 2008, after the
their discretionary spending. thank you for your commitment to AIM V.I. close of the reporting period, Warren
Capital Development Fund. Tennant left the team.
Outperformance in the materials sector
was driven primarily by stock selection. Sources: (1) Lipper Inc.
Within this sector, POTASH CORP. OF
SASKATCHEWAN was among the top five THE VIEWS AND OPINIONS EXPRESSED IN
contributors to overall performance during MANAGEMENT'S DISCUSSION OF FUND
the year. This company, one of the largest PERFORMANCE ARE THOSE OF A I M ADVISORS,
producers of potash-based fertilizer, INC. THESE VIEWS AND OPINIONS ARE SUBJECT
benefited from growing demand in TO CHANGE AT ANY TIME BASED ON FACTORS
developing nations such as India and SUCH AS MARKET AND ECONOMIC CONDITIONS.
China. Glass container maker THESE VIEWS AND OPINIONS MAY NOT BE RELIED
Owens-Illinois also made a significant UPON AS INVESTMENT ADVICE OR
contribution to Fund performance during RECOMMENDATIONS, OR AS AN OFFER FOR A
the year. PARTICULAR SECURITY. THE INFORMATION IS
NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF
Underperformance versus the Russell ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR
Midcap Growth Index was largely THE FUND. STATEMENTS OF FACT ARE FROM
concentrated in the financials and SOURCES CONSIDERED RELIABLE, BUT A I M
information technology (IT) sectors. In ADVISORS, INC. MAKES NO REPRESENTATION OR ==========================================
the financials sector, WARRANTY AS TO THEIR COMPLETENESS OR FOR A DISCUSSION OF THE RISKS OF INVESTING
ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IN YOUR FUND, INDEXES USED IN THIS REPORT
IS NO GUARANTEE OF FUTURE RESULTS, THESE AND YOUR FUND'S LONG-TERM PERFORMANCE,
INSIGHTS MAY HELP YOU UNDERSTAND OUR PLEASE TURN THE PAGE.
INVESTMENT MANAGEMENT PHILOSOPHY. ==========================================
AIM V.I. Capital Development Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. CAPITAL DEVELOPMENT FUND, A
AVERAGE ANNUAL TOTAL RETURNS PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
As of 12/31/07 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
SERIES I SHARES FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
Inception (5/1/98) 7.91% MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
5 Years 17.22 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
1 Year 10.84 REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
SERIES II SHARES PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
Inception 7.64% MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
5 Years 16.93 SHARES. DETERMINED BY THE VARIABLE PRODUCT
1 Year 10.55 ISSUERS, WILL VARY AND WILL LOWER THE
========================================== THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
RATIO SET FORTH IN THE MOST RECENT FUND
SERIES II SHARES' INCEPTION DATES IS PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
AUGUST 21, 2001. RETURNS SINCE THAT DATE FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
ARE HISTORICAL. ALL OTHER RETURNS ARE THE 1.09% AND 1.34%, RESPECTIVELY.(1) THE PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
BLENDED RETURNS OF THE HISTORICAL TOTAL ANNUAL FUND OPERATING EXPENSE RATIO AUTOMATED INFORMATION LINE, 866-702-4402.
PERFORMANCE OF SERIES II SHARES SINCE SET FORTH IN THE MOST RECENT FUND AS MENTIONED ABOVE, FOR THE MOST RECENT
THEIR INCEPTION AND THE RESTATED PROSPECTUS AS OF THE DATE OF THIS REPORT MONTH-END PERFORMANCE INCLUDING VARIABLE
HISTORICAL PERFORMANCE OF SERIES I SHARES FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, PLEASE CONTACT YOUR
(FOR PERIODS PRIOR TO INCEPTION OF SERIES 1.10% AND 1.35%, RESPECTIVELY. THE EXPENSE VARIABLE PRODUCT ISSUER OR FINANCIAL
II SHARES) ADJUSTED TO REFLECT THE RULE RATIOS PRESENTED ABOVE MAY VARY FROM THE ADVISOR.
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 (1) Total annual operating expenses less
MAY 1, 1998. INCURRED DURING THE PERIOD COVERED BY THIS contractual advisory fee waivers by the
REPORT. advisor in effect through at least
THE PERFORMANCE OF THE FUND'S SERIES I April 30, 2009. See current prospectus
AND SERIES II SHARE CLASSES WILL DIFFER for more information.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
Principal risks of investing in the Fund taxable gain distributions to the Fund's The prices of securities held by the
shareholders. Fund may decline in response to market
Prices of equity securities change in risks.
response to many factors including the There is no guarantee that the
historical and prospective earnings of the investment techniques and risk analyses About indexes used in this report
issuer, the value of its assets, general used by the Fund's portfolio managers will
economic conditions, interest rates, produce the desired results. The S&P 500--registered trademark-- Index
investor perceptions and market liquidity. is a market capitalization-weighted index
Investing in developing countries can covering all major areas of the U.S.
The Fund invests in "growth" stocks, add additional risk, such as high rates of economy. It is not the 500 largest
which may be more volatile than other inflation or sharply devalued currencies companies, but rather the most widely held
investment styles because growth stocks against the U.S. dollar. Transaction costs 500 companies chosen with respect to
are more sensitive to investor perceptions are often higher, and there may be delays market size, liquidity, and their
of an issuing company's growth potential. in settlement procedures. industry.
Foreign securities have additional Mid-capitalization companies tend to be The Russell Midcap--registered
risks, including exchange rate changes, more vulnerable to adverse developments trademark- - Growth Index measures the
political and economic upheaval, the and more volatile than larger companies. performance of those Russell Midcap
relative lack of information, relatively companies with higher price-to-book ratios
low market liquidity, and the potential Investments in mid-capitalization sized and higher forecasted growth values. The
lack of strict financial and accounting companies may involve special risks Russell Midcap Growth Index is a
controls and standards. including those associated with dependence trademark/service mark of the Frank
on a small management group, little or no Russell Company. Russell--registered
Portfolio turnover is greater than most operating history, little or no track trademark-- is a trademark of the Frank
funds, which may affect the Fund's record of success, limited product lines, Russell Company.
performance due to higher brokerage less publicly available information,
commissions. Active trading may also illiquidity, restricted resale or less The Fund has elected to use the Lipper
increase short-term gains and losses, frequent trading. Variable Underlying Funds (VUF) Mid-Cap
which may also result in Growth Funds Index as its peer group
instead of the Lipper Mid-Cap Growth Funds
Continued
AIM V.I. Capital Development Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
Index. In 2006, Lipper began publishing The Fund is not managed to track the and the returns based on those net asset
VUF indexes, allowing the Fund to be performance of any particular index, values may differ from the net asset
compared with the Lipper VUF Mid-Cap including the indexes defined here, and values and returns reported in the
Growth Index. The unmanaged Lipper VUF consequently, the performance of the Fund Financial Highlights. Additionally, the
Mid-Cap Growth Funds Index is an equally may deviate significantly from the returns and net asset values shown
weighted representation of the largest performance of the indexes. throughout this report are at the Fund
variable insurance underlying funds in the level only and do not include variable
Lipper Mid-Cap Growth Funds category. A direct investment cannot be made in product issuer charges. If such charges
These funds have an above-average an index. Unless otherwise indicated, were included, the total returns would be
price-to-earnings ratio, price-to-book index results include reinvested lower.
ratio, and three-year sales-per-share dividends, and they do not reflect sales
growth value, compared to the S&P MidCap charges. Performance of an index of funds Industry classifications used in this
400 Index. reflects fund expenses; performance of a report are generally according to the
market index does not. Global Industry Classification Standard,
The Lipper Mid-Cap Growth Funds Index which was developed by and is the
is an equally weighted representation of Other information exclusive property and a service mark of
the largest funds in the Lipper Mid-Cap Morgan Stanley Capital International Inc.
Growth Funds category. These funds have an The returns shown in the management's and Standard & Poor's.
above-average price-to-earnings ratio, discussion of Fund performance are based
price-to-book ratio, and three-year on net asset values calculated for The Chartered Financial
sales-per-share growth value, compared to shareholder transactions. Generally Analyst--registered trademark--
the S&P MidCap 400 Index. accepted accounting principles require (CFA--registered trademark--) designation
adjustments to be made to the net assets is a globally recognized standard for
of the Fund at period end for financial measuring the competence and integrity of
reporting purposes, and as such, the net investment professionals.
asset values for shareholder transactions
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/98, FUND DATA FROM 5/1/98
AIM V.I. CAPITAL LIPPER MID-CAP
DEVELOPMENT FUND- RUSSELL MIDCAP GROWTH LIPPER VUF MID-CAP GROWTH
DATE SERIES I SHARES S&P 500 INDEX(1) INDEX(1) GROWTH FUNDS INDEX(1) FUNDS INDEX(1)
4/30/98 $10000 $10000 $10000 $10000
5/98 $ 9430 9828 9589 9457 9417
6/98 9530 10227 9860 9961 9850
7/98 8840 10119 9438 9409 9195
8/98 7120 8657 7636 7430 7212
9/98 7760 9212 8214 7958 7964
10/98 7970 9960 8819 8256 8257
11/98 8480 10564 9414 8816 8885
12/98 9249 11172 10389 9975 10031
1/99 9139 11639 10700 10230 10529
2/99 8346 11278 10177 9595 9711
3/99 8547 11729 10744 10173 10403
4/99 8788 12183 11233 10616 10830
5/99 8888 11895 11089 10476 10785
6/99 9431 12554 11863 11331 11654
7/99 9360 12164 11485 11090 11495
8/99 8958 12103 11366 11168 11437
9/99 9209 11772 11269 11224 11770
10/99 9580 12517 12140 12260 12811
11/99 10534 12771 13397 13631 14418
12/99 11941 13522 15717 16360 17426
1/00 11740 12843 15714 16398 17126
2/00 14432 12600 19018 20153 21419
3/00 14402 13832 19037 19389 19911
4/00 13317 13416 17189 17375 17284
5/00 12544 13141 15936 16239 15731
6/00 13336 13464 17627 18492 18175
7/00 12955 13254 16511 17889 17421
8/00 14371 14077 19001 20367 19699
9/00 13799 13334 18072 19405 18753
10/00 13487 13277 16835 17807 17236
11/00 11981 12231 13177 14352 13632
12/00 13044 12291 13871 15161 14615
1/01 13356 12727 14663 15587 14813
2/01 12363 11567 12127 13157 12591
3/01 11398 10835 10391 11387 11255
4/01 12473 11676 12123 13014 12739
5/01 12764 11755 12066 13002 12844
6/01 12894 11469 12073 12848 12794
7/01 12552 11356 11258 12063 12121
8/01 11990 10646 10442 11127 11309
9/01 10393 9786 8717 9514 9678
10/01 10614 9973 9633 10106 10217
11/01 11418 10738 10670 10865 11056
12/01 11990 10832 11075 11251 11535
1/02 11728 10674 10716 10638 11094
2/02 11688 10468 10108 10089 10543
3/02 12622 10861 10880 10723 11207
4/02 12521 10203 10304 10340 10835
5/02 12280 10128 9996 10084 10473
6/02 11407 9407 8893 9205 9532
7/02 10052 8674 8029 8324 8504
8/02 9941 8731 8001 8236 8403
9/02 8987 7783 7366 7768 7881
10/02 9298 8467 7936 8148 8278
11/02 9840 8965 8557 8528 8770
12/02 9428 8439 8040 8114 8251
1/03 9258 8218 7961 7969 8129
2/03 9167 8095 7892 7903 8003
3/03 9227 8173 8039 8019 8118
4/03 9830 8846 8586 8530 8687
5/03 10533 9311 9413 9229 9406
6/03 10804 9430 9547 9363 9553
7/03 11075 9597 9888 9704 9930
8/03 11527 9784 10432 10217 10418
9/03 11266 9680 10230 9869 10068
10/03 12130 10227 11055 10634 10858
11/03 12452 10317 11350 10843 11116
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
12/03 12763 10858 11474 10957 11173
1/04 13124 11057 11853 11187 11456
2/04 13465 11211 12052 11365 11614
3/04 13475 11042 12029 11463 11611
4/04 13093 10868 11689 11104 11243
5/04 13164 11017 11965 11335 11487
6/04 13455 11231 12156 11681 11764
7/04 12661 10860 11351 10879 10928
8/04 12490 10903 11211 10718 10739
9/04 13002 11021 11629 11223 11198
10/04 13313 11190 12024 11531 11529
11/04 14136 11642 12645 12257 12170
12/04 14738 12038 13250 12782 12741
1/05 14467 11745 12896 12387 12330
2/05 14648 11992 13222 12553 12489
3/05 14387 11780 13029 12278 12240
4/05 13685 11557 12514 11709 11650
5/05 14468 11924 13230 12403 12341
6/05 14850 11941 13476 12638 12624
7/05 15663 12385 14263 13340 13351
8/05 15673 12272 14176 13302 13309
9/05 15764 12371 14359 13519 13541
10/05 15162 12165 13936 13223 13165
11/05 15945 12625 14693 13940 13877
12/05 16156 12629 14854 13998 13962
1/06 17401 12964 15743 14863 14920
2/06 17401 12999 15549 14722 14792
3/06 18014 13160 15984 15237 15285
4/06 18475 13337 16052 15274 15428
5/06 17581 12954 15296 14400 14569
6/06 17541 12971 15234 14367 14576
7/06 16939 13051 14688 13700 13959
8/06 17290 13361 15026 13934 14188
9/06 17590 13705 15369 14167 14391
10/06 18203 14151 15959 14668 14895
11/06 18916 14420 16585 15273 15514
12/06 18823 14622 16437 15189 15501
1/07 19507 14843 17035 15679 16018
2/07 19567 14554 16998 15631 15973
3/07 19863 14716 17087 15794 16236
4/07 20506 15368 17837 16426 16900
5/07 21823 15904 18561 17301 17853
6/07 21639 15640 18239 17183 17780
7/07 20854 15155 17831 16953 17549
8/07 20649 15382 17927 17209 17734
9/07 21641 15957 18631 18174 18824
10/07 22080 16211 19106 18958 19671
11/07 20956 15533 18265 17945 18628
12/07 20870 15425 18315 17983 18819
AIM V.I. Capital Development Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.97%
ADVERTISING-1.02%
Focus Media Holding Ltd.-ADR (China)(b)(c) 61,098 $ 3,470,977
=========================================================================
AEROSPACE & DEFENSE-4.47%
BE Aerospace, Inc.(c) 72,825 3,852,442
- -------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 31,714 3,359,781
- -------------------------------------------------------------------------
Precision Castparts Corp. 34,858 4,834,805
- -------------------------------------------------------------------------
Spirit AeroSystems Holdings Inc.-Class A(c) 92,381 3,187,145
=========================================================================
15,234,173
=========================================================================
AIR FREIGHT & LOGISTICS-0.65%
Robinson (C.H.) Worldwide, Inc. 40,756 2,205,715
=========================================================================
APPAREL RETAIL-3.18%
Abercrombie & Fitch Co.-Class A 41,481 3,317,236
- -------------------------------------------------------------------------
Aeropostale, Inc.(c) 187,991 4,981,761
- -------------------------------------------------------------------------
Guess?, Inc. 66,951 2,536,773
=========================================================================
10,835,770
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-3.51%
Coach, Inc.(c) 108,089 3,305,362
- -------------------------------------------------------------------------
Hanesbrands, Inc.(c) 123,438 3,353,810
- -------------------------------------------------------------------------
Polo Ralph Lauren Corp. 52,818 3,263,624
- -------------------------------------------------------------------------
Under Armour, Inc.-Class A(b)(c) 46,218 2,018,340
=========================================================================
11,941,136
=========================================================================
APPLICATION SOFTWARE-3.61%
ANSYS, Inc.(c) 87,342 3,621,200
- -------------------------------------------------------------------------
Cadence Design Systems, Inc.(c) 140,510 2,390,075
- -------------------------------------------------------------------------
Citrix Systems, Inc.(c) 44,325 1,684,793
- -------------------------------------------------------------------------
Solera Holdings Inc.(c) 186,118 4,612,004
=========================================================================
12,308,072
=========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.27%
FBR Capital Markets Corp. (Acquired 07/14/06;
Cost $1,110,000)(c)(d)(e) 74,000 708,920
- -------------------------------------------------------------------------
SEI Investments Co. 112,005 3,603,201
=========================================================================
4,312,121
=========================================================================
BIOTECHNOLOGY-1.91%
Cephalon, Inc.(c) 37,800 2,712,528
- -------------------------------------------------------------------------
Genzyme Corp.(c) 50,977 3,794,728
=========================================================================
6,507,256
=========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
CASINOS & GAMING-2.03%
International Game Technology 76,619 $ 3,365,873
- -------------------------------------------------------------------------
Scientific Games Corp.-Class A(b)(c) 106,576 3,543,652
=========================================================================
6,909,525
=========================================================================
COAL & CONSUMABLE FUELS-1.13%
Cameco Corp. (Canada) 45,614 1,815,893
- -------------------------------------------------------------------------
Peabody Energy Corp. 33,100 2,040,284
=========================================================================
3,856,177
=========================================================================
COMMUNICATIONS EQUIPMENT-1.48%
Infinera Corp.(b)(c) 99,150 1,471,386
- -------------------------------------------------------------------------
Polycom, Inc.(c) 71,206 1,978,103
- -------------------------------------------------------------------------
Sonus Networks, Inc.(b)(c) 273,000 1,591,590
=========================================================================
5,041,079
=========================================================================
COMPUTER & ELECTRONICS RETAIL-0.89%
GameStop Corp.-Class A(c) 48,681 3,023,577
=========================================================================
COMPUTER STORAGE & PERIPHERALS-0.29%
SanDisk Corp.(c) 29,691 984,850
=========================================================================
CONSTRUCTION & ENGINEERING-2.79%
Aecom Technology Corp.(c) 97,818 2,794,660
- -------------------------------------------------------------------------
Foster Wheeler Ltd.(c) 43,309 6,713,761
=========================================================================
9,508,421
=========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.28%
Joy Global Inc. 66,043 4,346,950
=========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.53%
Euronet Worldwide, Inc.(b)(c) 105,390 3,161,700
- -------------------------------------------------------------------------
Fidelity National Information Services, Inc. 49,000 2,037,910
=========================================================================
5,199,610
=========================================================================
DISTRIBUTORS-0.97%
LKQ Corp.(c) 157,480 3,310,230
=========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.50%
Corrections Corp. of America(c) 153,928 4,542,415
- -------------------------------------------------------------------------
IHS Inc.-Class A(c) 65,436 3,962,804
=========================================================================
8,505,219
=========================================================================
DRUG RETAIL-1.18%
Shoppers Drug Mart Corp. (Canada) 74,600 4,008,145
=========================================================================
EDUCATION SERVICES-0.89%
Apollo Group, Inc.-Class A(c) 43,462 3,048,859
=========================================================================
</Table>
AIM V.I. Capital Development Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT-2.13%
Cooper Industries, Ltd.-Class A 63,559 $ 3,361,000
- -------------------------------------------------------------------------
General Cable Corp.(c) 52,979 3,882,301
=========================================================================
7,243,301
=========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.19%
Amphenol Corp.-Class A 87,305 4,048,333
=========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.20%
EnergySolutions Inc.(c) 25,050 676,100
=========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.35%
Potash Corp. of Saskatchewan Inc. (Canada) 31,902 4,592,612
=========================================================================
FOOTWEAR-0.95%
Crocs, Inc.(b)(c) 88,211 3,247,047
=========================================================================
HEALTH CARE EQUIPMENT-4.86%
ArthroCare Corp.(b)(c) 50,300 2,416,915
- -------------------------------------------------------------------------
ev3 Inc.(c) 174,079 2,212,544
- -------------------------------------------------------------------------
Hologic, Inc.(c) 51,640 3,544,570
- -------------------------------------------------------------------------
Kinetic Concepts, Inc.(c) 56,000 2,999,360
- -------------------------------------------------------------------------
St. Jude Medical, Inc.(c) 89,758 3,647,765
- -------------------------------------------------------------------------
Zimmer Holdings, Inc.(c) 26,000 1,719,900
=========================================================================
16,541,054
=========================================================================
HEALTH CARE SERVICES-2.73%
DaVita, Inc.(c) 50,270 2,832,715
- -------------------------------------------------------------------------
Express Scripts, Inc.(c) 37,000 2,701,000
- -------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(c) 55,042 3,751,112
=========================================================================
9,284,827
=========================================================================
HEALTH CARE SUPPLIES-1.02%
Inverness Medical Innovations, Inc.(c) 62,000 3,483,160
=========================================================================
HOME ENTERTAINMENT SOFTWARE-3.08%
Activision, Inc.(c) 132,811 3,944,486
- -------------------------------------------------------------------------
Electronic Arts Inc.(c) 44,000 2,570,040
- -------------------------------------------------------------------------
THQ Inc.(c) 141,588 3,991,366
=========================================================================
10,505,892
=========================================================================
HOTELS, RESORTS & CRUISE LINES-0.92%
Choice Hotels International, Inc. 94,123 3,124,884
=========================================================================
HOUSEWARES & SPECIALTIES-0.74%
Jarden Corp.(c) 107,027 2,526,908
=========================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.74%
KGEN Power Corp. (Acquired 01/12/07; Cost
$2,219,196)(c)(d) 158,514 2,536,224
=========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-1.08%
McDermott International, Inc.(c) 62,322 $ 3,678,868
=========================================================================
INDUSTRIAL MACHINERY-0.75%
Flowserve Corp. 26,716 2,570,079
=========================================================================
INSURANCE BROKERS-0.73%
National Financial Partners Corp. 54,393 2,480,865
=========================================================================
INTERNET RETAIL-0.89%
Orbitz Worldwide, Inc.(c) 261,087 2,219,239
- -------------------------------------------------------------------------
VistaPrint Ltd.(c) 18,854 807,894
=========================================================================
3,027,133
=========================================================================
INTERNET SOFTWARE & SERVICES-0.28%
Akamai Technologies, Inc.(c) 27,585 954,441
=========================================================================
INVESTMENT BANKING & BROKERAGE-2.27%
MF Global Ltd.(c) 133,485 4,200,773
- -------------------------------------------------------------------------
TD Ameritrade Holding Corp.(c) 176,297 3,536,518
=========================================================================
7,737,291
=========================================================================
IT CONSULTING & OTHER SERVICES-1.73%
Cognizant Technology Solutions Corp.-Class
A(c) 96,741 3,283,389
- -------------------------------------------------------------------------
Gartner, Inc.(c) 148,212 2,602,603
=========================================================================
5,885,992
=========================================================================
LIFE SCIENCES TOOLS & SERVICES-1.98%
Applera Corp.-Applied Biosystems Group 100,454 3,407,400
- -------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 82,498 3,330,444
=========================================================================
6,737,844
=========================================================================
MANAGED HEALTH CARE-1.61%
Aveta, Inc. (Acquired 12/21/05-02/21/06; Cost
$2,162,718)(c)(d) 157,251 1,258,008
- -------------------------------------------------------------------------
Humana Inc.(c) 56,200 4,232,422
=========================================================================
5,490,430
=========================================================================
METAL & GLASS CONTAINERS-3.51%
Crown Holdings, Inc.(c) 151,708 3,891,310
- -------------------------------------------------------------------------
Owens-Illinois, Inc.(c) 92,581 4,582,759
- -------------------------------------------------------------------------
Pactiv Corp.(c) 131,090 3,490,927
=========================================================================
11,964,996
=========================================================================
MULTI-LINE INSURANCE-0.52%
Genworth Financial Inc.-Class A 69,603 1,771,396
=========================================================================
OIL & GAS DRILLING-2.02%
Diamond Offshore Drilling, Inc. 21,000 2,982,000
- -------------------------------------------------------------------------
Noble Corp. 69,331 3,917,895
=========================================================================
6,899,895
=========================================================================
</Table>
AIM V.I. Capital Development Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-4.98%
Cameron International Corp.(c) 58,000 $ 2,791,540
- -------------------------------------------------------------------------
Compagnie Generale de Geophysique-Veritas-ADR
(France)(c) 55,370 3,103,489
- -------------------------------------------------------------------------
FMC Technologies, Inc.(c) 61,000 3,458,700
- -------------------------------------------------------------------------
National-Oilwell Varco Inc.(c) 53,000 3,893,380
- -------------------------------------------------------------------------
Weatherford International Ltd.(c) 54,000 3,704,400
=========================================================================
16,951,509
=========================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.13%
Quicksilver Resources Inc.(c) 57,600 3,432,384
- -------------------------------------------------------------------------
Southwestern Energy Co.(c) 68,700 3,827,964
=========================================================================
7,260,348
=========================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.09%
Williams Cos., Inc. (The) 103,400 3,699,652
=========================================================================
PHARMACEUTICALS-0.98%
Shire PLC-ADR (United Kingdom) 48,500 3,344,075
=========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.32%
Meruelo Maddux Properties, Inc.(c) 273,586 1,094,344
=========================================================================
REGIONAL BANKS-0.56%
Signature Bank(c) 56,255 1,898,606
=========================================================================
RESTAURANTS-1.09%
Burger King Holdings Inc. 129,765 3,699,600
=========================================================================
SEMICONDUCTOR EQUIPMENT-0.74%
MEMC Electronic Materials, Inc.(c) 28,626 2,533,115
=========================================================================
SEMICONDUCTORS-4.05%
Broadcom Corp.-Class A(c) 104,708 2,737,067
- -------------------------------------------------------------------------
Marvell Technology Group Ltd.(c) 160,621 2,245,482
- -------------------------------------------------------------------------
Maxim Integrated Products, Inc. 62,074 1,643,719
- -------------------------------------------------------------------------
NVIDIA Corp.(c) 105,909 3,603,024
- -------------------------------------------------------------------------
ON Semiconductor Corp.(b)(c) 400,376 3,555,339
=========================================================================
13,784,631
=========================================================================
SOFT DRINKS-0.98%
Hansen Natural Corp.(c) 75,409 3,339,865
=========================================================================
SPECIALIZED FINANCE-1.39%
IntercontinentalExchange Inc.(c) 15,000 2,887,500
- -------------------------------------------------------------------------
KKR Financial Holdings LLC 113,526 1,595,040
- -------------------------------------------------------------------------
MSCI Inc.-Class A(c) 6,627 254,477
=========================================================================
4,737,017
=========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
SPECIALTY CHEMICALS-0.53%
Wacker Chemie A.G. (Germany)(f) 6,361 $ 1,821,092
=========================================================================
SPECIALTY STORES-0.13%
PetSmart, Inc. 19,366 455,682
=========================================================================
STEEL-0.38%
Allegheny Technologies, Inc. 14,890 1,286,496
=========================================================================
TIRES & RUBBER-0.97%
Goodyear Tire & Rubber Co. (The)(c) 116,620 3,291,016
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.79%
American Tower Corp.-Class A(c) 71,482 3,045,133
- -------------------------------------------------------------------------
Crown Castle International Corp.(c) 84,847 3,529,635
- -------------------------------------------------------------------------
SBA Communications Corp.-Class A(c) 87,098 2,947,397
=========================================================================
9,522,165
=========================================================================
Total Common Stocks & Other Equity
Interests (Cost $280,103,726) 330,286,647
=========================================================================
PREFERRED STOCK-0.77%
MORTGAGE REIT'S-0.77%
Thornburg Mortgage Inc.-Series F, $2.50 Conv.
Pfd. (Cost $2,737,500) 109,500 2,628,000
=========================================================================
MONEY MARKET FUNDS-2.09%
Liquid Assets Portfolio-Institutional
Class(g) 3,552,625 3,552,625
- -------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 3,552,625 3,552,625
=========================================================================
Total Money Market Funds (Cost
$7,105,250) 7,105,250
=========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.83% (Cost
$289,946,476) 340,019,897
=========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-4.21%
Liquid Assets Portfolio-Institutional (Cost
$14,322,425)(g)(h) 14,322,425 14,322,425
=========================================================================
TOTAL INVESTMENTS-104.04% (Cost $304,268,901) 354,342,322
=========================================================================
OTHER ASSETS LESS LIABILITIES-(4.04)% (13,751,529)
=========================================================================
NET ASSETS-100.00% $340,590,793
_________________________________________________________________________
=========================================================================
</Table>
AIM V.I. Capital Development Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) All or a portion of this security was out on loan at December 31, 2007.
(c) Non-income producing security.
(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 December 31, 2007 was $4,503,152,
which represented 1.32% 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.
(e) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at December
31, 2007 represented 0.21% of the Fund's Net Assets. See Note 1A.
(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 December 31, 2007 represented 0.53% 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. Capital Development Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $282,841,226)* $332,914,647
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $21,427,675) 21,427,675
=============================================================
Total investments (Cost $304,268,901) 354,342,322
=============================================================
Foreign currencies, at value (Cost $267) 263
- -------------------------------------------------------------
Receivables for:
Investments sold 2,413,188
- -------------------------------------------------------------
Fund shares sold 2,581,906
- -------------------------------------------------------------
Dividends 113,986
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 37,281
=============================================================
Total assets 359,488,946
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 3,412,027
- -------------------------------------------------------------
Fund shares reacquired 740,463
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 51,430
- -------------------------------------------------------------
Collateral upon return of securities loaned 14,322,425
- -------------------------------------------------------------
Accrued administrative services fees 214,752
- -------------------------------------------------------------
Accrued distribution fees -- Series II 121,843
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 488
- -------------------------------------------------------------
Accrued transfer agent fees 1,124
- -------------------------------------------------------------
Accrued operating expenses 33,601
=============================================================
Total liabilities 18,898,153
=============================================================
Net assets applicable to shares outstanding $340,590,793
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $265,017,505
- -------------------------------------------------------------
Undistributed net investment income (loss) (62,720)
- -------------------------------------------------------------
Undistributed net realized gain 25,562,725
- -------------------------------------------------------------
Unrealized appreciation 50,073,283
=============================================================
$340,590,793
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $149,776,115
_____________________________________________________________
=============================================================
Series II $190,814,678
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 7,944,877
_____________________________________________________________
=============================================================
Series II 10,296,203
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 18.85
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 18.53
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $14,022,732 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$8,345) $ 1,354,233
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$91,811) 556,529
============================================================
Total investment income 1,910,762
============================================================
EXPENSES:
Advisory fees 2,468,370
- ------------------------------------------------------------
Administrative services fees 890,045
- ------------------------------------------------------------
Custodian fees 33,473
- ------------------------------------------------------------
Distribution fees -- Series II 430,249
- ------------------------------------------------------------
Transfer agent fees 23,335
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 25,420
- ------------------------------------------------------------
Other 58,302
============================================================
Total expenses 3,929,194
============================================================
Less: Fees waived and expense offset
arrangement(s) (40,137)
============================================================
Net expenses 3,889,057
============================================================
Net investment income (loss) (1,978,295)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$148,154) 27,762,295
- ------------------------------------------------------------
Foreign currencies (23,857)
- ------------------------------------------------------------
Option contracts written 70,117
============================================================
27,808,555
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 3,997,799
- ------------------------------------------------------------
Foreign currencies (237)
- ------------------------------------------------------------
Option contracts written 3,364
============================================================
4,000,926
============================================================
Net realized and unrealized gain 31,809,481
============================================================
Net increase in net assets resulting from
operations $29,831,186
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,978,295) $ (1,348,237)
- ------------------------------------------------------------------------------------------
Net realized gain 27,808,555 28,747,177
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation 4,000,926 6,372,091
==========================================================================================
Net increase in net assets resulting from operations 29,831,186 33,771,031
==========================================================================================
Distributions to shareholders from net realized gains:
Series I (12,026,991) (2,202,279)
- ------------------------------------------------------------------------------------------
Series II (15,317,782) (2,172,661)
==========================================================================================
Decrease in net assets resulting from distributions (27,344,773) (4,374,940)
==========================================================================================
Share transactions-net:
Series I (2,786,456) 14,360,380
- ------------------------------------------------------------------------------------------
Series II 63,232,922 32,838,781
==========================================================================================
Net increase in net assets resulting from share
transactions 60,446,466 47,199,161
==========================================================================================
Net increase in net assets 62,932,879 76,595,252
==========================================================================================
NET ASSETS:
Beginning of year 277,657,914 201,062,662
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(62,720) and $(42,127), respectively) $340,590,793 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 Development Fund
K. CALL OPTIONS WRITTEN AND PURCHASED -- The Fund may write and/or 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 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.
When the Fund buys a call option, an amount equal to the premium paid by
the Fund is recorded as an investment on the Statement of Assets and
Liabilities. The amount of the investment is subsequently
"marked-to-market" to reflect the current value of the option purchased.
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.
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 $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 Ltd. ("Invesco")
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. AIM
did not waive fees and/or reimburse expenses during the period under this
expense limitation.
AIM V.I. Capital Development 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 (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 year ended December 31, 2007, AIM waived advisory fees of $36,104.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$85,697 for accounting and fund administrative services and reimbursed $804,348
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio -- Institutional Class $17,152,937 $ 89,141,840 $(102,742,152) $ 3,552,625 $232,446
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio -- Institutional Class 17,152,937 89,141,840 (102,742,152) 3,552,625 232,272
=================================================================================================================================
Subtotal $34,305,874 $178,283,680 $(205,484,304) $ 7,105,250 $464,718
=================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio -- Institutional Class $ 2,108,462 $100,793,097 $ (88,579,134) $14,322,425 $ 67,420
- ---------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio -- Institutional Class 2,108,462 18,828,614 (20,937,076) -- 24,391
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Subtotal $ 4,216,924 $119,621,711 $(109,516,210) $14,322,425 $ 91,811
=================================================================================================================================
Total Investments in Affiliates $38,522,798 $297,905,391 $(315,000,514) $21,427,675 $556,529
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
* Net of compensation to counterparties.
AIM V.I. Capital Development Fund
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 year ended December 31, 2007, the Fund
engaged in securities sales of $5,728,074, which resulted in net realized gains
of $148,154, and securities purchases of $596,919.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $4,033.
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 year ended December 31, 2007, the Fund paid legal fees of $4,436
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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $14,022,732 were
on loan to brokers. The loans were secured by cash collateral of $14,322,425
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $91,811 for securities lending transactions, 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
- -----------------------------------------------------------------------------------
Written 613 33,683
- -----------------------------------------------------------------------------------
Closed (753) (53,964)
- -----------------------------------------------------------------------------------
Expired (210) (40,336)
===================================================================================
End of period -- $ --
___________________________________________________________________________________
===================================================================================
</Table>
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years December 31, 2007 and
2006 was as follows:
<Table>
<Caption>
2007 2006
- ---------------------------------------------------------------------------------------
Distributions paid from ordinary income $10,034,730 $ 262,849
- ---------------------------------------------------------------------------------------
Long-term capital gain 17,310,043 4,112,091
=======================================================================================
Total distributions $27,344,773 $4,374,940
_______________________________________________________________________________________
=======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- --------------------------------------------------------------------------
Undistributed ordinary income $ 3,129,164
- --------------------------------------------------------------------------
Undistributed long-term gain 25,652,400
- --------------------------------------------------------------------------
Net unrealized appreciation -- investments 49,496,529
- --------------------------------------------------------------------------
Temporary book/tax differences (45,650)
- --------------------------------------------------------------------------
Post-October Capital loss deferral (2,642,085)
- --------------------------------------------------------------------------
Post-October Currency loss deferral (17,070)
- --------------------------------------------------------------------------
Shares of beneficial interest 265,017,505
==========================================================================
Total net assets $340,590,793
__________________________________________________________________________
==========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the deferral of losses on certain straddle transactions. The tax-basis net
unrealized appreciation on investments amount includes appreciation
(depreciation) on foreign currencies of $(138).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
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 year ended December 31, 2007 was $384,000,900 and
$348,313,727, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 68,177,303
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (18,680,636)
==============================================================================
Net unrealized appreciation of investment securities $ 49,496,667
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $304,845,655.
</Table>
AIM V.I. Capital Development Fund
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on December 31, 2007, undistributed net
investment income (loss) was increased by $1,957,702 and undistributed net
realized gain was decreased by $1,957,702. This reclassification had no effect
on the net assets of the Fund.
<Table>
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
NOTE 13--SHARE INFORMATION
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007(A) 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
Sold:
Series I 899,466 $ 18,335,807 2,145,804 $ 38,715,460
- ----------------------------------------------------------------------------------------------------------------------
Series II 5,098,023 102,303,777 2,681,069 46,879,330
======================================================================================================================
Issued as reinvestment of dividends:
Series I 620,908 12,026,991 117,706 2,202,279
- ----------------------------------------------------------------------------------------------------------------------
Series II 804,506 15,317,782 117,632 2,172,661
======================================================================================================================
Reacquired:
Series I (1,642,891) (33,149,254) (1,511,376) (26,557,359)
- ----------------------------------------------------------------------------------------------------------------------
Series II (2,699,333) (54,388,637) (944,292) (16,213,210)
======================================================================================================================
3,080,679 $ 60,446,466 2,606,543 $ 47,199,161
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following proposal.
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Capital Development Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.43 $ 16.09 $ 14.68 $ 12.71 $ 9.39
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.07) (0.04) (0.03)(a) (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.14 2.73 1.45 2.00 3.33
========================================================================================================================
Total from investment operations 2.04 2.66 1.41 1.97 3.32
========================================================================================================================
Less distributions from net realized gains (1.62) (0.32) -- -- --
========================================================================================================================
Net asset value, end of period $ 18.85 $ 18.43 $ 16.09 $ 14.68 $ 12.71
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 10.84% 16.52% 9.61% 15.50% 35.36%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $149,776 $148,668 $117,674 $112,028 $93,813
========================================================================================================================
Ratio of expenses to average net assets 1.05%(c)(d) 1.08%(d) 1.09% 1.10% 1.13%
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.47)%(d) (0.48)% 0.22)% (0.21)% (0.13)%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 109% 119% 125% 93% 95%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 based on average daily net assets of $157,016,320.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.06% and 1.09% for the years ended December 31, 2007 and 2006,
respectively.
<Table>
<Caption>
SERIES II
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.19 $ 15.92 $ 14.57 $ 12.64 $ 9.36
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.10) (0.07) (0.06)(a) (0.03)
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.11 2.69 1.42 1.99 3.31
======================================================================================================================
Total from investment operations 1.96 2.59 1.35 1.93 3.28
======================================================================================================================
Less distributions from net realized gains (1.62) (0.32) -- -- --
======================================================================================================================
Net asset value, end of period $ 18.53 $ 18.19 $ 15.92 $ 14.57 $ 12.64
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 10.55% 16.26% 9.27% 15.27% 35.04%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $190,815 $128,990 $83,388 $71,339 $33,550
======================================================================================================================
Ratio of expenses to average net assets 1.30%(c)(d) 1.33%(d) 1.34% 1.35% 1.38%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.72)%(c) (0.73)% (0.47)% (0.46)% (0.38)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 109% 119% 125% 93% 95%
______________________________________________________________________________________________________________________
======================================================================================================================
</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 based on average daily net assets of $172,099,671.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.31% and 1.34% for the years ended December 31, 2007 and 2006,
respectively.
AIM V.I. Capital Development Fund
NOTE 16--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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Capital Development Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Capital Development Fund,
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, and the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the three years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Capital Development Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $964.10 $5.20 $1,019.91 $5.35 1.05%
Series II 1,000.00 962.60 6.43 1,018.65 6.61 1.30
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Capital Development Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
<Table>
FEDERAL AND STATE INCOME TAX
-------------------------------------
Long-Term Capital Gain Dividends $17,310,043
Corporate Dividends Received
Deduction* 6.38%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Capital Development Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Capital Development Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Large Cap Blend
AIM V.I. CORE EQUITY FUND
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. CORE EQUITY FUND's investment objective
department at 800-410-4246 or on the AIM is growth of capital.
Web site, AIMinvestments.com. On the home
page, scroll down and click on 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
30, 2007, is available at our Web site. Go IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
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 UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
SEC Web site, sec.gov. 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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Core Equity Fund
Management's Discussion of Fund Performance evaluate the sustainability of competitive
advantages. Both the financial and
======================================================================================= business analyses serve as a basis to
construct valuation models that help us
PERFORMANCE SUMMARY estimate a company's value. We use three
primary valuation techniques, including
For the year ended December 31, 2007, AIM V.I. Core Equity Fund, excluding variable discounted cash flow, traditional
product issuer charges, delivered positive returns for shareholders and outperformed valuation multiples and net asset value.
the S&P 500 Index as well as the Russell 1000 Index. Overall results were driven in
part by strength in our energy, consumer staples and non-U.S holdings. Additionally, We consider selling a stock when:
our relative results were helped by avoiding turbulence in the financials sector and
weakness in the consumer discretionary sector. o It exceeds our target price.
Your Fund's long-term performance appears later in this report. o We have not seen a demonstrable
improvement in fundamentals.
FUND VS. INDEXES
o More compelling investment opportunities
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If exist.
variable product issuer charges were included, returns would be lower.
Market conditions and your Fund
Series I Shares 8.12%
Series II Shares 7.88 For the year ended December 31, 2007, we
S&P 500 Index(triangle) (Broad Market Index) 5.49 worked diligently to provide shareholders
Russell 1000 Index(triangle) (Style-Specific Index) 5.77 with a wealth creation strategy that takes
Lipper VUF Large-Cap Core Funds Index(triangle) (Peer Group Index) 6.78 a full market cycle perspective (over bull
Lipper Large-Cap Core Funds Index(triangle) (Former Peer Group Index) 6.63 and bear markets). This objective became
SOURCE: (triangle)LIPPER INC. increasingly important as we marked the
five-year(1) anniversary of the bull
======================================================================================= market and witnessed increased volatility
How we Invest tments for the Fund includes three in the financial markets.
phases:
We manage your Fund as a core fund, Economic growth, as measured by gross
seeking to provide upside potential as o Financial analysis to evaluate returns domestic product, increased at an
well as a measure of protection in on invested capital and capital allocation annualized rate of 4.9% in the third
difficult markets. As part of an overall quarter of 2007.(2) This was slightly
well-diversified asset allocation o Business analysis to determine above the growth rate during the second
strategy, the Fund can serve as a competitive positioning quarter and the highest rate we have seen
cornerstone within an overall portfolio to over the past 12 months.(2) This
complement more aggressive value and o Valuation analysis to identify represented strong growth despite
growth investments. attractively valued companies expectations by many that we were in the
later stages of the current economic cycle
We conduct fundamental research of Financial analysis provides vital and that the economy would be affected by
companies to gain a thorough understanding insight into historical and potential the housing decline. Weakness in housing
of their business prospects, appreciation returns on invested capital, a key affected consumer spending, but as of the
potential and return on invested capital. indicator of business quality and the end of 2007, had not influenced job growth
The process we use to identify potential caliber of management. Business analysis in a meaningful way.
inves allows us to identify key drivers of the
company, understand industry challenges
and
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Pharmaceuticals 6.0% 1. Amgen Inc. 2.9%
Information Technology 21.4% 2. Communications Equipment 5.5 2. Progressive Corp. (The) 2.7
Energy 12.4 3. Oil & Gas Equipment & Services 5.5 3. 3M Co. 2.6
Health Care 12.4 4. Property & Casualty Insurance 5.2 4. Microsoft Corp. 2.6
Consumer Staples 11.0 5. Systems Software 4.9 5. Berkshire Hathway Inc.-Class A 2.5
Financials 10.6 6. Cadbury Schwepps PLC 2.5
Industrials 10.3 Total Net Assets $2.33 billion 7. Motorola, Inc. 2.4
Consumer Discretionary 6.1 8. Pfizer Inc. 2.3
Telecommunication Services 0.7 Total Number of Holdings* 70 9. Symantec Corp. 2.3
Money Market Funds Plus 10. Medtronic, Inc. 2.2
Other Assets Less Liabilities 15.1
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Core Equity Fund
Over the year, we observed an increase avoidance of these stocks helped our subject to change at any time based on
in yield spreads between BBB corporate results versus our style-specific index as factors such as market and economic
bonds and 10-year U.S. Treasury bonds, financials was the worst performing sector conditions. These views and opinions may
indicating a shift in the risk appetite of of the market for the year.(5) not be relied upon as investment advice or
investors and a sign that it is becoming recommendations, or as an offer for a
more difficult to obtain financing.(3) Some aspects of the portfolio's particular security. The information is
positioning detracted from relative not a complete analysis of every aspect of
Inflation, as measured by the Consumer performance. Notably, the Fund's largest any market, country, industry, security or
Price Index, increased to 4.1% in 2007, detractor from performance was health care the Fund. Statements of fact are from
largely due to energy costs, which were up holding AMGEN. The stock came under sources considered reliable, but A I M
17.4%.(4) This represented the sharpest pressure as a result of an ongoing patent Advisors, Inc. makes no representation or
increase in nearly two decades and a dispute with rival Roche Holdings (not a warranty as to their completeness or
significant increase versus the 2.5% Fund holding). accuracy. Although historical performance
increase in 2006.(4) is no guarantee of future results, these
The Fund held 16% of its total net insights may help you understand our
Fund returns were largely driven by our assets in cash at the end of 2007, which investment management philosophy.
overweight in the energy sector. Strength detracted from overall returns. Cash may
in the global economy and emerging markets reduce returns in up markets, decrease ==========================================
caused oil prices to rise from $61.05 per volatility during more turbulent periods
barrel at the beginning of the year to and improve returns in negative markets. FOR A DISCUSSION OF THE RISKS OF INVESTING
$95.98 per barrel at the close of 2007.(1) Overall, the Fund's cash position was a IN YOUR FUND, INDEXES USED IN THIS REPORT
The Fund's exposure to this sector has function of our fundamental research, as AND YOUR FUND'S LONG-TERM PERFORMANCE,
been a consistent theme in the portfolio; we will only invest it when we have a PLEASE TURN THE PAGE.
however the nature of our exposure has compelling investment opportunity. To do
changed as the capital spending cycle has otherwise would be contrary to our ==========================================
matured. intended wealth creation strategy.
Ronald S. Sloan
Early in the capital spending cycle, The Fund's positioning at the end of [SLOAN Chartered Financial Analyst,
the primary beneficiaries were oil 2007 was somewhat more defensive than its PHOTO] senior portfolio manager, is
producers such as EXXON MOBIL, which is a style-specific index, as fundamental data lead manager of AIM V.I. Core
long-term Fund holding. Our research suggest growth catalysts and sustainable Equity Fund. Mr. Sloan has worked in the
suggested that as the capital spending profits tied to the credit cycle show investment industry since 1971 and joined
cycle matured, energy service providers signs of diminishing. Among our largest AIM in 1998. Mr. Sloan attended the
would likely do well as oil producers overweight sectors were information University of Missouri, where he earned
invested to maintain and update their technology and consumer staples, while our both a B.S. in business administration and
infrastructure. This benefited companies underweight sectors included financials an M.B.A.
such as WEATHERFORD INTERNATIONAL, an oil and consumer discretionary. We also
services and equipment firm. We made our maintained sizeable exposure--16% of total Tyler Dann II
investment in Weatherford International in net assets at the end of the year--to [DANN Chartered Financial Analyst,
the fall of 2006 on price weakness non-U.S. companies due to their attractive PHOTO] portfolio manager, is manager
resulting from the market's overreaction relative valuations and growth rates. of AIM V.I. Core Equity Fund.
to the firm's exposure to softening Mr. Dann joined AIM in 2004. He serves on
natural gas prices. We believed the firm We believe our competitive advantage is the board of directors of the National
had attractive growth prospects due to a a strict focus on identifying growth-value Association of Petroleum Investment
supportive commodity pricing cycle, anomalies--companies with strong prospects Analysts and is a member of the CFA
expanding exposure to more attractive to grow shareholder value, managed by good Society of San Francisco. He earned an
opportunities in the eastern hemisphere stewards of capital that are trading at A.B. degree from Princeton University.
and as a beneficiary of the capital attractive valuations. In our opinion,
spending cycle. During 2007, other this allows us to serve as a source of Brian Nelson
investors began to agree. stability within our shareholders' overall [NELSON Chartered Financial Analyst,
asset allocation as we strive to deliver PHOTO] portfolio manager, is manager
In the past, we have spoken about our above average risk-adjusted returns over a of AIM V.I. Core Equity Fund.
rationale for decreasing the Fund's full market cycle. He began his investment career in 1988 and
exposure to the financials sector. Our joined AIM in 2004. He earned a B.A. from
fundamental research raised concerns that Thank you for your continued investment the University of California-Santa Barbara
the increasingly lenient lending standards in AIM V.I. Core Equity Fund. and is a member of the Security Analyst
of some regional banks and consumer Society of San Francisco.
financials would lead to higher default Sources: (1)Bloomberg L.P.; (2)Bureau of
rates. This concern was validated in 2007 Economic Analysis; (3)Lehman Brothers; Assisted by the Mid/Large Cap Core Team
by the controversy surrounding the (4)Bureau of Labor Statistics; (5)Lipper
subprime mortgage industry and weighed Inc.
heavily on the returns of financial
stocks. Our The views and opinions expressed in
management's discussion of Fund
performance are those of A I M Advisors,
Inc. These views and opinions are
AIM V.I. Core Equity Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE OF THE FUND'S SERIES I BASED ON EXPENSES INCURRED DURING THE
AVERAGE ANNUAL TOTAL RETURNS AND SERIES II SHARE CLASSES WILL DIFFER PERIOD COVERED BY THIS REPORT.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
As of 12/31/07 AIM V.I. CORE EQUITY FUND, A SERIES
SERIES I SHARES THE PERFORMANCE DATA QUOTED REPRESENT PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
Inception (5/2/94) 9.53% PAST PERFORMANCE AND CANNOT GUARANTEE IS CURRENTLY OFFERED THROUGH INSURANCE
10 Years 5.57 COMPARABLE FUTURE RESULTS; CURRENT COMPANIES ISSUING VARIABLE PRODUCTS. YOU
5 Years 12.49 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CANNOT PURCHASE SHARES OF THE FUND
1 Year 8.12 CONTACT YOUR VARIABLE PRODUCT ISSUER OR DIRECTLY. PERFORMANCE FIGURES GIVEN
SERIES II SHARES FINANCIAL ADVISOR FOR THE MOST RECENT REPRESENT THE FUND AND ARE NOT INTENDED TO
10 Years 5.31% MONTH-END VARIABLE PRODUCT PERFORMANCE. REFLECT ACTUAL VARIABLE PRODUCT VALUES.
5 Years 12.23 PERFORMANCE FIGURES REFLECT FUND EXPENSES, THEY DO NOT REFLECT SALES CHARGES,
1 Year 7.88 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
SERIES II SHARES' INCEPTION DATE IS MAY HAVE A GAIN OR LOSS WHEN YOU SELL THE VARIABLE PRODUCT ISSUERS, WILL VARY
OCTOBER 24, 2001. RETURNS SINCE THAT DATE SHARES. AND WILL LOWER THE TOTAL RETURN.
ARE HISTORICAL. ALL OTHER RETURNS ARE THE
BLENDED RETURNS OF THE HISTORICAL THE TOTAL ANNUAL FUND OPERATING EXPENSE THE MOST RECENT MONTH-END PERFORMANCE
PERFORMANCE OF THE FUND'S SERIES II SHARES RATIO SET FORTH IN THE MOST RECENT FUND DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
SINCE THEIR INCEPTION AND THE RESTATED PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
HISTORICAL PERFORMANCE OF SERIES I SHARES FOR SERIES I AND SERIES II SHARES WAS AUTOMATED INFORMATION LINE, 866-702-4402.
(FOR PERIODS PRIOR TO INCEPTION OF THE 0.91% AND 1.16%, RESPECTIVELY. THE EXPENSE AS MENTIONED ABOVE, FOR THE MOST RECENT
SERIES II SHARES) ADJUSTED TO REFLECT THE RATIOS PRESENTED ABOVE MAY VARY FROM THE MONTH-END PERFORMANCE INCLUDING VARIABLE
RULE 12B-1 FEES APPLICABLE TO THE SERIES EXPENSE RATIOS PRESENTED IN OTHER SECTIONS PRODUCT CHARGES, PLEASE CONTACT YOUR
II SHARES. THE INCEPTION DATE OF SERIES I OF THIS REPORT THAT ARE VARIABLE PRODUCT ISSUER OR FINANCIAL
SHARES IS MAY 2, 1994. ADVISOR.
====================================================================================================================================
Principal risks of investing in the Fund torical and prospective earnings of the companies, but rather the most widely held
issuer, the value of its assets, general 500 companies chosen with respect to
To the extent the Fund holds cash or cash economic conditions, interest rates, market size, liquidity, and their
equivalents rather than equity securities investor perceptions and market liquidity. industry.
for risk management purposes, the Fund may
not achieve its investment objective. Foreign securities have additional The Russell 1000--REGISTERED
risks, including exchange rate changes, TRADEMARK-- Index is comprised of 1000 of
The value of convertible securities in political and economic upheaval, the the largest capitalized U.S. domiciled
which the Fund invests may be affected by relative lack of information, relatively companies whose common stock is traded in
market interest rates-the risk that the low market liquidity, and the potential the United States. The Russell 1000 Index
issuer may default on interest or lack of strict financial and accounting is a trademark/service mark of the Frank
principal payments and the value of the controls and standards. Russell Company. Russell--REGISTERED
underlying common stock into which these TRADEMARK-- is a trademark of the Frank
securities may be converted may decline as There is no guarantee that the Russell Company.
a result. investment techniques and risk analyses
used by the Fund's portfolio managers will The Fund has elected to use the LIPPER
Investing in developing countries can produce the desired results. VARIABLE UNDERLYING FUNDS (VUF) LARGE-CAP
add additional risk, such as high rates of CORE FUNDS INDEX as its peer group instead
inflation or sharply devalued currencies About indexes used in this report of the Lipper Large-Cap Core Funds Index.
against the U.S. dollar. Transaction costs In 2006, Lipper began publishing VUF
are often higher, and there may be delays The S&P 500--REGISTERED TRADEMARK-- Index indexes, allowing the Fund to be compared
in settlement procedures. is a market capitalization-weighted index with the Lipper VUF Large-Cap Core Funds
covering all major areas of the U.S. Index. The unmanaged Lipper VUF Large-Cap
Prices of equity securities change in economy. It is not the 500 largest Core Funds Index is an equally weighted
response to many factors including the representation of the largest variable
his- insurance
Continued
AIM V.I. Core Equity Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
underlying funds in the Lipper Large-Cap A direct investment cannot be made in ues may differ from the net asset
Core Funds category. These funds typically an index. Unless otherwise indicated, values and returns reported in the
have an average price-to-earnings ratio, index results include reinvested Financial Highlights. Additionally, the
price-to-book ratio, and three-year dividends, and they do not reflect sales returns and net asset values shown
sales-per-share growth value, compared to charges. Performance of an index of funds throughout this report are at the Fund
the S&P 500--REGISTERED TRADEMARK-- Index. reflects fund expenses; performance of a level only and do not include variable
market index does not. product issuer charges. If such charges
The LIPPER LARGE-CAP CORE FUNDS INDEX were included, the total returns would be
is an equally weighted representation of Other information lower.
the largest funds in the Lipper Large-Cap
Core Funds category. These funds typically The returns shown in the management's Industry classifications used in this
have an average price-to-earnings ratio, discussion of Fund performance are based report are generally according to the
price-to-book ratio, and three-year on net asset values calculated for Global Industry Classification Standard,
sales-per-share growth value, compared to shareholder transactions. Generally which was developed by and is the
the S&P 500 Index. accepted accounting principles require exclusive property and a service mark of
adjustments to be made to the net assets Morgan Stanley Capital International Inc.
The Fund is not managed to track the of the Fund at period end for financial and Standard & Poor's.
performance of any particular index, reporting purposes, and as such, the net
including the indexes defined here, and asset values for shareholder transactions The Chartered Financial
consequently, the performance of the Fund and the returns based on those net asset Analyst--REGISTERED TRADEMARK--
may deviate significantly from the val- (CFA--REGISTERED TRADEMARK--) designation
performance of the indexes. is a globally recognized standard for
measuring the competence and integrity of
investment professionals.
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/94, FUND DATA FROM 5/2/94
LIPPER
AIM V.I. CORE EQUITY LIPPER VUF LARGE-CAP LARGE-CAP CORE
DATE FUND-SERIES I SHARES S&P 500 INDEX(1) RUSSELL 1000 INDEX(1) CORE FUNDS INDEX(1) FUNDS INDEX(1)
4/30/94 $10000 $10000 $10000 $10000
5/94 $ 9820 10163 10133 10115 10079
6/94 9770 9915 9862 9896 9813
7/94 10030 10240 10183 10193 10107
8/94 10450 10659 10613 10593 10468
9/94 10194 10399 10366 10333 10249
10/94 10345 10632 10562 10467 10414
11/94 9903 10245 10182 10078 10047
12/94 9999 10397 10327 10238 10140
1/95 10090 10666 10594 10408 10319
2/95 10454 11081 11025 10839 10674
3/95 10867 11408 11309 11147 10939
4/95 11202 11744 11609 11436 11180
5/95 11577 12212 12055 11790 11541
6/95 12014 12495 12374 12101 11844
7/95 12562 12910 12847 12555 12248
8/95 12724 12942 12944 12653 12267
9/95 13301 13488 13476 13099 12726
10/95 13058 13440 13415 12935 12667
11/95 13454 14029 14013 13518 13162
12/95 13388 14299 14227 13663 13361
1/96 13684 14785 14687 14097 13754
2/96 13968 14923 14878 14287 13921
3/96 14052 15066 15011 14446 14048
4/96 14401 15288 15240 14694 14252
5/96 14707 15682 15606 15017 14537
6/96 14644 15742 15623 14927 14558
7/96 13884 15047 14870 14245 13963
8/96 14327 15364 15274 14620 14280
9/96 15161 16228 16133 15363 15020
10/96 15277 16676 16490 15683 15319
11/96 16228 17935 17707 16778 16312
12/96 16057 17580 17421 16538 16012
1/97 16998 18678 18454 17330 16887
2/97 16934 18824 18524 17422 16867
3/97 15930 18052 17690 16740 16144
4/97 16720 19129 18647 17565 17039
5/97 17990 20299 19841 18652 18073
6/97 18739 21201 20664 19416 18857
7/97 20427 22887 22355 20965 20346
8/97 19455 21606 21300 20123 19311
9/97 20641 22789 22468 21223 20305
10/97 19744 22029 21740 20454 19679
11/97 20097 23048 22683 21084 20322
12/97 20187 23443 23144 21332 20691
1/98 20337 23702 23316 21348 20895
2/98 21610 25411 24978 22906 22376
3/98 22615 26711 26238 24111 23482
4/98 22583 26984 26508 24352 23720
5/98 21985 26521 25934 23934 23315
6/98 23097 27598 26894 24591 24423
7/98 23118 27306 26571 24137 24226
8/98 19384 23361 22599 20495 20600
9/98 20379 24859 24121 21519 21624
10/98 22154 26878 26026 23216 23246
11/98 23609 28506 27637 24512 24628
12/98 25774 30148 29398 25849 26264
1/99 27174 31408 30447 26558 27182
2/99 26133 30432 29480 25760 26342
3/99 27902 31649 30610 26601 27402
4/99 28293 32875 31890 27565 28136
5/99 27532 32099 31201 27164 27390
6/99 29528 33876 32791 28698 28918
7/99 28441 32823 31789 27824 28070
8/99 28418 32660 31492 27408 27784
9/99 28060 31766 30626 26731 27031
10/99 29741 33775 32684 28124 28687
11/99 30978 34462 33525 28718 29390
====================================================================================================================================
SOURCE: (1)LIPPER INC.
====================================================================================================================================
[MOUNTAIN CHART]
12/99 34597 36489 35545 30770 31345
1/00 33317 34656 34090 29329 30078
2/00 34456 34000 33999 29487 30068
3/00 37467 37324 37097 31929 32683
4/00 34991 36202 35860 30896 31615
5/00 33031 35460 34933 29887 30810
6/00 34980 36333 35823 30723 31938
7/00 35057 35765 35228 30335 31440
8/00 37851 37986 37836 32602 33609
9/00 35330 35981 36079 30738 31819
10/00 33875 35828 35645 30182 31451
11/00 29044 33006 32385 27330 28685
12/00 29561 33167 32777 27864 29036
1/01 30826 34343 33855 28427 29858
2/01 26357 31214 30697 25734 27079
3/01 23523 29238 28658 23860 25417
4/01 26221 31508 30961 25875 27349
5/01 26266 31719 31170 26005 27503
6/01 25420 30948 30466 25244 26772
7/01 24505 30643 30050 24789 26384
8/01 22552 28726 28219 23180 24830
9/01 19945 26407 25826 21319 22946
10/01 20825 26911 26363 21841 23487
11/01 22745 28974 28393 23353 25025
12/01 22813 29228 28696 23637 25309
1/02 22395 28802 28332 23138 24910
2/02 22158 28247 27767 22661 24492
3/02 23073 29309 28908 23532 25326
4/02 22316 27533 27252 22247 24002
5/02 22305 27331 27011 22024 23827
6/02 21130 25385 25018 20387 22181
7/02 19458 23406 23167 18966 20533
8/02 19661 23560 23288 19108 20702
9/02 18159 21002 20787 17105 18692
10/02 19175 22848 22514 18393 20144
11/02 20102 24192 23831 19315 21043
12/02 19257 22771 22483 18205 19935
1/03 18622 22176 21938 17801 19412
2/03 18225 21843 21598 17573 19154
3/03 18316 22054 21822 17708 19315
4/03 19620 23870 23584 19054 20739
5/03 20935 25126 24928 20092 21744
6/03 21117 25447 25256 20347 21959
7/03 21413 25896 25759 20684 22305
8/03 21980 26400 26282 21025 22736
9/03 21640 26121 26013 20815 22442
10/03 22364 27598 27538 21996 23540
11/03 22830 27840 27868 22237 23738
12/03 23962 29299 29203 23312 24880
1/04 24226 29837 29758 23613 25231
2/04 24662 30251 30170 23934 25529
3/04 24077 29795 29758 23616 25129
4/04 24306 29328 29221 23134 24739
5/04 24478 29730 29642 23398 24990
6/04 24936 30307 30176 23857 25437
7/04 24158 29305 29117 22959 24537
8/04 24091 29422 29260 22973 24552
9/04 24298 29741 29630 23248 24834
10/04 24572 30195 30108 23513 25170
11/04 25270 31416 31397 24522 26125
12/04 26114 32485 32533 25355 26942
1/05 25548 31693 31714 24849 26333
2/05 26391 32360 32427 25369 26824
3/05 25953 31787 31913 24899 26333
4/05 25420 31185 31325 24467 25746
5/05 25733 32176 32435 25254 26580
6/05 25859 32222 32568 25406 26671
7/05 26772 33420 33834 26277 27619
8/05 26678 33115 33542 26148 27366
9/05 26886 33383 33853 26467 27683
10/05 26263 32827 33260 25917 27351
11/05 27326 34067 34526 27010 28399
12/05 27501 34079 34572 27128 28482
1/06 28511 34982 35541 27875 29280
2/06 28605 35076 35621 27829 29149
3/06 29085 35513 36125 28163 29675
4/06 29402 35989 36558 28516 29984
5/06 28699 34955 35479 27588 29075
6/06 28616 35001 35525 27581 29100
7/06 28817 35217 35603 27686 29000
====================================================================================================================================
===================================================================================================================================
[MOUNTAIN CHART]
8/06 29497 36053 36457 28379 29720
9/06 30281 36982 37322 29052 30347
10/06 31008 38186 38589 29901 31358
11/06 31724 38911 39412 30474 31971
12/06 32095 39457 39917 30889 32295
1/07 32660 40053 40686 31383 32819
2/07 32095 39272 39986 30764 32251
3/07 32731 39711 40401 31157 32574
4/07 34344 41469 42099 32475 33931
5/07 35062 42915 43616 33652 35088
6/07 35003 42202 42783 33179 34663
7/07 34212 40896 41461 32165 33687
8/07 34129 41508 42025 32547 34073
9/07 35379 43058 43630 33856 35305
10/07 36026 43743 44391 34517 36068
11/07 35014 41914 42498 33196 34634
12/07 34693 41623 42222 32982 34436
====================================================================================================================================
AIM V.I. Core Equity Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-68.67%
AEROSPACE & DEFENSE-2.40%
Northrop Grumman Corp. 273,326 $ 21,494,357
- ---------------------------------------------------------------------------
United Technologies Corp. 450,000 34,443,000
===========================================================================
55,937,357
===========================================================================
AIR FREIGHT & LOGISTICS-1.61%
United Parcel Service, Inc.-Class B 529,928 37,476,508
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.11%
Legg Mason, Inc. 36,530 2,672,169
===========================================================================
BIOTECHNOLOGY-2.86%
Amgen Inc.(b) 1,437,585 66,761,447
===========================================================================
BROADCASTING & CABLE TV-1.50%
Comcast Corp.-Class A(b) 1,912,476 34,921,812
===========================================================================
COMMUNICATIONS EQUIPMENT-4.47%
Cisco Systems, Inc.(b) 1,145,338 31,004,300
- ---------------------------------------------------------------------------
Corning Inc. 730,652 17,528,341
- ---------------------------------------------------------------------------
Motorola, Inc. 3,471,319 55,679,957
===========================================================================
104,212,598
===========================================================================
COMPUTER HARDWARE-0.91%
International Business Machines Corp. 196,925 21,287,592
===========================================================================
COMPUTER STORAGE & PERIPHERALS-2.00%
EMC Corp.(b) 1,325,936 24,569,594
- ---------------------------------------------------------------------------
Seagate Technology 867,025 22,109,138
===========================================================================
46,678,732
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.76%
Automatic Data Processing, Inc. 920,191 40,976,105
===========================================================================
DEPARTMENT STORES-0.38%
Kohl's Corp.(b) 193,176 8,847,461
===========================================================================
DIVERSIFIED BANKS-1.25%
Wells Fargo & Co. 969,660 29,274,035
===========================================================================
DRUG RETAIL-1.06%
Walgreen Co. 651,276 24,800,590
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.97%
Agilent Technologies, Inc.(b) 1,250,000 45,925,000
===========================================================================
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
ELECTRONIC MANUFACTURING SERVICES-1.49%
Tyco Electronics Ltd. 934,677 $ 34,704,557
===========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.47%
Waste Management, Inc. 1,048,373 34,250,346
===========================================================================
HEALTH CARE EQUIPMENT-3.49%
Covidien Ltd. 660,440 29,250,888
- ---------------------------------------------------------------------------
Medtronic, Inc. 1,039,239 52,242,544
===========================================================================
81,493,432
===========================================================================
HYPERMARKETS & SUPER CENTERS-1.94%
Wal-Mart Stores, Inc. 951,803 45,239,197
===========================================================================
INDUSTRIAL CONGLOMERATES-4.06%
3M Co. 726,752 61,279,729
- ---------------------------------------------------------------------------
General Electric Co. 646,452 23,963,976
- ---------------------------------------------------------------------------
Tyco International Ltd. 236,830 9,390,309
===========================================================================
94,634,014
===========================================================================
INSURANCE BROKERS-0.95%
Marsh & McLennan Cos., Inc. 838,646 22,198,960
===========================================================================
INTEGRATED OIL & GAS-1.53%
Exxon Mobil Corp. 380,342 35,634,242
===========================================================================
MOVIES & ENTERTAINMENT-1.01%
News Corp.-Class A 1,145,752 23,476,458
===========================================================================
MULTI-LINE INSURANCE-0.43%
Genworth Financial Inc.-Class A 395,322 10,060,945
===========================================================================
OFFICE ELECTRONICS-1.02%
Xerox Corp. 1,475,605 23,890,045
===========================================================================
OIL & GAS DRILLING-1.00%
Transocean Inc. 163,356 23,384,411
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-4.86%
BJ Services Co. 1,859,148 45,102,930
- ---------------------------------------------------------------------------
Schlumberger Ltd. 186,893 18,384,664
- ---------------------------------------------------------------------------
Smith International, Inc. 287,868 21,259,052
- ---------------------------------------------------------------------------
Weatherford International Ltd.(b) 416,168 28,549,125
===========================================================================
113,295,771
===========================================================================
</Table>
AIM V.I. Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-3.04%
Apache Corp. 172,998 $ 18,604,205
- ---------------------------------------------------------------------------
Chesapeake Energy Corp. 894,565 35,066,948
- ---------------------------------------------------------------------------
XTO Energy, Inc. 336,721 17,294,003
===========================================================================
70,965,156
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.54%
Citigroup Inc. 429,868 12,655,314
===========================================================================
PERSONAL PRODUCTS-2.46%
Avon Products, Inc. 758,582 29,986,747
- ---------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 629,469 27,451,143
===========================================================================
57,437,890
===========================================================================
PHARMACEUTICALS-3.05%
Merck & Co. Inc. 296,701 17,241,295
- ---------------------------------------------------------------------------
Pfizer Inc. 2,376,999 54,029,187
===========================================================================
71,270,482
===========================================================================
PROPERTY & CASUALTY INSURANCE-5.24%
Berkshire Hathaway Inc.-Class A(b) 412 58,339,200
- ---------------------------------------------------------------------------
Progressive Corp. (The) 3,335,993 63,917,626
===========================================================================
122,256,826
===========================================================================
PUBLISHING-1.10%
Washington Post Co. (The)-Class B 32,464 25,692,984
===========================================================================
RAILROADS-0.73%
Union Pacific Corp. 135,374 17,005,682
===========================================================================
SEMICONDUCTORS-0.89%
Analog Devices, Inc. 651,466 20,651,472
===========================================================================
SOFT DRINKS-0.73%
Coca-Cola Co. (The) 276,986 16,998,631
===========================================================================
SPECIALIZED FINANCE-0.50%
Moody's Corp. 325,000 11,602,500
===========================================================================
SYSTEMS SOFTWARE-4.86%
Microsoft Corp. 1,680,670 59,831,852
- ---------------------------------------------------------------------------
Symantec Corp.(b) 3,310,919 53,438,233
===========================================================================
113,270,085
===========================================================================
Total Domestic Common Stocks (Cost
$1,412,462,645) 1,601,840,806
===========================================================================
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-15.49%
ARGENTINA-0.63%
Tenaris S.A.-ADR (Oil & Gas Equipment &
Services)(c) 325,621 $ 14,565,027
===========================================================================
FINLAND-1.04%
Nokia Oyj-ADR (Communications Equipment) 631,565 24,245,780
===========================================================================
FRANCE-2.56%
Renault S.A. (Automobile Manufacturers)(d) 116,359 16,296,564
- ---------------------------------------------------------------------------
Sanofi-Aventis-ADR (Pharmaceuticals) 236,020 10,745,991
- ---------------------------------------------------------------------------
Total S.A. (Integrated Oil & Gas)(d) 395,458 32,758,291
===========================================================================
59,800,846
===========================================================================
GERMANY-0.09%
Henkel KGaA (Household Products)(d) 42,939 2,187,688
===========================================================================
ISRAEL-1.52%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 764,615 35,539,305
===========================================================================
JAPAN-1.27%
Fujitsu Ltd. (Computer Hardware)(d) 3,447,000 23,122,991
- ---------------------------------------------------------------------------
Sega Sammy Holdings Inc. (Leisure
Products)(c) 518,800 6,484,709
===========================================================================
29,607,700
===========================================================================
NETHERLANDS-2.70%
Koninklijke (Royal) Phillips Electronics N.V.
(Industrial Conglomerates)(d) 615,230 26,613,499
- ---------------------------------------------------------------------------
Unilever N.V. (Packaged Foods & Meats)(d) 992,203 36,260,073
===========================================================================
62,873,572
===========================================================================
SOUTH KOREA-0.67%
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services)(c) 521,645 15,565,887
===========================================================================
SWITZERLAND-0.33%
UBS A.G. (Diversified Capital Markets)(d) 167,097 7,751,328
===========================================================================
UNITED KINGDOM-4.68%
Barclays PLC (Diversified Banks)(d) 730,499 7,385,864
- ---------------------------------------------------------------------------
Cadbury Schweppes PLC (Packaged Foods &
Meats)(d) 4,577,174 56,950,430
- ---------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals) 450,199 22,685,528
- ---------------------------------------------------------------------------
Lloyds TSB Group PLC (Diversified Banks)(d) 2,385,248 22,199,563
===========================================================================
109,221,385
===========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $269,507,378) 361,358,518
===========================================================================
FOREIGN PREFERRED STOCKS-0.71%
GERMANY-0.71%
Henkel KGaA-Pfd. (Household Products)(d)
(Cost $16,007,622) 297,000 16,617,671
===========================================================================
</Table>
AIM V.I. Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
MONEY MARKET FUNDS-15.20%
Liquid Assets Portfolio-Institutional
Class(e) 177,264,636 $ 177,264,636
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 177,264,636 177,264,636
===========================================================================
Total Money Market Funds (Cost
$354,529,272) 354,529,272
===========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.07% (Cost
$2,052,506,917) 2,334,346,267
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN MONEY MARKET
FUNDS-1.12%
Liquid Assets Portfolio-Institutional Class
(Cost $26,118,298)(e)(f) 26,118,298 26,118,298
===========================================================================
TOTAL INVESTMENTS-101.19% (Cost
$2,078,625,215) 2,360,464,565
===========================================================================
OTHER ASSETS LESS LIABILITIES-(1.19)% (27,685,666)
===========================================================================
NET ASSETS-100.00% $2,332,778,899
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(c) All or a portion of this security was out on loan at December 31, 2007.
(d) 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 December 31, 2007 was $248,143,962,
which represented 10.64% 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.
(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. Core Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $1,697,977,645)* $1,979,816,995
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $380,647,570) 380,647,570
=============================================================
Total investments (Cost $2,078,625,215) 2,360,464,565
=============================================================
Foreign currencies, at value (Cost
$9,168,589) 9,149,159
- -------------------------------------------------------------
Receivables for:
Investments sold 3,734,258
- -------------------------------------------------------------
Fund shares sold 421,870
- -------------------------------------------------------------
Dividends 3,720,899
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 177,895
- -------------------------------------------------------------
Other assets 196
=============================================================
Total assets 2,377,668,842
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 11,400,378
- -------------------------------------------------------------
Fund shares reacquired 5,308,795
- -------------------------------------------------------------
Trustee deferred compensation and
retirement plans 430,631
- -------------------------------------------------------------
Collateral upon return of securities loaned 26,118,298
- -------------------------------------------------------------
Accrued administrative services fees 1,457,037
- -------------------------------------------------------------
Accrued distribution fees--Series II 22,700
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,026
- -------------------------------------------------------------
Accrued transfer agent fees 18,815
- -------------------------------------------------------------
Accrued operating expenses 131,263
=============================================================
Total liabilities 44,889,943
=============================================================
Net assets applicable to shares outstanding $2,332,778,899
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,284,002,118
- -------------------------------------------------------------
Undistributed net investment income 38,129,325
- -------------------------------------------------------------
Undistributed net realized gain (loss) (271,178,664)
- -------------------------------------------------------------
Unrealized appreciation 281,826,120
=============================================================
$2,332,778,899
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $2,298,006,821
_____________________________________________________________
=============================================================
Series II $ 34,772,078
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 78,942,944
_____________________________________________________________
=============================================================
Series II 1,204,214
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 29.11
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 28.88
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $25,428,439 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$1,151,569) $ 45,272,469
- -------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$361,560) 14,358,021
=============================================================
Total investment income 59,630,490
=============================================================
EXPENSES:
Advisory fees 15,637,805
- -------------------------------------------------------------
Administrative services fees 6,632,708
- -------------------------------------------------------------
Custodian fees 160,611
- -------------------------------------------------------------
Distribution fees--Series II 95,066
- -------------------------------------------------------------
Transfer agent fees 66,734
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 93,131
- -------------------------------------------------------------
Other 143,598
=============================================================
Total expenses 22,829,653
=============================================================
Less: Fees waived and expense offset
arrangement(s) (232,539)
=============================================================
Net expenses 22,597,114
=============================================================
Net investment income 37,033,376
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
from securities sold to affiliates of
$304,557) 385,962,879
- -------------------------------------------------------------
Foreign currencies 1,489,708
- -------------------------------------------------------------
Option contracts written 2,354
=============================================================
387,454,941
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (211,985,767)
- -------------------------------------------------------------
Foreign currencies (27,597)
=============================================================
(212,013,364)
=============================================================
Net realized and unrealized gain 175,441,577
=============================================================
Net increase in net assets resulting from
operations $ 212,474,953
_____________________________________________________________
=============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Core Equity Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 37,033,376 $ 30,024,489
- ----------------------------------------------------------------------------------------------
Net realized gain 387,454,941 133,384,161
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (212,013,364) 153,292,057
==============================================================================================
Net increase in net assets resulting from operations 212,474,953 316,700,707
==============================================================================================
Distributions to shareholders from net investment income:
Series I (26,080,139) (14,522,140)
- ----------------------------------------------------------------------------------------------
Series II (332,527) (203,586)
==============================================================================================
Decrease in net assets resulting from distributions (26,412,666) (14,725,726)
==============================================================================================
Share transactions-net:
Series I (584,578,394) 1,153,932,649
- ----------------------------------------------------------------------------------------------
Series II (7,686,109) 32,686,606
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (592,264,503) 1,186,619,255
==============================================================================================
Net increase (decrease) in net assets (406,202,216) 1,488,594,236
==============================================================================================
NET ASSETS:
Beginning of year 2,738,981,115 1,250,386,879
==============================================================================================
End of year (including undistributed net investment income
of $38,129,325 and $26,018,906, respectively) $2,332,778,899 $2,738,981,115
______________________________________________________________________________________________
==============================================================================================
</Table>
AIM V.I. Core Equity Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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. Core Equity Fund
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 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 $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 Ltd. ("Invesco")
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. 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 year ended December 31, 2007, AIM waived advisory fees of $215,531.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$496,111 for accounting and fund administrative services and reimbursed
$6,136,597 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 year ended December 31, 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 A I M
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
AIM V.I. Core Equity Fund
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- ---------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $140,001,437 $ 465,173,086 $ (427,909,887) $177,264,636 $ 7,005,973
- ---------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 140,001,437 465,173,086 (427,909,887) 177,264,636 6,990,488
===================================================================================================
Subtotal $280,002,874 $ 930,346,172 $ (855,819,774) $354,529,272 $13,996,461
===================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- ---------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 18,777,590 $ 323,659,027 $ (316,318,319) $ 26,118,298 $ 361,560
===================================================================================================
Total
Investments
in
Affiliates $298,780,464 $1,254,005,199 $(1,172,138,093) $380,647,570 $14,358,021
___________________________________________________________________________________________________
===================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $1,211,948, which resulted in net realized gains
of $304,557, and securities purchases of $13,372,896.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangements 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 year ended
December 31, 2007, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $17,008.
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 year ended December 31, 2007, the Fund paid legal fees of $11,734
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 SEC, 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
AIM V.I. Core Equity Fund
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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $25,428,439 were
on loan to brokers. The loans were secured by cash collateral of $26,118,298
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $361,560 for securities lending transactions, which
are net of compensation to counterparties.
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- -------------------------------------------------------------------------------------------------------------
CALL OPTION CONTRACTS PUT OPTION CONTRACTS
--------------------- ----------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
- -------------------------------------------------------------------------------------------------------------
Beginning of period -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Written 4,537 $72,592 4,537 $ 748,605
- -------------------------------------------------------------------------------------------------------------
Closed (2,422) (38,752) -- --
- -------------------------------------------------------------------------------------------------------------
Expired (2,115) (33,840) (4,537) (748,605)
=============================================================================================================
End of period -- $ -- -- $ --
_____________________________________________________________________________________________________________
=============================================================================================================
</Table>
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
Distributions paid from ordinary income: $26,412,666 $14,725,726
________________________________________________________________________________________
========================================================================================
</Table>
AIM V.I. Core Equity Fund
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ------------------------------------------------------------------------------
Undistributed ordinary income $ 38,528,865
- ------------------------------------------------------------------------------
Net unrealized appreciation--investments 278,636,570
- ------------------------------------------------------------------------------
Temporary book/tax differences (399,540)
- ------------------------------------------------------------------------------
Capital loss carryforward (267,989,114)
- ------------------------------------------------------------------------------
Shares of beneficial interest 2,284,002,118
==============================================================================
Total net assets $2,332,778,899
______________________________________________________________________________
==============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies of $(13,230).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 utilized $383,107,945 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $ 89,586,793
- -----------------------------------------------------------------------------
December 31, 2010 157,184,467
- -----------------------------------------------------------------------------
December 31, 2011 21,217,854
=============================================================================
Total capital loss carryforward $267,989,114
_____________________________________________________________________________
=============================================================================
</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.
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 year ended December 31, 2007 was $1,046,293,348 and
$1,689,620,830, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $371,328,458
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (92,678,658)
==============================================================================
Net unrealized appreciation of investment securities $278,649,800
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $2,081,814,765.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, on December 31, 2007, undistributed net investment income was
increased by $1,489,709 and undistributed net realized gain (loss) was decreased
by $1,489,709. This reclassification had no effect on the net assets of the
Fund.
AIM V.I. Core Equity Fund
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007(a) DECEMBER 31, 2006
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,426,134 $ 41,447,869 6,743,339 $ 168,070,113
- ---------------------------------------------------------------------------------------------------------------------------
Series II 162,780 4,629,698 392,367 10,002,894
===========================================================================================================================
Issued as reinvestment of dividends:
Series I 869,048 26,080,138 506,735 13,717,305
- ---------------------------------------------------------------------------------------------------------------------------
Series II 11,166 332,527 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 (22,533,393) (652,106,401) (25,886,608) (648,866,764)
- ---------------------------------------------------------------------------------------------------------------------------
Series II (440,110) (12,648,334) (221,253) (5,589,264)
===========================================================================================================================
(20,504,375) $(592,264,503) 47,328,116 $1,186,619,255
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 61% 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 acquisitions were 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, respectively to the net asset value of the Fund on the close of
business, 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 subsequent to the reorganization were $2,882,869,163.
NOTE 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers")(the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new proposed
sub-advisory arrangements would not affect the fees the Fund pays pursuant to
the advisory agreement. If approved by shareholders, the New Sub-advisory
Arrangements are expected to become effective on or about May 1, 2008.
AIM V.I. Core Equity Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.22 $ 23.45 $ 22.60 $ 20.94 $ 16.99
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.42(a) 0.34(a) 0.24(a) 0.30(b) 0.17(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.80 3.58 0.96 1.58 3.97
=================================================================================================================================
Total from investment operations 2.22 3.92 1.20 1.88 4.14
=================================================================================================================================
Less dividends from net investment income (0.33) (0.15) (0.35) (0.22) (0.19)
=================================================================================================================================
Net asset value, end of period $ 29.11 $ 27.22 $ 23.45 $ 22.60 $ 20.94
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 8.12% 16.70% 5.31% 8.97% 24.42%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,298,007 $2,699,252 $1,246,529 $1,487,462 $1,555,475
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.87%(d)(e) 0.89% 0.89% 0.91% 0.81%(e)
=================================================================================================================================
Ratio of net investment income to average net assets 1.44%(d) 1.35% 1.08% 1.25(b) 0.91%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 45% 45% 52% 52% 31%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) 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 per share and the ratio of net investment income 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 do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(d) Ratios are based on average daily net assets of $2,547,440,950.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.88% and 0.82% for the years ended December 31, 2007 and 2003,
respectively.
<Table>
<Caption>
SERIES II
----------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.02 $ 23.33 $22.48 $ 20.85 $16.94
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.34(a) 0.28(a) 0.18(a) 0.21(b) 0.12(a)
- ------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.80 3.55 0.96 1.60 3.96
==================================================================================================================
Total from investment operations 2.14 3.83 1.14 1.81 4.08
==================================================================================================================
Less dividends from net investment income (0.28) (0.14) (0.29) (0.18) (0.17)
==================================================================================================================
Net asset value, end of period $ 28.88 $ 27.02 $23.33 $ 22.48 $20.85
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) 7.88% 16.42% 5.08% 8.67% 24.15%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $34,772 $39,729 $3,858 $ 4,173 $3,808
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 1.12%(d)(e) 1.14% 1.14% 1.16% 1.06%(e)
==================================================================================================================
Ratio of net investment income to average net assets 1.19%(d) 1.10% 0.83% 1.00%(b) 0.66%
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate 45% 45% 52% 52% 31%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) 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 per share and the ratio of net investment income 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 do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(d) Ratios are based on average daily net assets of $38,026,461.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.13% and 1.07% for the years ended December 31, 2007 and 2003,
respectively.
AIM V.I. Core Equity Fund
NOTE 16--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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Core Equity Fund (one of
the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those financial
highlights.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Core Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $991.20 $4.37 $1,020.82 $4.43 0.87%
Series II 1,000.00 990.10 5.62 1,019.56 5.70 1.12
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Core Equity Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year -- end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement. The Fund
designates the following amounts or, if subsequently determined to be different,
the maximum amount allowable for its fiscal year ended December 31, 2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received Deduction* 90.6%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the fund's fiscal year.
AIM V.I. Core Equity Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Core Equity Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
FIXED INCOME
Intermediate-Term Taxable
Investment Grade
AIM V.I. Diversified
Income Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. DIVERSIFIED INCOME FUND's investment
determine how to vote proxies objective is achieve a high level of current income.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
Us tab, click on Required Notices and IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
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, UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
sec.gov. 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
[AIM INVESTMENTS LOGO] CHARGES AND EXPENSES. INVESTORS SHOULD READ EACH CAREFULLY
- --REGISTERED TRADEMARK-- BEFORE INVESTING.
=============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Diversified Income Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE In evaluating the credit quality of a
security, we use input from various rating
================================================================================ agencies and Wall Street fixed-income and equity
PERFORMANCE SUMMARY analysts, and conduct our own internal credit
analysis.
For the year ended December 31, 2007, AIM V.I. Diversified Income Fund
underperformed its broad market and style-specific indexes. Our defensive We consider selling a bond when:
duration structure in the later part of the year was a major detractor from
performance. While yields declined across the yield curve, the U.S. Federal o It becomes fully valued.
Reserve Board (the Fed) reduced interest rates more aggressively than we
anticipated, causing short term interest rates to decline most steeply. In o Overall market and economic trends indicate
addition, the Fund's relative returns were negatively affected by its exposure that sector emphasis should be changed.
to the high yield market, which significantly underperformed due to the credit
risk repricing and subprime mortgage debacle. o Fundamentals, such as credit quality ratings,
deteriorate for an individual issuer or a sector.
Your Fund's long-term performance appears later in this report.
o An unanticipated change occurs involving an
FUND VS. INDEXES individual issuer or sector.
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If MARKET CONDITIONS AND YOUR FUND
variable product issuer charges were included, returns would be lower.
The U.S. economy expanded throughout 2007. The
Series I Shares 1.72% annualized rate of growth in gross domestic
Series II Shares 1.51 product accelerated from 0.6% to 3.8% to 4.9%(1)
Lehman Brothers U.S. Aggregate Bond Index(triangle) (Broad Market Index) 6.97 in the first, second and third quarters of 2007,
Lehman Brothers U.S. Credit Index(triangle) (Style-Specific Index) 5.11 respectively. Initial estimates suggested the
Lipper VUF Corporate Debt BBB-Rated Funds Index(triangle) economy expanded at an annualized rate of 0.6%(1)
(Peer Group Index) 6.03 in the fourth quarter.
Lipper BBB Rated Funds Index(triangle) (Former Peer Group Index) 5.27
Inflation, as measured by the core Consumer
SOURCE: (triangle)LIPPER INC. Price Index (which excludes volatile food and
================================================================================ energy prices), increased at an annual rate of
HOW WE INVEST eign governments, U.S. corporate 2.4%(2) in December, up from a 2.1%(2) pace in
bonds, mortgages, asset-backed the third quarter.
We seek to provide consistent returns securities, money markets, high yield
while minimizing risk. Our security debt and convertible corporate bonds. The spillover from the housing and sub-prime
selection process involves both We make allocation decisions based on markets and credit risk repricing dramatically
top-down analysis, which takes account performance and valuations among the diminished liquidity and reduced credit
of overall economic and market trends different areas of the bond market. availability. Consequently, the Fed began adding
and bottom-up analysis, which includes Our focus is on bonds that are liquidity to the system by cutting the discount
an evaluation of individual bond attractively valued relative to the rate by one-half a percentage point on August
issuers. rest of the bond market. 17(3) and by lowering its federal funds target
rate by one-half a percentage point on September
We look for potential investments 18.(3) While the September rate cut was larger
in all sectors of the bond market: than expected, two subsequent quarter-point cuts
domestic and for- on October 31 and December 11 were fully
anticipated by markets.(3)
======================================= ======================================
PORTFOLIO COMPOSITION TOP 10 FIXED INCOME ISSUERS* Treasury yields fell and the U.S. Treasury
yield curve steepened by the end of the year as
By industry 1. Federal National Mortgage investors avoided risky assets and turned instead
Other Diversified Financial Association 4.9% to the relative safety of government securities.
Services 20.0% 2. Ford Motor Credit Co. LLC 3.7 This flight to safety resulted in a significant
Diversified Banks 8.2 3. SLM Corp. 3.2 demand for money market funds.
Property & Casualty Insurance 7.2 4. Patron's Legacy
Integrated Telecommunication 2004-1-LILACS-1 2.4 Despite concerns about the implications of the
Services 6.2 5. Verizon Virginia Inc. 2.4 credit crunch on the broader economy, for the
Consumer Finance 5.7 6. Residential Capital LLC 2.4 year ended December 31, 2007, the Lehman Brothers
Broadcasting & Cable TV 5.5 7. Regional Diversified Funding 2.4 U.S. Aggregate Bond index, which represents the
Federal National Mortgage 8. Oil Insurance Ltd. 2.3 performance of investment-grade fixed income
Association (FNMA) 4.9 9. First American Capital investments, returned 6.97%.(4) It outperformed
Wireless Telecommunication Trust I 2.2 the S&P 500 Index, which represents the
Services 3.7 10. iStar Financial Inc. 2.0 performance of the U.S.
Regional Banks 3.4
43 Other Industries, Each with Total Net Assets $38.94 million
Less than 3% of Total Net Assets 39.8
Money Market Funds Plus Total Number of Holdings* 179
Other Assets Less Liabilities -4.6
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
*Excluding money market fund holdings.
======================================= ======================================
AIM V.I. Diversified Income Fund
stock market and which returned 5.49%(4) in the investment grade bond sector Jan H. Friedli
for the year. detracted from relative performance. [FRIEDLI Senior portfolio manager, is
PHOTO] lead portfolio manager of AIM
During the year, fixed income markets In 2007, the U.S. high yield market V.I. Diversified Income Fund.
were focused on the benchmark 10-year lagged all major segments of the bond Mr. Friedli graduated cum laude from
Treasury note, which finished 2007 with a market.(4) Despite historically low Villanova University with a B.S. in
slight gain, as yields for Treasuries of default rates, credit spreads, which computer science before earning an M.B.A.
all maturities dropped during the year. We reflect the risk premium, widened with honors from the University of
started off the year with a considerably by the end of the year as Chicago.
short-to-neutral duration positioning to investors fled to the relative safety
take advantage of the continuing rally of of government securities. As a result, Peter Ehret
long-term bond yields. By the middle of the our overweight exposure to the high [EHRET Chartered Financial Analyst,
year, short term yields had decreased while yield sector was a negative for PHOTO] senior portfolio manager, is
long term yields had increased, both by a the Fund's relative performance. manager of AIM V.I.
small amount, restoring the yield curve to Diversified Income Fund. He graduated cum
a more normal shape. As a result, we The Fund maintained a neutral position laude with a B.S. in economics from the
slightly benefited from the portfolio's in mortgage-backed securities (MBS). University of Minnesota. He also earned an
longer duration during the first two Affected by the weak housing market and M.S. in real estate appraisal and
quarters. subprime-related problems, MBS investment analysis from the University of
underperformed U.S. Treasury securities.5 Wisconsin-Madison.
Beginning in the summer, we moved to a The Fund's weighting in MBS detracted
defensive duration positioning to minimize from performance. Brendan Gau
the Fund's interest rate sensitivity. The [GAU Chartered Financial Analyst,
market began to anticipate that the Fed In the international non-dollar PHOTO] portfolio manager, is manager
would lower interest rates, but we believed sector, we had small hedged positions in of AIM V.I. Diversified
its interest rate reductions would be more Europe and Japan during the first few Income Fund. He earned a B.A. degree in
measured. Unfortunately, the Fed cut rates months of 2007. As the U.S. dollar mathematics, physics and economics from
more aggressively than we expected and remained weak against the British pound Rice University.
short term interest rates experienced the and Japanese yen, our hedged holdings in
steepest decline. Being underweight the United Kingdom and Japan detracted Carolyn L. Gibbs
duration in the later part of the year, from Fund performance. By the middle of [GIBBS Chartered Financial Analyst,
when bond yields rallied dramatically, was the year, we exited all our non-dollar PHOTO] senior portfolio manager, is
a major detractor from relative positions, as we believed these markets manager of AIM V.I.
performance. offered limited investment opportunities. Diversified Income Fund. Ms. Gibbs is a
Phi Beta Kappa graduate of Texas Christian
Duration is a measure of a bond's Thank you for your investment in AIM University, where she earned a B.A. in
sensitivity to interest rate changes. V.I. Diversified Income Fund. English. She also earned an M.B.A. in
Shorter duration bonds tend to be less finance from The Wharton School of the
sensitive to interest rate changes. For Sources: (1)Bureau of Economic Analysis; University of Pennsylvania.
duration management purposes, we used five- (2)Bureau of Labor Statistics; (3)U.S.
and 10-year U.S. Treasury futures. In our Federal Reserve Board; (4)Lipper Inc.; Darren Hughes
view, gaining exposure to the U.S. Treasury (5)Lehman Brothers Inc. [HUGHES Chartered Financial Analyst,
market through U.S. Treasury futures is a PHOTO] senior portfolio manager, is
more effective way to use the Fund's cash THE VIEWS AND OPINIONS EXPRESSED IN manager of AIM V.I.
than buying actual bonds. U.S. Treasury MANAGEMENT'S DISCUSSION OF FUND Diversified Income Fund. Mr. Hughes earned
futures offer a variety of standardized PERFORMANCE ARE THOSE OF A I M ADVISORS, a B.B.A. in finance and economics from
contracts, are exchange traded and provide INC. THESE VIEWS AND OPINIONS ARE SUBJECT Baylor University.
a high level of liquidity. TO CHANGE AT ANY TIME BASED ON FACTORS
SUCH AS MARKET AND ECONOMIC CONDITIONS. Assisted by the Taxable Investment Grade
During the year, the Fund was positioned THESE VIEWS AND OPINIONS MAY NOT BE Bond Team and the Taxable High Yield Team
in anticipation of a slight steepening of RELIED UPON AS INVESTMENT ADVICE OR
the yield curve over the medium to long RECOMMENDATIONS, OR AS AN OFFER FOR A
term. By the end of the year, the PARTICULAR SECURITY. THE INFORMATION IS
two-year/10-year yield spread increased, NOT A COMPLETE ANALYSIS OF EVERY ASPECT
implying the yield curve had steepened, OF ANY MARKET, COUNTRY, INDUSTRY,
which benefited the Fund's relative SECURITY OR THE FUND. STATEMENTS OF FACT
performance. ARE FROM SOURCES CONSIDERED RELIABLE, BUT
A I M ADVISORS, INC. MAKES NO
Driven by the turmoil in the capital REPRESENTATION OR WARRANTY AS TO THEIR
markets, investment grade corporate bonds COMPLETENESS OR ACCURACY. ALTHOUGH
underperformed U.S. Treasury securities and HISTORICAL PERFORMANCE IS NO GUARANTEE OF
many other sectors of the bond markets.(5) FUTURE RESULTS, THESE INSIGHTS MAY HELP
While maintaining a relatively neutral YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
exposure to corporate bonds, some of our PHILOSOPHY.
financial industry bonds with longer
maturities performed poorly. Overall, the =========================================
Fund's position FOR A DISCUSSION OF THE RISKS OF
INVESTING IN YOUR FUND, INDEXES USED IN
THIS REPORT AND YOUR FUND'S LONG-TERM
PERFORMANCE, PLEASE TURN THE PAGE.
=========================================
AIM V.I. Diversified Income Fund
Your Fund's long-term performance
=========================================== CANNOT GUARANTEE COMPARABLE FUTURE VARIABLE PRODUCTS. YOU CANNOT PURCHASE
AVERAGE ANNUAL TOTAL RETURNS RESULTS; CURRENT PERFORMANCE MAY BE LOWER SHARES OF THE FUND DIRECTLY. PERFORMANCE
OR HIGHER. PLEASE CONTACT YOUR VARIABLE FIGURES GIVEN REPRESENT THE FUND AND ARE
As of 12/31/07 PRODUCT ISSUER OR FINANCIAL ADVISOR FOR NOT INTENDED TO REFLECT ACTUAL VARIABLE
THE MOST RECENT MONTH-END VARIABLE PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES I SHARES PRODUCT PERFORMANCE. CHARGES, EXPENSES AND FEES ASSESSED IN
Inception (5/5/93) 4.72% CONNECTION WITH A VARIABLE PRODUCT. SALES
10 Years 3.13 PERFORMANCE FIGURES REFLECT FUND CHARGES, EXPENSES AND FEES, WHICH ARE
5 Years 4.64 EXPENSES, REINVESTED DISTRIBUTIONS AND DETERMINED BY THE VARIABLE PRODUCT
1 Year 1.72 CHANGES IN NET ASSET VALUE. INVESTMENT ISSUERS, WILL VARY AND WILL LOWER THE
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE TOTAL RETURN.
SERIES II SHARES SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN
10 Years 2.87% YOU SELL SHARES. THE MOST RECENT MONTH-END PERFORMANCE
5 Years 4.38 DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
1 Year 1.51 THE NET ANNUAL FUND OPERATING EXPENSE PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
=========================================== RATIO SET FORTH IN THE MOST RECENT FUND AUTOMATED INFORMATION LINE, 866-702-4402.
PROSPECTUS AS OF THE DATE OF THIS REPORT AS MENTIONED ABOVE, FOR THE MOST RECENT
SERIES II SHARES' INCEPTION DATE IS FOR SERIES I AND SERIES II SHARES WAS MONTH-END PERFORMANCE INCLUDING VARIABLE
MARCH 14, 2002. RETURNS SINCE THAT DATE ARE 0.75% AND 1.00%, RESPECTIVELY.1 THE TOTAL PRODUCT CHARGES, PLEASE CONTACT YOUR
HISTORICAL. ALL OTHER RETURNS ARE THE ANNUAL FUND OPERATING EXPENSE RATIO SET VARIABLE PRODUCT ISSUER OR FINANCIAL
BLENDED RETURNS OF THE HISTORICAL FORTH IN THE MOST RECENT FUND PROSPECTUS ADVISOR.
PERFORMANCE OF SERIES II SHARES SINCE THEIR AS OF THE DATE OF THIS REPORT FOR SERIES
INCEPTION AND THE RESTATED HISTORICAL I AND SERIES II SHARES WAS 1.10% AND HAD THE ADVISOR NOT WAIVED FEES AND/OR
PERFORMANCE OF SERIES I SHARES (FOR PERIODS 1.35%, RESPECTIVELY. THE EXPENSE RATIOS REIMBURSED EXPENSES, PERFORMANCE WOULD
PRIOR TO INCEPTION OF SERIES II SHARES) PRESENTED ABOVE MAY VARY FROM THE EXPENSE HAVE BEEN LOWER.
ADJUSTED TO REFLECT THE RULE 12B-1 FEES RATIOS PRESENTED IN OTHER SECTIONS OF
APPLICABLE TO SERIES II SHARES. THE THIS REPORT THAT ARE BASED ON EXPENSES (1) Total annual operating expenses less
INCEPTION DATE OF SERIES I SHARES IS MAY 5, INCURRED DURING THE PERIOD COVERED BY any contractual fee waivers and/or
1993. THIS REPORT. expense reimbursements by the advisor
in effect through at least April 30,
THE PERFORMANCE OF THE FUND'S SERIES I AIM V.I. DIVERSIFIED INCOME FUND, A 2009. See current prospectus for more
AND SERIES II SHARE CLASSES WILL DIFFER SERIES PORTFOLIO OF AIM VARIABLE information.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. INSURANCE FUNDS, IS CURRENTLY OFFERED
THROUGH INSURANCE COMPANIES ISSUING
THE PERFORMANCE DATA QUOTED REPRESENT
PAST PERFORMANCE AND
===================================================================================================================================
PRINCIPAL RISKS OF INVESTING IN THE FUND The Fund may invest in lower quality ABOUT INDEXES USED IN THIS REPORT
debt securities, commonly known as "junk
The Fund may invest in debt securities, bonds." Compared to higher quality debt The LEHMAN BROTHERS U.S. Aggregate Bond
such as notes and bonds, which carry securities, junk bonds involve greater Index covers U.S. investment-grade
interest rate and credit risk. risk of default or price changes due to fixed-rate bonds with components for
changes in credit quality of the issuer government and corporate securities,
Prices of equity securities change in because they are generally unsecured and mortgage pass-throughs, and asset-backed
response to many factors including the may be subordinated to other creditors' securities.
historical and prospective earnings of the claims. Credit ratings on junk bonds do
issuer, the value of its assets, general not necessarily reflect their actual The LEHMAN BROTHERS U.S. Credit Index
economic conditions, interest rates, market risk. is an unmanaged index that consists of
investor perceptions and market liquidity. publicly issued, SEC-registered U.S.
The Fund may use enhanced investment corporate and specified foreign debentures
High-coupon, U.S. government agency techniques such as derivatives. The and secured notes that meet the specified
mortgage-backed securities provide a higher principal risk of derivatives is that the maturity, liquidity, and quality
coupon than current prevailing market fluctuations in their value may not requirements.
interest rates, and the Fund may purchase correlate perfectly with the overall
such securities at a premium. If these securities markets. Derivatives are The Fund has elected to use the Lipper
securities experience a faster principal subject to counterparty risk--the risk Variable Underlying Funds (VUF) Corporate
prepayment rate than expected, both the that the other party will not complete Debt BBB-Rated Funds Index as its peer
market value and income from such the transaction with the Fund. group instead of the Lipper BBB-Rated
securities will decrease. Funds Index. In 2006, Lipper began
Foreign securities have additional publishing VUF indexes, allowing the Fund
Interest rate risk refers to the risk risks, including exchange rate changes, to be compared with the Lipper VUF
that bond prices generally fall as interest political and economic upheaval, the Corporate Debt BBB-Rated Funds Index. The
rates rise; conversely, bond prices relative lack of information, relatively unmanaged Lipper VUF Corporate Debt
generally rise as interest rates fall. low market liquidity, and the potential BBB-Rated Funds Index is an
lack of strict financial and accounting
controls and standards.
Continued
AIM V.I. Diversified Income Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment
representing a percent change in the
This chart, which is a logarithmic value of the investment. In this chart,
chart, presents the fluctuations in the each segment represents a doubling, or
value of the Fund and its indexes. We 100% change, in the value of the
believe that a logarithmic chart is more investment. In other words, the space
effective than other types of charts in between $5,000 and $10,000 is the same
illustrating changes in value during the size as the space between $10,000 and
early years shown in the chart. The $20,000.
vertical axis, the one that indicates
===================================================================================================================================
Continued from previous page
equally weighted representation of the the indexes defined here, and ues may differ from the net asset values
largest variable insurance underlying funds consequently, the performance of the Fund and returns reported in the Financial
in the Lipper Corporate Debt BBB-Rated may deviate significantly from the Highlights. Additionally, the returns and
Funds category. These funds invest at least performance of the indexes. net asset values shown throughout this
65% of assets in corporate and government report are at the Fund level only and do
debt issues rated in the top four grades. A direct investment cannot be made in not include variable product issuer
an index. Unless otherwise indicated, charges. If such charges were included,
The Lipper BBB Rated Funds Index is an index results include reinvested the total returns would be lower.
equally weighted representation of the dividends, and they do not reflect sales
largest funds in the Lipper BBB Rated Funds charges. Performance of an index of funds Industry classifications used in this
category. The funds invest at least 65% of reflects fund expenses; performance of a report are generally according to the
assets in corporate and government debt market index does not. Global Industry Classification Standard,
issues rated in the top four grades. which was developed by and is the
OTHER INFORMATION exclusive property and a service mark of
The S&P 500--REGISTERED TRADEMARK-- Morgan Stanley Capital International Inc.
Index is a market capitalization-weighted The returns shown in the management's and Standard & Poor's.
index covering all major areas of the U.S. discussion of Fund performance are based
economy. It is not the 500 largest on net asset values calculated for The Chartered Financial
companies, but rather the most widely held shareholder transactions. Generally Analyst--REGISTERED TRADEMARK--
500 companies chosen with respect to market accepted accounting principles require (CFA--REGISTERED TRADEMARK--) designation
size, liquidity, and their industry. adjustments to be made to the net assets is a globally recognized standard for
of the Fund at period end for financial measuring the competence and integrity of
The Fund is not managed to track the reporting purposes, and as such, the net investment professionals.
performance of any particular index, asset values for shareholder transactions
including and the returns based on those net asset
val-
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/93, FUND DATA FROM 5/5/93
AIM V.I. DIVERSIFIED LEHMAN BROTHERS U.S. LIPPER VUF CORPORATE
INCOME FUND-SERIES I AGGREGATE BOND LEHMAN BROTHERS U.S. DEBT BBB-RATED FUNDS LIPPER BBB RATED
DATE SHARES INDEX(1) CREDIT INDEX(1) INDEX(1) FUNDS INDEX(1)
4/30/93 $10000 $10000 $10000 $10000
5/93 $ 9980 10013 10012 10011 10024
6/93 10160 10194 10255 10225 10249
7/93 10240 10252 10329 10310 10345
8/93 10480 10432 10586 10540 10586
9/93 10510 10460 10611 10584 10616
10/93 10622 10499 10665 10632 10690
11/93 10500 10410 10534 10522 10567
12/93 10605 10466 10596 10500 10638
1/94 10833 10608 10801 10657 10823
2/94 10574 10423 10546 10433 10587
3/94 10271 10166 10223 10136 10285
4/94 10166 10085 10124 10033 10161
5/94 10093 10084 10087 10017 10135
6/94 10124 10062 10062 9994 10093
7/94 10178 10261 10316 10172 10266
8/94 10188 10274 10328 10182 10306
9/94 10177 10123 10135 10019 10164
10/94 10231 10114 10112 9999 10131
11/94 10090 10091 10095 9991 10104
12/94 10068 10161 10179 10072 10155
1/95 10146 10362 10395 10261 10319
2/95 10446 10609 10694 10520 10554
3/95 10603 10674 10782 10593 10637
4/95 10795 10823 10964 10749 10829
5/95 11123 11242 11480 11281 11296
6/95 11191 11324 11584 11354 11381
7/95 11281 11299 11533 11287 11354
8/95 11372 11435 11718 11462 11521
9/95 11564 11546 11857 11594 11656
10/95 11734 11696 12012 11798 11812
11/95 11812 11872 12242 12007 12005
12/95 11984 12038 12443 12215 12203
1/96 12056 12118 12524 12280 12302
2/96 11971 11908 12226 11971 12043
3/96 11983 11825 12122 11875 11955
4/96 12007 11758 12021 11784 11878
5/96 12043 11735 12000 11768 11870
6/96 12235 11892 12176 11939 12006
7/96 12259 11925 12200 11962 12036
8/96 12343 11905 12162 11941 12030
9/96 12582 12112 12420 12201 12271
10/96 12881 12380 12759 12521 12565
11/96 13182 12592 13032 12797 12845
12/96 13205 12475 12852 12653 12721
1/97 13129 12514 12870 12676 12761
2/97 13244 12545 12924 12736 12834
3/97 12989 12406 12723 12557 12636
4/97 13168 12591 12916 12738 12823
5/97 13372 12710 13062 12887 12970
6/97 13577 12861 13247 13082 13163
7/97 13947 13208 13731 13554 13618
8/97 13806 13095 13529 13353 13438
9/97 14178 13289 13765 13627 13674
10/97 14242 13481 13940 13770 13813
11/97 14293 13543 14019 13859 13880
12/97 14446 13680 14167 13995 14029
1/98 14688 13855 14335 14189 14208
2/98 14740 13845 14331 14197 14203
3/98 14931 13893 14384 14316 14275
4/98 14945 13965 14474 14376 14336
5/98 15047 14098 14646 14486 14459
6/98 15047 14217 14754 14584 14565
7/98 15072 14247 14741 14593 14554
8/98 14739 14479 14810 14475 14448
9/98 14881 14818 15289 14826 14746
10/98 14625 14740 15054 14656 14564
11/98 14983 14824 15337 14918 14833
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
12/98 14963 14868 15382 14953 14870
1/99 15168 14974 15534 15101 15000
2/99 14841 14713 15165 14767 14675
3/99 14977 14794 15272 14913 14839
4/99 15100 14841 15317 15039 14945
5/99 14759 14711 15112 14827 14743
6/99 14663 14664 15033 14767 14666
7/99 14622 14602 14950 14698 14592
8/99 14525 14595 14914 14648 14538
9/99 14634 14764 15076 14783 14663
10/99 14580 14818 15145 14802 14692
11/99 14621 14817 15161 14846 14727
12/99 14677 14746 15081 14839 14703
1/00 14618 14698 15028 14816 14660
2/00 14779 14875 15167 15017 14841
3/00 14793 15071 15296 15198 14977
4/00 14487 15028 15162 15045 14796
5/00 14225 15021 15106 14932 14683
6/00 14531 15334 15485 15293 15055
7/00 14574 15473 15673 15431 15119
8/00 14764 15697 15877 15665 15395
9/00 14764 15796 15960 15673 15439
10/00 14603 15901 15976 15647 15389
11/00 14530 16160 16183 15799 15532
12/00 14777 16460 16497 16115 15857
1/01 15291 16729 16948 16493 16240
2/01 15400 16875 17096 16645 16401
3/01 15150 16960 17202 16645 16391
4/01 14932 16890 17140 16539 16301
5/01 15072 16991 17297 16668 16448
6/01 14979 17056 17385 16682 16467
7/01 15337 17437 17839 17069 16840
8/01 15493 17637 18078 17273 17042
9/01 15198 17842 18051 17181 16897
10/01 15571 18215 18499 17561 17255
11/01 15478 17964 18338 17416 17143
12/01 15308 17850 18213 17272 17039
1/02 15341 17995 18367 17383 17132
2/02 15257 18169 18505 17498 17214
3/02 15056 17867 18164 17292 16988
4/02 15223 18213 18417 17618 17248
5/02 15273 18368 18660 17754 17384
6/02 15071 18527 18691 17726 17303
7/02 14702 18750 18681 17712 17216
8/02 15021 19067 19165 18077 17564
9/02 15255 19376 19529 18263 17722
10/02 15021 19288 19303 18120 17596
11/02 15238 19282 19553 18307 17849
12/02 15657 19681 20130 18734 18265
1/03 15767 19698 20195 18861 18386
2/03 16040 19970 20599 19196 18695
3/03 16094 19955 20614 19223 18727
4/03 16423 20119 20995 19507 19105
5/03 16878 20495 21657 19898 19605
6/03 16950 20454 21604 19907 19631
7/03 16294 19766 20683 19276 18962
8/03 16403 19897 20845 19410 19112
9/03 16913 20424 21573 19935 19700
10/03 16822 20234 21343 19821 19622
11/03 16894 20282 21441 19910 19757
12/03 17104 20489 21680 20147 20045
1/04 17297 20653 21899 20331 20227
2/04 17434 20877 22174 20527 20406
3/04 17570 21033 22389 20690 20546
4/04 17143 20486 21683 20202 20023
5/04 17066 20404 21531 20085 19871
6/04 17143 20519 21622 20204 19988
7/04 17297 20723 21889 20404 20197
8/04 17646 21118 22405 20777 20607
9/04 17743 21175 22531 20862 20735
10/04 17898 21353 22749 21045 20940
11/04 17801 21183 22521 20921 20870
12/04 17963 21377 22815 21128 21108
1/05 18087 21512 22996 21230 21220
2/05 18025 21385 22861 21164 21185
3/05 17861 21275 22576 21004 20947
4/05 18108 21563 22879 21233 21118
5/05 18334 21796 23199 21460 21338
6/05 18479 21915 23383 21611 21519
7/05 18355 21715 23149 21492 21419
===================================================================================================================================
===================================================================================================================================
[MOUNTAIN CHART]
8/05 18623 21994 23501 21745 21685
9/05 18398 21767 23149 21518 21469
10/05 18212 21595 22896 21363 21283
11/05 18314 21690 23035 21454 21370
12/05 18486 21897 23262 21649 21580
1/06 18508 21898 23215 21682 21659
2/06 18595 21971 23318 21756 21758
3/06 18398 21755 22990 21571 21520
4/06 18288 21716 22906 21588 21506
5/06 18310 21692 22866 21574 21454
6/06 18354 21738 22901 21611 21457
7/06 18616 22032 23238 21894 21754
8/06 18901 22370 23668 22232 22151
9/06 19120 22566 23932 22440 22370
10/06 19229 22715 24123 22622 22565
11/06 19449 22979 24464 22902 22878
12/06 19312 22846 24253 22806 22719
1/07 19289 22836 24248 22814 22751
2/07 19733 23188 24737 23208 23190
3/07 19709 23189 24618 23192 23106
4/07 19849 23314 24796 23364 23313
5/07 19663 23137 24553 23191 23167
6/07 19570 23069 24438 23067 23024
7/07 19570 23261 24522 23126 22994
8/07 19617 23546 24748 23363 23257
9/07 19664 23725 24946 23646 23521
10/07 19827 23938 25238 23864 23776
11/07 19710 24369 25453 24040 23954
12/07 19648 24437 25491 24181 23915
===================================================================================================================================
AIM V.I. Diversified Income Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
BONDS & NOTES-82.82%
AEROSPACE & DEFENSE-0.80%
Systems 2001 Asset Trust LLC (United
Kingdom)- Series 2001, Class G, Jr. Sec.
Pass Through Ctfs., (INS-MBIA Insurance
Corp.) 6.66%, 09/15/13 (Acquired
02/09/05-10/27/05; Cost $331,874)(b)(c)(d) $ 302,183 $ 311,249
=======================================================================
AIRLINES-0.53%
Southwest Airlines Co., Sr. Unsec. Deb.,
7.38%, 03/01/27(d) 190,000 208,257
=======================================================================
ALTERNATIVE CARRIERS-0.14%
Level 3 Financing Inc., Sr. Unsec. Gtd.
Unsub. Global Notes, 9.25%, 11/01/14(d) 60,000 54,600
=======================================================================
ALUMINUM-0.50%
Novelis Inc. (Canada), Sr. Unsec. Gtd. Global
Notes, 7.25%, 02/15/15(d) 205,000 194,237
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.67%
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)(b)(d) 250,000 259,852
=======================================================================
AUTO PARTS & EQUIPMENT-0.09%
Visteon Corp., Sr. Unsec. Global Notes,
8.25%, 08/01/10(d) 40,000 35,800
=======================================================================
BROADCASTING & CABLE TV-5.36%
Clear Channel Communications Inc.,
Sr. Notes,
5.50%, 09/15/14(d) 40,000 30,458
- -----------------------------------------------------------------------
Sr. Unsec. Unsub. Global Notes,
4.63%, 01/15/08(d) 750,000 747,203
- -----------------------------------------------------------------------
Comcast Cable Communications Holdings Inc.,
Unsec. Gtd. Global Notes, 9.46%,
11/15/22(d) 440,000 549,859
- -----------------------------------------------------------------------
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12(d) 485,000 575,676
- -----------------------------------------------------------------------
Cox Enterprises, Inc., Sr. Unsec. Notes,
7.88%, 09/15/10 (Acquired 05/02/07; Cost
$128,774)(b)(d) 120,000 128,124
- -----------------------------------------------------------------------
CSC Holdings, Inc.-Series B, Sr. Unsec.
Notes, 7.63%, 04/01/11(d) 55,000 54,931
=======================================================================
2,086,251
=======================================================================
COMMERCIAL PRINTING-0.15%
Quebecor World Capital Corp. (Canada), Sr.
Notes, 8.75%, 03/15/16 (Acquired 01/11/07;
Cost $78,800)(b)(d) 80,000 59,100
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
CONSUMER FINANCE-5.73%
Capital One Capital III, Jr. Gtd. Sub. Notes,
7.69%, 08/15/36(d) $ 260,000 $ 209,165
- -----------------------------------------------------------------------
Ford Motor Credit Co. LLC,
Sr. Unsec. Notes,
4.95%, 01/15/08(d) 1,000,000 998,930
- -----------------------------------------------------------------------
6.63%, 06/16/08(d) 240,000 237,552
- -----------------------------------------------------------------------
8.00%, 12/15/16(d) 230,000 197,496
- -----------------------------------------------------------------------
SLM Corp.,
Sr. Unsec. Floating Rate Medium Term Notes,
5.08%, 03/16/09 (Acquired 09/25/07; Cost
$385,000)(b)(d)(e) 400,000 388,551
- -----------------------------------------------------------------------
Unsec. Floating Rate Medium Term Notes,
5.04%, 04/14/08(d)(e) 200,000 198,552
=======================================================================
2,230,246
=======================================================================
DISTILLERS & VINTNERS-0.10%
Constellation Brands, Inc., Sr. Gtd. Notes,
7.25%, 05/15/17 (Acquired 08/08/07; Cost
$38,300)(b)(d) 40,000 37,150
=======================================================================
DIVERSIFIED BANKS-8.20%
Bangkok Bank PCL (Hong Kong), Unsec. Sub.
Notes, 9.03%, 03/15/29 (Acquired
04/21/05-05/11/06; Cost $493,483)(b)(d) 400,000 441,556
- -----------------------------------------------------------------------
BankAmerica Institutional-Series A, Gtd.
Trust Pfd. Capital Securities, 8.07%,
12/31/26 (Acquired 02/15/06-09/26/06; Cost
$209,596)(b)(d) 200,000 208,194
- -----------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Jr. Unsec. Gtd. Sub. Notes, 5.92%
(Acquired 03/22/07; Cost $220,000)(b)(d)(f) 220,000 192,661
- -----------------------------------------------------------------------
Centura Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.85%, 06/01/27
(Acquired 05/22/03; Cost $632,715)(b)(d) 500,000 524,635
- -----------------------------------------------------------------------
First Empire Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.23%, 02/01/27(d) 260,000 271,947
- -----------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series
1, Unsec. Sub. Floating Rate Euro Notes,
5.13%(d)(e)(f) 180,000 145,476
- -----------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Gtd. Sub. Second Tier Euro Bonds,
8.38%(d)(f) 100,000 101,069
- -----------------------------------------------------------------------
National Bank of Canada (Canada), Floating
Rate Euro Deb., 5.56%, 08/29/87(d)(e) 200,000 155,000
- -----------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)- Series B, Unsec. Sub. Floating
Rate Euro Notes, 5.56%(d)(e)(f) 280,000 215,799
- -----------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,
8.25%, 11/01/24(d) 140,000 161,808
- -----------------------------------------------------------------------
RBD Capital S.A. (Luxembourg), Euro Notes,
6.50%, 08/11/08(d) 110,000 109,642
- -----------------------------------------------------------------------
RBS Capital Trust III, Jr. Gtd. Sub. Trust
Pfd. Global Notes, 5.51%(d)(f) 120,000 108,798
- -----------------------------------------------------------------------
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
DIVERSIFIED BANKS-(CONTINUED)
Sumitomo Mitsui Banking Corp. (Japan), Sub.
Second Tier Euro Notes, 8.15%(d)(f) $ 280,000 $ 285,773
- -----------------------------------------------------------------------
Wachovia Capital Trust V, Jr. Gtd. Sub. Trust
Pfd. Capital Securities, 7.97%, 06/01/27
(Acquired 08/08/07; Cost $270,517)(b)(d) 260,000 271,619
=======================================================================
3,193,977
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-1.06%
Erac USA Finance Co., Sr. Unsec. Gtd. Notes,
7.00%, 10/15/37 (Acquired 10/10/07; Cost
$396,536)(b)(d) 400,000 370,416
- -----------------------------------------------------------------------
GEO Group, Inc. (The), Sr. Unsec. Global
Notes, 8.25%, 07/15/13(d) 40,000 40,500
=======================================================================
410,916
=======================================================================
DIVERSIFIED METALS & MINING-0.25%
Reynolds Metals Co., Sr. Unsec. Unsub. Medium
Term Notes, 7.00%, 05/15/09(d) 94,000 96,225
=======================================================================
ELECTRIC UTILITIES-0.80%
Edison Mission Energy, Sr. Unsec. Global
Notes, 7.00%, 05/15/17(d) 80,000 78,800
- -----------------------------------------------------------------------
Tenaska Alabama Partners L.P., Sr. Sec.
Notes, 7.00%, 06/30/21 (Acquired
05/03/07-05/21/07; Cost $129,588)(b)(d) 124,783 124,471
- -----------------------------------------------------------------------
Westar Energy, Inc., Sr. Sec. First Mortgage
Notes, 7.13%, 08/01/09(d) 105,000 108,255
=======================================================================
311,526
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.23%
Waste Management Inc., Unsec. Deb., 8.75%,
05/01/18(d) 473,000 477,498
=======================================================================
GENERAL MERCHANDISE STORES-0.19%
Pantry, Inc. (The), Sr. Gtd. Sub. Global
Notes, 7.75%, 02/15/14(d) 80,000 73,800
=======================================================================
HEALTH CARE SERVICES-0.57%
Orlando Lutheran Towers Inc.,
Bonds,
7.75%, 07/01/11(d) 95,000 94,733
- -----------------------------------------------------------------------
8.00%, 07/01/17(g)(h) 125,000 126,875
=======================================================================
221,608
=======================================================================
HOMEBUILDING-1.00%
D.R. Horton, Inc.,
Sr. Unsec. Gtd. Notes,
8.00%, 02/01/09(d) 200,000 195,940
- -----------------------------------------------------------------------
7.88%, 08/15/11(d) 200,000 194,468
=======================================================================
390,408
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
INTEGRATED OIL & GAS-2.20%
ConocoPhillips, Unsec. Deb., 7.13%,
03/15/28(d) $ 300,000 $ 310,290
- -----------------------------------------------------------------------
Husky Oil Ltd. (Canada), Unsec. Sub. Yankee
Capital Securities, 8.90%, 08/15/28(d) 540,000 547,096
=======================================================================
857,386
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-6.16%
Embarq Corp.,
Sr. Unsec. Notes,
7.08%, 06/01/16(d) 150,000 154,606
- -----------------------------------------------------------------------
8.00%, 06/01/36(d) 380,000 400,311
- -----------------------------------------------------------------------
Pacific Bell, Unsec. Deb., 7.38%, 07/15/43(d) 380,000 399,217
- -----------------------------------------------------------------------
Southwestern Bell Telephone L.P., Sr. Unsec.
Unsub. Deb., 7.20%, 10/15/26(d) 180,000 183,100
- -----------------------------------------------------------------------
Verizon Florida Inc.-Series F, Sr. Unsec.
Deb., 6.13%, 01/15/13(d) 150,000 157,752
- -----------------------------------------------------------------------
Verizon New York Inc., Sr. Unsec. Bonds,
7.00%, 12/01/33(d) 180,000 179,248
- -----------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Sr. Unsec.
Global Bonds, 4.63%, 03/15/13(d) 958,000 923,818
=======================================================================
2,398,052
=======================================================================
INTERNET RETAIL-1.06%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13(d) 400,000 411,276
=======================================================================
INVESTMENT BANKING & BROKERAGE-2.55%
Bear Stearns Cos. Inc., (The), Floating Rate
Notes, 5.60%, 07/19/10(d)(e) 260,000 244,566
- -----------------------------------------------------------------------
Dryden Investor Trust, Bonds, 7.16%, 07/23/08
(Acquired 04/10/06-09/25/07; Cost
$50,757)(b)(d) 50,474 50,560
- -----------------------------------------------------------------------
Goldman Sachs Group Inc., Sr. Sub. Global
Notes, 6.75%, 10/01/37(d) 140,000 139,171
- -----------------------------------------------------------------------
Jefferies Group, Inc., Sr. Unsec. Notes,
6.45%, 06/08/27(d) 400,000 377,344
- -----------------------------------------------------------------------
Lehman Brothers Holdings Inc.-Series I, Sr.
Floating Rate Medium Term Notes, 4.91%,
11/24/08(d)(e) 50,000 49,275
- -----------------------------------------------------------------------
Morgan Stanley-Series F, Sr. Unsec. Medium
Term Global Notes, 5.95%, 12/28/17(d) 130,000 130,485
=======================================================================
991,401
=======================================================================
LIFE & HEALTH INSURANCE-1.03%
Americo Life Inc., Notes, 7.88%, 05/01/13
(Acquired 04/25/03; Cost $93,875)(b)(d) 95,000 100,650
- -----------------------------------------------------------------------
Prudential Holdings, LLC-Series B, Bonds,
(INS-Financial Security Assurance Inc.)
7.25%, 12/18/23 (Acquired 01/22/04; Cost
$307,765)(b)(c)(d) 260,000 300,118
=======================================================================
400,768
=======================================================================
METAL & GLASS CONTAINERS-0.37%
Owens-Brockway Glass Container Inc., Sr.
Unsec. Gtd. Global Notes, 8.25%,
05/15/13(d) 140,000 145,600
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
,x
MORTGAGE REIT'S-2.05%
iStar Financial Inc.,
Sr. Unsec. Floating Rate Notes,
5.51%, 03/03/08(d)(e) $ 700,000 $ 697,550
- -----------------------------------------------------------------------
Sr. Unsec. Notes,
7.00%, 03/15/08(d) 100,000 100,388
=======================================================================
797,938
=======================================================================
MOVIES & ENTERTAINMENT-1.67%
News America Holdings Inc., Sr. Unsec. Gtd.
Deb., 7.75%, 12/01/45(d) 380,000 416,104
- -----------------------------------------------------------------------
Time Warner Inc., Sr. Unsec. Gtd. Deb.,
6.50%, 11/15/36(d) 240,000 234,597
=======================================================================
650,701
=======================================================================
MULTI-UTILITIES-1.23%
Dominion Capital Trust I, Jr. Unsec. Gtd.
Sub. Trust Pfd. Capital Securities, 7.83%,
12/01/27(d) 400,000 417,032
- -----------------------------------------------------------------------
Dominion Resources, Inc., Sr. Unsec. Notes,
4.13%, 02/15/08(d) 61,000 60,921
=======================================================================
477,953
=======================================================================
OIL & GAS REFINING & MARKETING-0.59%
Premcor Refining Group Inc., (The), Sr.
Unsec. Global Notes, 9.50%, 02/01/13(d) 220,000 230,701
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-13.09%
BankAmerica Capital II-Series 2, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
8.00%, 12/15/26(d) 130,000 135,028
- -----------------------------------------------------------------------
BankAmerica Capital III, Gtd. Floating Rate
Trust Pfd. Capital Securities, 5.81%,
01/15/27(d)(e) 410,000 374,977
- -----------------------------------------------------------------------
Capmark Financial Group Inc., Sr. Unsec. Gtd.
Floating Rate Notes, 5.53%, 05/10/10
(Acquired 09/27/07; Cost $279,000)(b)(d)(e) 300,000 242,088
- -----------------------------------------------------------------------
Lazard Group, Sr. Unsec. Global Notes, 6.85%,
06/15/17(d) 210,000 204,855
- -----------------------------------------------------------------------
Mantis Reef Ltd. (Cayman Islands), Notes,
4.69%, 11/14/08 (Acquired 02/23/07; Cost
$316,109)(b)(d) 320,000 321,498
- -----------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Sub.
Bonds, 9.87% (Acquired 06/16/04-03/03/06;
Cost $787,636)(b)(d)(f) 700,000 714,434
- -----------------------------------------------------------------------
NB Capital Trust IV, Jr. Gtd. Sub. Trust Pfd.
Capital Securities, 8.25%, 04/15/27(d) 470,000 492,414
- -----------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2,
Class A1, Global Bonds, 9.69%,
08/15/09(c)(d) 234,500 241,467
- -----------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands), Sr. Notes, 9.25%, 03/15/30
(Acquired 01/10/03-09/22/04; Cost
$525,327)(b)(d) 453,889 514,465
- -----------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands)- Class A-1a, Sr. Sec. Floating
Rate Notes, 5.41%, 01/25/36 (Acquired
03/21/05; Cost $419,615)(b)(d)(e)(h) 419,615 403,722
- -----------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Residential Capital LLC, Sr. Unsec. Gtd.
Unsub. Floating Rate Notes, 5.65%,
06/09/08(d)(e) $1,065,000 $ 918,563
- -----------------------------------------------------------------------
Twin Reefs Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 6.24%
(Acquired 12/07/04-04/03/06; Cost
$130,332)(b)(d)(e)(f)(h) 130,000 84,607
- -----------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 5.83%
(Acquired 11/10/06; Cost
$220,260)(b)(d)(e)(f)(h) 220,000 99,275
- -----------------------------------------------------------------------
UFJ Finance Aruba AEC (Japan), Gtd. Sub.
Second Tier Euro Bonds, 8.75%(d)(f) 250,000 253,413
- -----------------------------------------------------------------------
Windsor Financing LLC, Sr. Gtd. Notes, 5.88%,
07/15/17 (Acquired 02/07/06; Cost
$92,856)(b)(d) 92,856 97,882
=======================================================================
5,098,688
=======================================================================
PAPER PACKAGING-0.54%
Sealed Air Corp., Sr. Unsec. Notes, 5.38%,
04/15/08 (Acquired 05/18/07; Cost
$209,572)(b)(d) 210,000 210,065
=======================================================================
PAPER PRODUCTS-0.54%
International Paper Co., Notes, 5.13%,
11/15/12(d) 80,000 79,978
- -----------------------------------------------------------------------
Mercer International Inc., Sr. Unsec. Global
Notes, 9.25%, 02/15/13(d) 140,000 129,500
=======================================================================
209,478
=======================================================================
PROPERTY & CASUALTY INSURANCE-7.22%
First American Capital Trust I, Gtd. Trust
Pfd. Capital Securities, 8.50%, 04/15/12(d) 790,000 861,803
- -----------------------------------------------------------------------
North Front Pass-Through Trust, Pass Through
Ctfs., 5.81%, 12/15/24 (Acquired 12/08/04;
Cost $351,994)(b)(d) 350,000 335,090
- -----------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec.
Gtd. Deb, 8.00%, 09/15/34 (Acquired
04/29/05-06/09/05; Cost $352,536)(b)(d) 330,000 341,659
- -----------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56% (Acquired
06/15/06; Cost $870,000)(b)(d)(f) 870,000 894,108
- -----------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia), Gtd.
Sub. Bonds, 6.80% (Acquired
04/25/07-06/29/07; Cost $393,124)(b)(d)(f) 400,000 377,964
=======================================================================
2,810,624
=======================================================================
REGIONAL BANKS-3.37%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd.
Sub. Floating Rate Notes, 6.67%,
03/01/34(d)(e) 600,000 586,536
- -----------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate Trust
Pfd. Capital Securities, 5.69%,
06/01/28(d)(e) 100,000 88,177
- -----------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes,
6.05%, 06/01/17(d) 480,000 464,050
- -----------------------------------------------------------------------
TCF National Bank, Sub. Notes, 5.00%,
06/15/14(d) 175,000 175,376
=======================================================================
1,314,139
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
REINSURANCE-1.56%
Reinsurance Group of America, Inc., Jr.
Unsec. Sub. Deb., 6.75%, 12/15/65(d) $ 380,000 $ 345,846
- -----------------------------------------------------------------------
Stingray Pass-Through Trust, Pass Through
Ctfs., 5.90%, 01/12/15 (Acquired
01/07/05-11/03/05; Cost $493,840)(b)(d)(h) 500,000 262,880
=======================================================================
608,726
=======================================================================
RESTAURANTS-0.38%
Darden Restaurants Inc., Sr. Unsec. Notes,
6.20%, 10/15/17(d) 150,000 149,344
=======================================================================
SPECIALIZED FINANCE-0.28%
CIT Group Inc., Sr. Unsec. Medium Term Global
Notes, 4.00%, 05/08/08(d) 110,000 109,434
=======================================================================
SPECIALIZED REIT'S-1.20%
HCP Inc.,
Sr. Unsec. Floating Rate Medium Term Notes,
5.44%, 09/15/08(d)(e) 165,000 164,754
- -----------------------------------------------------------------------
Sr. Unsec. Medium Term Notes,
6.70%, 01/30/18(d) 140,000 137,525
- -----------------------------------------------------------------------
Health Care REIT Inc., Sr. Unsec. Notes,
5.88%, 05/15/15(d) 175,000 165,660
=======================================================================
467,939
=======================================================================
SPECIALTY CHEMICALS-0.52%
Valspar Corp.,
Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12(d) 100,000 101,223
- -----------------------------------------------------------------------
6.05%, 05/01/17(d) 100,000 103,157
=======================================================================
204,380
=======================================================================
STEEL-0.54%
United States Steel Corp.,
Sr. Unsec. Unsub. Notes,
6.05%, 06/01/17(d) 150,000 141,210
- -----------------------------------------------------------------------
6.65%, 06/01/37(d) 80,000 70,857
=======================================================================
212,067
=======================================================================
THRIFTS & MORTGAGE FINANCE-1.29%
Countrywide Financial Corp., Unsec. Gtd.
Unsub. Floating Rate Medium Term Notes,
5.38%, 01/05/09(d)(e) 260,000 203,255
- -----------------------------------------------------------------------
Washington Mutual, Inc., Floating Rate Ctfs.
of Deposit, 5.24%, 04/18/08(d)(e) 300,000 300,048
=======================================================================
503,303
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-1.29%
United Rentals North America, Inc., Sr.
Unsec. Gtd. Global Notes, 6.50%,
02/15/12(d) 80,000 73,000
- -----------------------------------------------------------------------
Western Power Distribution Holdings Ltd.
(United Kingdom), Sr. Unsec. Unsub. Notes,
7.38%, 12/15/28 (Acquired
01/25/05-03/03/05; Cost $428,237)(b)(d) 375,000 429,525
=======================================================================
502,525
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
TRUCKING-1.69%
Roadway Corp., Sr. Sec. Gtd. Global Notes,
8.25%, 12/01/08(d) $ 650,000 $ 656,799
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.03%
Alamosa Delaware Inc., Sr. Gtd. Global Notes,
8.50%, 01/31/12(d) 190,000 198,158
- -----------------------------------------------------------------------
Nextel Communications, Inc.-Series D, Sr.
Gtd. Notes, 7.38%, 08/01/15(d) 710,000 703,177
- -----------------------------------------------------------------------
Sprint Nextel Corp., Unsec. Deb., 9.25%,
04/15/22(d) 235,000 280,261
=======================================================================
1,181,596
=======================================================================
Total Bonds & Notes (Cost $33,752,026) 32,253,583
=======================================================================
U.S. MORTGAGE-BACKED SECURITIES-5.96%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-1.25%
Pass Through Ctfs.,
8.50%, 03/01/10(d) 108 108
- -----------------------------------------------------------------------
6.50%, 05/01/16 to 08/01/32(d) 23,776 24,597
- -----------------------------------------------------------------------
6.00%, 05/01/17 to 11/01/33(d) 228,059 232,430
- -----------------------------------------------------------------------
5.50%, 09/01/17(d) 82,834 84,015
- -----------------------------------------------------------------------
7.00%, 08/01/21(d) 137,056 143,856
=======================================================================
485,006
=======================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-4.15%
Pass Through Ctfs.,
7.00%, 02/01/16 to 09/01/32(d) 44,162 46,402
- -----------------------------------------------------------------------
6.50%, 05/01/16 to 05/01/35(d) 153,993(i) 159,343
- -----------------------------------------------------------------------
5.00%, 11/01/18(d) 75,733 75,934
- -----------------------------------------------------------------------
7.50%, 04/01/29 to 10/01/29(d) 100,990 108,050
- -----------------------------------------------------------------------
8.00%, 04/01/32(d) 6,213 6,636
- -----------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 01/01/23(d)(j) 697,000 706,039
- -----------------------------------------------------------------------
6.50%, 01/01/38(d)(j) 499,000 512,956
=======================================================================
1,615,360
=======================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-0.56%
Pass Through Ctfs.,
7.50%, 06/15/23(d) 16,646 17,759
- -----------------------------------------------------------------------
8.50%, 11/15/24(d) 12,795 13,977
- -----------------------------------------------------------------------
7.00%, 07/15/31 to 08/15/31(d) 4,440 4,708
- -----------------------------------------------------------------------
6.50%, 11/15/31 to 09/15/32(d) 34,802 36,087
- -----------------------------------------------------------------------
6.00%, 12/15/31 to 11/15/32(d) 50,441 51,747
- -----------------------------------------------------------------------
5.50%, 02/15/34(d) 94,724(i) 95,459
=======================================================================
219,737
=======================================================================
Total U.S. Mortgage-Backed Securities
(Cost $2,313,119) 2,320,103
=======================================================================
</Table>
AIM V.I. Diversified Income Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
ASSET-BACKED SECURITIES-5.39%
COLLATERALIZED MORTGAGE OBLIGATIONS-0.95%
Federal Home Loan Bank-Series TQ-2015, Class
A, Pass Through Ctfs., 5.07%, 10/20/15(d) $ 111,427 $ 113,818
- -----------------------------------------------------------------------
U.S. Bank N.A., Sr. Medium Term Notes, 5.92%,
05/25/12(d) 242,940 254,715
=======================================================================
368,533
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.44%
Citicorp Lease Pass-Through Trust-Series
1999-1, Class A2, Pass Through Ctfs.,
(Acquired 06/01/00- 01/26/06; Cost $
364,942) 8.04%, 12/15/19 (Acquired
07/14/00-07/27/05; Cost $781,505)(b)(d) 675,000 778,139
- -----------------------------------------------------------------------
Patron's Legacy 2004-1-LILACS-1-Series A,
Ctfs., 6.67%, 03/04/19 (Acquired 04/30/04;
Cost $944,341)(b)(g)(h) 944,341 953,208
=======================================================================
1,731,347
=======================================================================
Total Asset-Backed Securities (Cost
$2,065,522) 2,099,880
=======================================================================
MUNICIPAL OBLIGATIONS-2.37%
Blount (County of), Tennessee Health &
Educational Facilities Board (Asbury Inc.),
Series 2007 B, Refunding Taxable RB, 7.50%,
04/01/09(d) 70,000 69,298
- -----------------------------------------------------------------------
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO,
(INS-Ambac Assurance Corp.) 4.96%,
04/01/20(c)(d) 130,000 125,253
- -----------------------------------------------------------------------
Florida (State of) Development Finance Corp.
(Palm Bay Academy Inc.); Series 2006 B,
Taxable RB, 7.50%, 05/15/17(d) 65,000 64,262
- -----------------------------------------------------------------------
Industry (City of), California Urban
Development Agency (Project 3); Series
2003, Taxable Allocation RB, (INS-MBIA
Insurance Corp.) 6.10%, 05/01/24(c)(d) 650,000 664,001
=======================================================================
Total Municipal Obligations (Cost
$929,295) 922,814
=======================================================================
U.S. GOVERNMENT AGENCY SECURITIES-2.43%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-0.77%
Unsec. Floating Rate Global Notes, 3.90%,
02/17/09(d)(e) 300,000 298,281
=======================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<Caption>
STUDENT LOAN MARKETING ASSOCIATION-1.66%
SLM Corp., Medium Term Notes, 5.05%,
11/14/14(d) $ 400,000 $ 336,612
- -----------------------------------------------------------------------
SLM Corp., Unsec. Unsub. Floating Rate Medium
Term Notes, 3.81%, 03/15/10(d)(e) 200,000 180,004
- -----------------------------------------------------------------------
SLM Corp., Series A, Medium Term Notes,
3.63%, 03/17/08(d) 130,000 129,395
=======================================================================
646,011
=======================================================================
Total U.S. Government Agency Securities
(Cost $978,711) 944,292
=======================================================================
<Caption>
SHARES
PREFERRED STOCKS-5.52%
LIFE & HEALTH INSURANCE-0.38%
Aegon N.V., 6.38% Pfd. (Netherlands)(k) 7,500 148,125
=======================================================================
OFFICE SERVICES & SUPPLIES-1.99%
Pitney Bowes International Holdings
Inc.,-Series D, 4.85% Pfd. (Acquired
07/11/07; Cost $771,274)(b)(d) 8 773,702
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.51%
Auction Pass Through Trust-Series 2007-T2,
Class A1, 7.95% Pfd. (Acquired 12/14/07;
Cost $975,000)(b)(g)(h) 13 977,434
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.64%
Telephone & Data Systems, Inc.-Series A,
7.60% Pfd.(k) 12,000 249,840
=======================================================================
Total Preferred Stocks (Cost $2,241,274) 2,149,101
=======================================================================
COMMON STOCKS & OTHER INTERESTS-0.13%
BROADCASTING & CABLE TV-0.13%
Adelphia Communications Corp.
Sr. Notes 10.88%, 10/01/10-Sub.(k) -- 9,113
- -----------------------------------------------------------------------
Adelphia Recovery Trust-Series ACC-1(k) 87,412 5,900
- -----------------------------------------------------------------------
Time Warner Cable, Inc.-Class A(k) 1,267 34,969
=======================================================================
Total Common Stocks & Other Interests
(Cost $85,829) 49,982
=======================================================================
TOTAL INVESTMENTS-104.62% (Cost $42,365,776) 40,739,755
- -----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(4.62)% (1,797,624)
- -----------------------------------------------------------------------
NET ASSETS-100.00% $38,942,131
_______________________________________________________________________
=======================================================================
</Table>
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
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
AIM V.I. Diversified Income Fund
Notes to Schedule of Investments:
(a) 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.
(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 December 31, 2007 was
$12,580,651, which represented 32.31% of the Fund's Net Assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(c) Principal and/or interest payments are secured by the bond insurance company
listed.
(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 aggregate value of these securities at December 31,
2007 was $38,234,291, which represented 98.18% of the Fund's Net Assets. See
Note 1A.
(e) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2007.
(f) Perpetual bond with no specified maturity date.
(g) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at December 31, 2007 was $2,057,517, which represented 5.28% of
the Fund's Net Assets. See Note 1A.
(h) 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 December 31, 2007 was
$2,908,001, which represented 7.47% of the Fund's Net Assets.
(i) 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 8.
(j) Security purchased on forward commitment basis. This security is subject to
dollar roll transactions. See Note 1J.
(k) Non-income producing security. Acquired as part of the Adelphia
Communications bankruptcy reorganization.
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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $42,365,776) $40,739,755
- ------------------------------------------------------------
Foreign currencies, at value (Cost $1,215) 1,224
- ------------------------------------------------------------
Receivables for:
Investments sold 2,333,800
- ------------------------------------------------------------
Variation margin 49,094
- ------------------------------------------------------------
Fund shares sold 921
- ------------------------------------------------------------
Dividends and Interest 493,922
- ------------------------------------------------------------
Fund expenses absorbed 3,986
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 46,425
- ------------------------------------------------------------
Other assets 2,325
============================================================
Total assets 43,671,452
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 3,552,323
- ------------------------------------------------------------
Fund shares reacquired 36,279
- ------------------------------------------------------------
Amount due custodian 47,446
- ------------------------------------------------------------
Trustee deferred compensation and retirement
plans 53,371
- ------------------------------------------------------------
Unrealized depreciation on swap agreements 702,590
- ------------------------------------------------------------
Premiums received on swap agreements 267,562
- ------------------------------------------------------------
Accrued administrative services fees 18,086
- ------------------------------------------------------------
Accrued distribution fees -- Series II 809
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 423
- ------------------------------------------------------------
Accrued transfer agent fees 702
- ------------------------------------------------------------
Accrued operating expenses 49,730
============================================================
Total liabilities 4,729,321
============================================================
Net assets applicable to shares outstanding $38,942,131
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $56,692,849
- ------------------------------------------------------------
Undistributed net investment income 2,561,896
- ------------------------------------------------------------
Undistributed net realized gain (loss) (18,001,766)
- ------------------------------------------------------------
Unrealized appreciation (depreciation) (2,310,848)
============================================================
$38,942,131
____________________________________________________________
============================================================
NET ASSETS:
Series I $38,336,449
____________________________________________________________
============================================================
Series II $ 605,682
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 4,915,091
____________________________________________________________
============================================================
Series II 78,267
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 7.80
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 7.74
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Interest $ 2,862,582
- -------------------------------------------------------------
Dividends 73,806
- -------------------------------------------------------------
Dividends from affiliated money market funds 15,384
=============================================================
Total investment income 2,951,772
=============================================================
EXPENSES:
Advisory fees 260,883
- -------------------------------------------------------------
Administrative services fees 127,458
- -------------------------------------------------------------
Custodian fees 22,570
- -------------------------------------------------------------
Distribution fees -- Series II 1,675
- -------------------------------------------------------------
Transfer agent fees 7,783
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 17,772
- -------------------------------------------------------------
Professional services fees 49,088
- -------------------------------------------------------------
Other 23,165
=============================================================
Total expenses 510,394
=============================================================
Less: Fees waived and expense offset
arrangement(s) (182,810)
=============================================================
Net expenses 327,584
=============================================================
Net investment income 2,624,188
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
(losses) from securities sold to affiliates
of $(2,612)) (195,230)
- -------------------------------------------------------------
Foreign currencies 2,502
- -------------------------------------------------------------
Foreign currency contracts 9,143
- -------------------------------------------------------------
Futures contracts (236,911)
- -------------------------------------------------------------
Swap agreements 142,390
=============================================================
(278,106)
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (1,147,051)
- -------------------------------------------------------------
Foreign currencies 41
- -------------------------------------------------------------
Foreign currency contracts (3,937)
- -------------------------------------------------------------
Futures contracts 309,256
- -------------------------------------------------------------
Swap agreements (700,819)
=============================================================
(1,542,510)
=============================================================
Net realized and unrealized gain (loss) (1,820,616)
=============================================================
Net increase in net assets resulting from
operations $ 803,572
_____________________________________________________________
=============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,624,188 $ 2,813,644
- ----------------------------------------------------------------------------------------
Net realized gain (loss) (278,106) (153,102)
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (1,542,510) (511,132)
========================================================================================
Net increase in net assets resulting from operations 803,572 2,149,410
========================================================================================
Distributions to shareholders from net investment income:
Series I (2,880,489) (2,878,667)
- ----------------------------------------------------------------------------------------
Series ll (43,745) (41,567)
- ----------------------------------------------------------------------------------------
Decrease in net assets resulting from distributions (2,924,234) (2,920,234)
========================================================================================
Share transactions-net:
Series l (6,318,959) (7,560,790)
- ----------------------------------------------------------------------------------------
Series ll (74,221) (179,546)
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from share
transactions (6,393,180) (7,740,336)
========================================================================================
Net increase (decrease) in net assets (8,513,842) (8,511,160)
========================================================================================
NET ASSETS:
Beginning of year 47,455,973 55,967,133
========================================================================================
End of year (including undistributed net investment income
of $2,561,896 and $2,853,143, respectively) $38,942,131 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 AND FORWARD COMMITMENT TRANSACTIONS -- The Fund may engage in
dollar roll and forward commitment transactions with respect to
mortgage-backed securities issued by GNMA, FNMA and FHLMC. These
transactions are often conducted on a to be announced ("TBA") basis. In a
TBA mortgage-backed transaction, the seller does not specify the particular
securities to be delivered. Rather, a Fund agrees to accept any security
that meets specified terms, such as an agreed upon issuer, coupon rate and
terms of the underlying mortgages. TBA mortgage-backed transactions
generally settle once a month on a specific date.
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 coupon 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.
AIM V.I. Diversified Income Fund
Forward commitment transactions involve commitments by the Fund to
acquire or sell TBA mortgage-backed securities from a financial
institution, such as a bank or broker-dealer at a specified future date and
amount. The TBA mortgage-backed security is marked to market until
settlement and the unrealized appreciation or depreciation is recorded in
the statement of operations.
At the time the Fund enters into the dollar roll or forward commitment
transaction, mortgage-backed securities or other liquid assets held by the
Fund having a dollar value equal to the purchase price or in an amount
sufficient to honor the forward commitment will be segregated.
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.
Forward commitment transactions involve the risk that a counter-party to
the transaction may fail to complete the transaction. If this occurs, the
Fund may lose the opportunity to purchase or sell the security at the
agreed upon price. Settlement dates of forward commitment transactions may
be a month or more after entering into these transactions and as a result
the market values of the securities may vary from the purchase or sale
prices. Therefore, forward commitment transactions may increase the Fund's
overall interest rate exposure.
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 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. 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 an upfront payment and/or 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 an upfront payment and/or a fixed
payment over the life of the agreement. 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
AIM V.I. Diversified Income Fund
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. Payments received or paid at the beginning of the agreement
are reflected as such on the Statement of Assets and Liabilities and may be
referred to as upfront payments. The Fund amortizes upfront payments and/or
accrues for the fixed payment stream on swap agreements on a daily basis
with the net amount, 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.
O. 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 Ltd. ("Invesco")
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.
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 year ended December 31, 2007, AIM waived advisory fees of $181,597.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $77,458
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 year ended December 31, 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 A I M
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 year ended December 31, 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. Diversified Income 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 year ended December 31, 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 12/31/07 INCOME
- -----------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $119,019 $ 7,598,444 $ (7,717,463) $ -- $ 7,703
- -----------------------------------------------------------------------------------------------------------
Premier Portfolio
-Institutional Class 119,019 7,598,444 (7,717,463) -- 7,681
===========================================================================================================
Total Investments in
Affiliates $238,038 $15,196,888 $(15,434,926) $ -- $15,384
___________________________________________________________________________________________________________
===========================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $530,093, which resulted in net realized gains
(losses) of $(2,612).
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $1,213.
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 year ended December 31, 2007, the Fund paid legal fees of $3,652
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 SEC, 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 is a party to 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 year ended December 31, 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 8--FUTURES CONTRACTS
On December 31, 2007, $187,663 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 12/31/07 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 7 Mar-08/Long $ 1,471,750 $ 5,016
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 22 Mar-08/Long 2,426,188 14,396
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 28 Mar-08/Long 3,174,937 27,671
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bond 38 Mar-08/Long 4,422,250 (29,328)
=========================================================================================================================
$11,495,125 $ 17,755
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL UNREALIZED
BUY/SELL (PAY)/RECEIVE EXPIRATION AMOUNT APPRECIATION
COUNTERPARTY REFERENCE ENTITY PROTECTION FIXED RATE DATE (000) (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Bros. Special
Financing Inc. CDX.NA.IG.75 Sell 0.75%(a) 06/20/12 $2,000 $ (42,103)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Bros. Special
Financing Inc. CDX.NA.IG.HVOL.8 Sell 0.75%(b) 06/20/12 9,500 (387,514)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Bros. Special
Financing Inc. MBIA Inc. Sell 1.90% 09/20/08 1,200 (66,455)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Bros. Special
Financing Inc. Residential Capital, LLC Sell 6.80% 09/20/08 200 (30,143)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Bros. Special
Financing Inc. Residential Capital, LLC Sell 5.00%(c) 03/20/08 225 (6,752)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Bros. Special
Financing Inc. Residential Capital, LLC Sell 2.75% 09/20/08 125 (21,709)
- ------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch
International CIT Group Inc. Sell 2.50% 09/20/08 100 (1,539)
- ------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch
International CIT Group Inc. Sell 2.40% 09/20/08 230 (3,702)
- ------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch
International Lehman Bros. Holdings Inc. Sell 0.90% 09/20/08 430 (2,138)
- ------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co.
International PLC CDX.NA.IG.HVOL.9 Sell 1.40%(d) 12/20/12 4,000 (114,987)
- ------------------------------------------------------------------------------------------------------------------------------
UBS A.G United Parcel Service, Inc. Buy (0.26)% 12/20/17 400 4,328
- ------------------------------------------------------------------------------------------------------------------------------
UBS A.G AMBAC Financial Group, Inc. Sell 5.10% 12/20/08 230 (7,065)
- ------------------------------------------------------------------------------------------------------------------------------
UBS A.G AMBAC Financial Group, Inc. Sell 11.00% 12/20/08 410 9,406
- ------------------------------------------------------------------------------------------------------------------------------
UBS A.G AMBAC Financial Group, Inc. Sell 2.30% 12/20/08 470 (26,406)
- ------------------------------------------------------------------------------------------------------------------------------
UBS A.G AMBAC Financial Group, Inc. Sell 6.75% 12/20/08 230 (3,614)
- ------------------------------------------------------------------------------------------------------------------------------
UBS A.G Pulte Homes, Inc. Sell 4.20% 12/20/08 470 (2,197)
==============================================================================================================================
Total Credit Default
Swap Agreements $(702,590)
______________________________________________________________________________________________________________________________
==============================================================================================================================
</Table>
(a) Unamortized premium at period-end of $79,551.
(b) Unamortized premium at period-end of $190,337.
(c) Unamortized premium at period-end of $8,589.
(d) Unamortized discount at period-end of $10,915.
AIM V.I. Diversified Income Fund
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from ordinary income $2,924,234 $2,920,234
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 1,902,734
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (1,628,731)
- ----------------------------------------------------------------------------
Temporary book/tax differences (46,173)
- ----------------------------------------------------------------------------
Capital loss carryforward (17,978,548)
- ----------------------------------------------------------------------------
Shares of beneficial interest 56,692,849
============================================================================
Total net assets $ 38,942,131
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to the
realization of unrealized gains on certain futures contracts and swaps,
treatment of partnership investments, and the deferral of losses on wash sales.
The tax-basis net unrealized appreciation (depreciation) on investments amount
includes appreciation on foreign currencies of $(9).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 has a capital loss carryforward as of December 31, 2007 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2008 $ 4,437,761
- -----------------------------------------------------------------------------
December 31, 2009 6,105,069
- -----------------------------------------------------------------------------
December 31, 2010 6,879,053
- -----------------------------------------------------------------------------
December 31, 2014 341,884
- -----------------------------------------------------------------------------
December 31, 2015 214,781
=============================================================================
Total capital loss carryforward $17,978,548
_____________________________________________________________________________
=============================================================================
</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 year ended December 31, 2007 was $28,866,298 and
$34,042,733, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
<Table>
Aggregate unrealized appreciation of investment securities $ 191,571
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,820,311)
===========================================================================
Net unrealized appreciation (depreciation) of investment
securities $(1,628,740)
___________________________________________________________________________
===========================================================================
Cost of investments for tax purposes is $42,368,495.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, foreign future transactions, paydowns on mortgage backed
securities, partnership transactions, dollar roll transactions, credit default
swap transactions, and capital loss carryforward expirations, on December 31,
2007, undistributed net investment income was increased by $8,799, undistributed
net realized gain (loss) was increased by $2,573,864 and shares of beneficial
interest decreased by $2,582,663. This reclassification had no effect on the net
assets of the Fund.
AIM V.I. Diversified Income Fund
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
------------------------------------------------------
2007(A) 2006
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Series I 731,982 $ 6,147,850 305,992 $ 2,591,467
- --------------------------------------------------------------------------------------------------------------------
Series II 6,451 53,596 12,578 106,190
====================================================================================================================
Issued as reinvestment of dividends:
Series I 370,719 2,880,489 345,164 2,878,667
- --------------------------------------------------------------------------------------------------------------------
Series II 5,674 43,745 5,026 41,567
====================================================================================================================
Reacquired:
Series I (1,834,796) (15,347,298) (1,533,737) (13,030,924)
- --------------------------------------------------------------------------------------------------------------------
Series II (20,652) (171,562) (38,705) (327,303)
====================================================================================================================
(740,622) $(6,393,180) (903,682) $(7,740,336)
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) There are entities that are 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Diversified Income Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.28 $ 8.43 $ 8.74 $ 8.82 $ 8.60
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.51 0.46 0.40 0.36 0.42
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.37) (0.08) (0.15) 0.08 0.37
====================================================================================================================
Total from investment operations 0.14 0.38 0.25 0.44 0.79
====================================================================================================================
Less dividends from net investment income (0.62) (0.53) (0.56) (0.52) (0.57)
====================================================================================================================
Net asset value, end of period $ 7.80 $ 8.28 $ 8.43 $ 8.74 $ 8.82
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 1.72% 4.48% 2.90% 5.03% 9.24%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $38,336 $46,743 $55,065 $65,069 $71,860
____________________________________________________________________________________________________________________
====================================================================================================================
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%
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.17%(c) 1.10% 1.08% 1.01% 0.95%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of net investment income to average net assets 6.04%(c) 5.47% 4.54% 4.01% 4.71%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 67% 78% 92% 113% 153%
____________________________________________________________________________________________________________________
====================================================================================================================
</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 based on average daily net assets of $42,810,310.
<Table>
<Caption>
SERIES II
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.21 $8.36 $8.67 $8.78 $8.58
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.48 0.44 0.38 0.33 0.40
- ------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.36) (0.09) (0.15) 0.08 0.37
============================================================================================================
Total from investment operations 0.12 0.35 0.23 0.41 0.77
============================================================================================================
Less dividends from net investment income (0.59) (0.50) (0.54) (0.52) (0.57)
============================================================================================================
Net asset value, end of period $ 7.74 $8.21 $8.36 $8.67 $8.78
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 1.51% 4.17% 2.67% 4.69% 9.02%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 606 $713 $902 $980 $ 762
____________________________________________________________________________________________________________
============================================================================================================
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%
- ------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.42%(c) 1.35% 1.33% 1.26% 1.20%
____________________________________________________________________________________________________________
============================================================================================================
Ratio of net investment income to average net assets 5.79%(c) 5.22% 4.29% 3.76% 4.46%
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate 67% 78% 92% 113% 153%
____________________________________________________________________________________________________________
============================================================================================================
</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 based on average daily net assets of $670,225.
AIM V.I. Diversified Income Fund
NOTE 16--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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Diversified Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Diversified Income Fund,
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, and the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the three years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Diversified Income Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING ACCOUNT EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,003.90 $3.79 $1,021.42 $ 3.82 0.75%
Series II 1,000.00 1,002.90 5.05 1,020.16 5.09 1.00
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Diversified Income Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year -- end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received
Deduction* 1.93%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the fund's fiscal year.
AIM V.I. Diversified Income Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Diversified Income Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Mid-Cap Growth
AIM V.I. Dynamics Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. DYNAMICS FUND's investment objective
life insurance policies ("variable is long-term capital growth.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
30, 2007, is available at our Web site. Go IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
to AIMinvestments.com, access the About Us
tab, click on Required Notices and then
click on Proxy Voting Activity. Next, UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
select the Fund from the drop-down menu. ARE FROM A I M MANAGEMENT GROUP INC.
The information is also available on the
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Dynamics Fund
Management's discussion of Fund performance risk. We seek to accomplish this goal by
investing in sectors, industries and
======================================================================================= companies with attractive fundamental
PERFORMANCE SUMMARY prospects. We limit the Fund's sector
exposure and also seek to minimize
For the year ended December 31, 2007, AIM V.I. Dynamics Fund had double-digit returns stock-specific risk by building a
and outperformed its style-specific Russell Midcap Growth Index by a narrow margin. diversified portfolio.
The Fund also outperformed the broad market as represented by the S&P 500 Index, as We consider selling a stock for any of
mid-cap growth stocks outperformed large-cap stocks. the following reasons:
Your Fund's long-term performance appears later in this report. o The stock is overvalued based on our
analysis.
FUND VS. INDEXES
o A change in fundamental metrics
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If indicates potential problems.
variable product issuer charges were included, returns would be lower.
o A change in market capitalization--if a
Series I Shares 12.19% stock grows and moves into the large-cap
Series II Shares 11.85 range.
S&P 500 Index(triangle) (Broad Market Index) 5.49
Russell Midcap Growth Index(triangle) (Style-Specific Index) 11.43 o A better stock candidate with higher
Lipper VUF Mid-Cap Growth Funds Index(triangle) (Peer Group Index) 18.39 potential return is found.
Lipper Mid-Cap Growth Funds Index(triangle) (Former Peer Group Index) 21.41
SOURCES: (triangle)LIPPER INC. Market conditions and your Fund
=======================================================================================
Despite high market volatility late in the
How we invest o Quality--focus on companies with year, major U.S. equity markets finished
sustainable earnings growth and management 2007 in positive territory.(1) In the
We believe a growth investment strategy is teams that profitably reinvest shareholder first part of the year, strong economic
an essential component of a diversified cash flow growth, favorable corporate earnings and
portfolio. increased merger and acquisition activity
o Valuation--focus on companies that are drove equity markets. However, concerns
Our investment process combines attractively valued given their growth about the credit markets, continued
quantitative and fundamental analysis to potential weakness in housing and rising oil prices
uncover companies exhibiting long-term, weighed heavily on investor sentiment
sustainable earnings and cash flow growth Stocks that are ranked highest by our during much of the second half of the
that is not yet reflected by the stock's quantitative model are the focus of our year.
market price. fundamental research efforts. Our
fundamental analysis focuses on In this environment, mid- and large-cap
Our quantitative model ranks companies identifying both industries and companies stocks generally outperformed small-cap
based on factors we have found to be with strong drivers of growth. stocks.(1) Additionally, growth stocks
highly correlated with outperformance in generally outperformed value stocks.(1)
the mid-cap growth universe, including: Risk management plays an important role Positive performance was broad among
in portfolio construction, as our target Russell Midcap Growth Index sectors, with
o Earnings--focus on companies exhibiting portfolio attempts to limit volatility and the best returns found in the energy,
strong growth in earnings, revenue and downside materials and industrials sectors.
cash flows
The Fund benefited from positive
absolute performance in seven of 10
economic sectors,
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Health Care Equipment 5.2% 1. McDermott International Inc. 2.0%
Consumer Discretionary 19.0% 2. Oil & Gas Equipment & Services 4.5 2. Owens-Illinois Inc. 1.9
Information Technology 16.7 3. Metal & Glass Containers 4.5 3. Foster Wheeler Ltd. 1.7
Industrials 15.7 4. Semiconductors 4.0 4. General Cable Corp. 1.6
Health Care 15.1 5. Apparel, Accessories 5. Corrections Corp. of America 1.6
Energy 11.0 & Luxury Goods 3.9 6. Crown Holdings Inc. 1.6
Financials 6.8 7. Hanesbrands, Inc. 1.5
Materials 6.5 Total Net Assets $122.19 million 8. Focus Media Holding Ltd.-ADR 1.4
Consumer Staples 2.8 9. Precision Castparts Corp. 1.4
Telecommunication Services 2.2 Total Number of Holdings* 107 10. Abercrombie & Fitch Co.-Class A 1.4
Utilities 0.8
Money Market Funds Plus
Other Assets Less Liabilities 3.4
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
* Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Dynamics Fund
with the highest positive impact on largely by stock selection in computers Paul Rasplicka
performance coming from holdings in the and peripheral holdings, as well as IT [RASPLICKA Chartered Financial Analyst,
industrials, energy and health care services holdings. Examples of key PHOTO] senior portfolio manager, is
sectors. On a relative basis, the Fund detractors in these areas included QLOGIC, lead manager of AIM V.I.
outperformed the Russell Midcap Growth SANDISK. and VERIFONE HOLDINGS. While we Dynamics Fund. Mr. Rasplicka has been
Index by the widest margin in the sold QLogic and Verifone due to associated with the advisor and/or its
industrials, consumer discretionary and deteriorating fundamentals, we continued affiliates since 1994. He began his
materials sectors. to own Sandisk at the close of the fiscal investment career in 1982 as an equity
year. research analyst. A native of Denver, Mr.
The industrials sector rallied during Rasplicka is a magna cum laude graduate of
much of 2007, and the Fund benefited from In the financials sector, the University of Colorado in Boulder with
solid stock selection in several underperformance was the result of both a B.S. in business administration. He
industries, including stock selection and an overweight earned an M.B.A. from the University of
construction/engineering and aerospace and position. Many financials stocks had weak Chicago. He is a Chartered Investment
defense. The leading contributor to performance due to concerns about the Counselor.
overall Fund performance during the year extent of potential subprime loan defaults
was FOSTER WHEELER, a company that designs and the related credit crisis. Within this Karl Farmer
and builds power generating facilities. sector, key detractors to performance [FARMER Chartered Financial Analyst,
Two other holdings that made significant included REIT holding RAIT FINANCIAL PHOTO] portfolio manager, is manager
contributions to Fund performance included TRUST, real estate management services of AIM V.I. Dynamics Fund. He
engineering and construction firm provider MERUELO MADDUX PROPERTIES and began his investment career in 1993 and
MCDERMOTT INTERNATIONAL and PRECISION diversified financial services holding KKR joined AIM in 1998. Mr. Farmer is a magna
CASTPARTS, a leading manufacturer of FINANCIAL. While we sold RAIT Financial cum laude graduate from Texas A&M
casting, forgings and fasteners for the Trust, we continued to own Meruelo Maddux University, where he earned a B.S. in
aerospace and defense, industrials and Properties and KKR Financial at the close economics. He subsequently earned his
automotive industries. All three holdings of the year. M.B.A. in finance from The Wharton School
benefited from solid growth in revenue, at the University of Pennsylvania.
earnings and cash flow during the fiscal During the reporting period, the most
year. significant changes to portfolio Warren Tennant
positioning included additions to the [TENNANT Chartered Financial Analyst,
While Fund performance in the consumer materials, energy and consumer PHOTO] portfolio manager, is manager
discretionary sector was basically flat discretionary sectors, and reductions in of AIM V.I. Dynamics Fund.
during the year, the Fund outperformed the the financials and telecommunication Mr. Tennant worked as an internal auditor
Russell Midcap Growth Index in this sector services sectors. All changes to the Fund in the energy industry and as a senior
primarily due to stock selection and an were based on our bottom-up stock equity analyst at AIM before assuming his
underweight position in multiline retail selection process of identifying high current position in 2007. He earned both
stocks. Many retail stocks faced selling quality growth companies trading at what his B.B.A. in finance and his M.B.A. from
pressure during the year, as investors we believe are attractive valuations. The University of Texas at Austin.
feared that consumers would finally begin
to slow their discretionary spending. The We are pleased to have provided Assisted by the Mid Cap Growth Team
fund also benefited from stock selection positive returns for our investors for the (formerly known as Mid Cap Growth/GARP
in other industries, including media and year by focusing on what we believed were Team)
hotels/restaurants/leisure. Examples of attractively priced stocks of mid-cap
holdings that performed well in these companies with sustainable revenue, Effective February 4, 2008, after the
areas included FOCUS MEDIA and BURGER earnings and cash flow growth. We thank close of the reporting period, Warren
KING. you for your commitment to AIM V.I. Tennant left the team.
Dynamics Fund.
Outperformance in the materials sector
was driven primarily by stock selection. Source: (1)Lipper Inc.
Within this sector, POTASH CORP. OF
SASKATCHEWAN was among the top five The views and opinions expressed in
contributors to overall performance during management's discussion of Fund
the year. This company, one of the largest performance are those of A I M Advisors,
producers of potash-based fertilizer, Inc. These views and opinions are subject
benefited from growing demand from to change at any time based on factors
developing nations such as India and China such as market and economic conditions.
..Glass container maker OWENS ILLINOIS INC. These views and opinions may not be relied
also made a significant contribution to upon as investment advice or
Fund performance during the year. recommendations, or as an offer for a
particular security. The information is
Underperformance versus the Russell not a complete analysis of every aspect of
Midcap Growth Index was largely any market, country, industry, security or
concentrated in the information technology the Fund. Statements of fact are from
(IT) and financials sectors. In the sources considered reliable, but A I M
information technology sector, Advisors, Inc. makes no representation or ==========================================
underperformance was driven warranty as to their completeness or FOR A DISCUSSION OF THE RISKS OF INVESTING
accuracy. Although historical performance IN YOUR FUND, INDEXES USED IN THIS REPORT
is no guarantee of future results, these AND YOUR FUND'S LONG-TERM PERFORMANCE,
insights may help you understand our PLEASE TURN THE PAGE.
investment management philosophy. ==========================================
AIM V.I. Dynamics Fund
Your Fund's long-term performance
========================================== SERIES II SHARE CLASSES WILL DIFFER THE PERIOD COVERED BY THIS REPORT.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS AIM V.I. DYNAMICS FUND, A SERIES
THE PERFORMANCE DATA QUOTED REPRESENT PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
As of 12/31/07 PAST PERFORMANCE AND CANNOT GUARANTEE IS CURRENTLY OFFERED THROUGH INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT COMPANIES ISSUING VARIABLE PRODUCTS. YOU
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CANNOT PURCHASE SHARES OF THE FUND
Inception (8/22/97) 6.70% CONTACT YOUR VARIABLE PRODUCT ISSUER OR DIRECTLY. PERFORMANCE FIGURES GIVEN
10 Years 6.59 FINANCIAL ADVISOR FOR THE MOST RECENT REPRESENT THE FUND AND ARE NOT INTENDED TO
5 Years 17.64 MONTH-END VARIABLE PRODUCT PERFORMANCE. REFLECT ACTUAL VARIABLE PRODUCT VALUES.
1 Year 12.19 PERFORMANCE FIGURES REFLECT FUND EXPENSES, THEY DO NOT REFLECT SALES CHARGES,
REINVESTED DISTRIBUTIONS AND CHANGES IN EXPENSES AND FEES ASSESSED IN CONNECTION
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND WITH A VARIABLE PRODUCT. SALES CHARGES,
10 Years 6.32% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU EXPENSES AND FEES, WHICH ARE DETERMINED BY
5 Years 17.34 MAY HAVE A GAIN OR LOSS WHEN YOU SELL THE VARIABLE PRODUCT ISSUERS, WILL VARY
1 Year 11.85 SHARES. AND WILL LOWER THE TOTAL RETURN.
========================================== THE TOTAL ANNUAL FUND OPERATING EXPENSE THE MOST RECENT MONTH-END PERFORMANCE
RATIO SET FORTH IN THE MOST RECENT FUND DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
SERIES II SHARES' INCEPTION DATE IS APRIL PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
30, 2004. RETURNS SINCE THAT DATE ARE FOR SERIES I AND SERIES II SHARES WAS AUTOMATED INFORMATION LINE, 866-702-4402.
HISTORICAL. ALL OTHER RETURNS ARE THE 1.13% AND 1.38%, RESPECTIVELY. THE EXPENSE AS MENTIONED ABOVE, FOR THE MOST RECENT
BLENDED RETURNS OF THE HISTORICAL RATIOS PRESENTED ABOVE MAY VARY FROM THE MONTH-END PERFORMANCE INCLUDING VARIABLE
PERFORMANCE OF SERIES II SHARES SINCE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS PRODUCT CHARGES, PLEASE CONTACT YOUR
THEIR INCEPTION AND THE RESTATED OF THIS REPORT THAT ARE BASED ON EXPENSES VARIABLE PRODUCT ISSUER OR FINANCIAL
HISTORICAL PERFORMANCE OF SERIES I SHARES INCURRED DURING ADVISOR.
(FOR PERIODS PRIOR TO INCEPTION OF SERIES
II SHARES) ADJUSTED TO REFLECT THE RULE
12B-1 FEES APPLICABLE TO SERIES II SHARES.
THE INCEPTION DATE OF SERIES I SHARES IS
AUGUST 22, 1997. THE PERFORMANCE OF THE
FUND'S SERIES I AND
====================================================================================================================================
Principal risks of investing in the Fund There is no guarantee that the About indexes used in this report
investment techniques and risk analyses
Prices of equity securities change in used by the Fund's portfolio managers will The S&P 500--REGISTERED TRADEMARK-- Index
response to many factors including the produce the desired results. is a market capitalization-weighted index
historical and prospective earnings of the covering all major areas of the U.S.
issuer, the value of its assets, general Investing in developing countries can economy. It is not the 500 largest
economic conditions, interest rates, add additional risk, such as high rates of companies, but rather the most widely held
investor perceptions and market liquidity. inflation or sharply devalued currencies 500 companies chosen with respect to
against the U.S. dollar. Transaction costs market size, liquidity, and their
The Fund invests in "growth" stocks, are often higher, and there may be delays industry.
which may be more volatile than other in settlement procedures.
investment styles because growth stocks The RUSSELL MIDCAP --REGISTERED
are more sensitive to investor perceptions Small- and mid-capitalization companies TRADEMARK-- GROWTH INDEX measures the
of an issuing company's growth potential. tend to be more vulnerable to adverse performance of those Russell Midcap
developments and more volatile than larger companies with higher price-to-book ratios
Foreign securities have additional companies. Investments in these sized and higher forecasted growth values. The
risks, including exchange rate changes, companies may involve special risks, Russell Midcap Growth Index is a
political and economic upheaval, the including those associated with dependence trademark/service mark of the Frank
relative lack of information, relatively on a small management group, little or no Russell Company. RUSSELL --REGISTERED
low market liquidity, and the potential operating history, little or no track TRADEMARK-- is a trademark of the Frank
lack of strict financial and accounting record of success, limited product lines, Russell Company.
controls and standards. less publicly available information,
illiquidity, restricted resale or less The Fund has elected to use the LIPPER
Portfolio turnover is greater than most frequent trading. VARIABLE UNDERLYING FUNDS (VUF) MID-CAP
funds, which may affect the Fund's GROWTH FUNDS INDEX as its peer group
performance due to higher brokerage The prices of securities held by the instead of the Lipper Mid-Cap Growth Funds
commissions. Active trading may also Fund may decline in response to market Index. In 2006, Lipper began publishing
increase short-term gains and losses, risks. VUF indexes, allowing the Fund to be
which may also result in taxable gain compared with the Lipper VUF Mid-Cap
distributions to the Fund's shareholders. Growth Index. The unmanaged Lipper VUF
Mid-Cap Growth Funds Index is an equally
weighted represen-
Continued
AIM V.I. Dynamics Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
tation of the largest variable insurance performance of the Fund may deviate differ from the net asset values and
underlying funds in the Lipper Mid-Cap significantly from the performance of the returns reported in the Financial
Growth Funds category. These funds have an indexes. Highlights. Additionally, the returns and
above-average price-to-earnings ratio, net asset values shown throughout this
price-to-book ratio, and three-year A direct investment cannot be made in report are at the Fund level only and do
sales-per-share growth value, compared to an index. Unless otherwise indicated, not include variable product issuer
the S&P MidCap 400 Index. index results include reinvested charges. If such charges were included,
dividends, and they do not reflect sales the total returns would be lower.
The LIPPER MID-CAP GROWTH FUNDS INDEX charges. Performance of an index of funds
is an equally weighted representation of reflects fund expenses; performance of a Industry classifications used in this
the largest funds in the Lipper Mid-Cap market index does not. report are generally according to the
Growth Funds category. These funds have an Global Industry Classification Standard,
above-average price-to-earnings ratio, Other information which was developed by and is the
price-to-book ratio, and three-year exclusive property and a service mark of
sales-per-share growth value, compared to The returns shown in the management's Morgan Stanley Capital International Inc.
the S&P MidCap 400 Index. discussion of Fund performance are based and Standard & Poor's.
on net asset values calculated for
The Fund is not managed to track the shareholder transactions. Generally The Chartered Financial
performance of any particular index, accepted accounting principles require Analyst--REGISTERED TRADEMARK--
including the indexes defined here, and adjustments to be made to the net assets (CFA--REGISTERED TRADEMARK--) designation
consequently, the of the Fund at period end for financial is a globally recognized standard for
reporting purposes, and as such, the net measuring the competence and integrity of
asset values for shareholder transactions investment professionals.
and the returns based on those net asset
values may
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 8/22/97, INDEX DATA FROM 8/31/97
LIPPER MID-CAP
AIM V.I. DYNAMICS RUSSELL MIDCAP GROWTH LIPPER VUF MID-CAP GROWTH
DATE FUND-SERIES I SHARES S&P 500 INDEX(1) INDEX(1) MODERATE FUNDS INDEX(1) FUNDS INDEX(1)
8/22/97 $10000
8/97 9930 $10000 $10000 $10000 $10000
9/97 10610 10547 10506 10591 10716
10/97 10240 10196 9980 10032 10116
11/97 10190 10667 10085 9982 9954
12/97 10340 10850 10217 10042 10187
1/98 10290 10970 10033 9879 9995
2/98 11240 11761 10977 10726 10843
3/98 11889 12363 11437 11257 11405
4/98 12069 12489 11592 11290 11455
5/98 11609 12275 11115 10678 10787
6/98 12179 12773 11430 11246 11283
7/98 11619 12638 10940 10623 10532
8/98 8959 10812 8852 8389 8261
9/98 9749 11505 9522 8985 9123
10/98 10550 12440 10223 9322 9458
11/98 10980 13193 10912 9954 10177
12/98 12341 13953 12043 11262 11490
1/99 13184 14536 12404 11550 12060
2/99 12462 14085 11797 10833 11124
3/99 13549 14648 12454 11486 11917
4/99 14148 15215 13022 11986 12405
5/99 14077 14856 12854 11828 12354
6/99 14849 15679 13751 12793 13350
7/99 14524 15191 13314 12521 13167
8/99 14229 15116 13175 12610 13100
9/99 14412 14702 13063 12672 13483
10/99 15682 15632 14073 13843 14675
11/99 16855 15950 15530 15390 16515
12/99 19201 16888 18220 18471 19960
1/00 18917 16040 18216 18514 19618
2/00 23001 15736 22046 22753 24534
3/00 21985 17275 22068 21891 22807
4/00 20085 16755 19926 19617 19798
5/00 18926 16412 18473 18334 18019
6/00 21822 16816 20434 20878 20819
7/00 21141 16553 19140 20197 19955
8/00 24158 17581 22026 22995 22565
9/00 24047 16653 20949 21909 21480
10/00 22056 16582 19516 20105 19743
11/00 17298 15276 15275 16204 15615
12/00 18518 15351 16079 17117 16740
1/01 19147 15895 16998 17599 16968
2/01 15527 14447 14057 14855 14422
3/01 13240 13532 12046 12857 12892
4/01 15416 14583 14053 14693 14592
5/01 15162 14681 13987 14679 14712
6/01 14989 14323 13995 14506 14655
7/01 13881 14182 13051 13619 13884
8/01 12518 13295 12105 12563 12954
9/01 9864 12222 10104 10742 11086
10/01 10912 12455 11167 11410 11703
11/01 12366 13410 12369 12267 12664
12/01 12754 13528 12839 12703 13213
1/02 12570 13330 12422 12011 12708
2/02 11401 13073 11718 11391 12076
3/02 12316 13565 12612 12106 12837
4/02 11502 12743 11944 11674 12410
5/02 11024 12649 11588 11386 11996
6/02 9773 11749 10309 10392 10919
7/02 8827 10833 9308 9398 9741
8/02 8633 10904 9275 9299 9625
9/02 7942 9720 8538 8770 9027
10/02 8765 10575 9200 9200 9482
11/02 9345 11197 9920 9628 10045
12/02 8684 10539 9320 9162 9451
1/03 8684 10264 9229 8997 9311
2/03 8542 10109 9149 8923 9167
===================================================================================================================================
SOURCE: (1) LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
3/03 8633 10207 9319 9054 9299
4/03 9233 11048 9953 9631 9951
5/03 9925 11629 10911 10420 10774
6/03 10066 11778 11067 10571 10942
7/03 10412 11985 11462 10957 11374
8/03 10920 12219 12094 11536 11933
9/03 10554 12089 11859 11143 11533
10/03 11480 12773 12815 12006 12438
11/03 11836 12885 13158 12242 12733
12/03 11968 13560 13301 12371 12799
1/04 12253 13809 13741 12630 13122
2/04 12375 14001 13971 12832 13303
3/04 12294 13790 13944 12943 13300
4/04 12141 13574 13551 12537 12878
5/04 12344 13760 13870 12797 13158
6/04 12517 14027 14091 13189 13475
7/04 11663 13563 13158 12283 12517
8/04 11491 13617 12996 12101 12301
9/04 11969 13765 13481 12671 12827
10/04 12253 13975 13938 13019 13206
11/04 13006 14540 14658 13839 13940
12/04 13565 15035 15360 14431 14595
1/05 13311 14669 14949 13985 14123
2/05 13546 14977 15328 14173 14305
3/05 13363 14712 15104 13863 14020
4/05 12621 14433 14506 13219 13345
5/05 13313 14892 15337 14003 14137
6/05 13730 14913 15622 14269 14460
7/05 14594 15468 16534 15062 15292
8/05 14615 15327 16433 15019 15245
9/05 14646 15451 16645 15263 15511
10/05 14117 15193 16155 14929 15080
11/05 14850 15767 17032 15739 15895
12/05 15022 15773 17219 15804 15992
1/06 16079 16190 18250 16781 17091
2/06 16070 16234 18025 16622 16943
3/06 16589 16436 18529 17203 17508
4/06 17005 16657 18607 17245 17672
5/06 16192 16178 17732 16258 16688
6/06 16131 16200 17659 16220 16696
7/06 15510 16299 17026 15467 15990
8/06 15784 16687 17419 15732 16251
9/06 16120 17116 17816 15995 16484
10/06 16791 17674 18500 16561 17061
11/06 17503 18009 19226 17243 17771
12/06 17442 18262 19054 17149 17755
1/07 18042 18538 19747 17702 18348
2/07 18022 18176 19704 17648 18296
3/07 18184 18379 19808 17832 18597
4/07 18844 19193 20678 18546 19358
5/07 20135 19862 21516 19533 20450
6/07 19912 19532 21143 19401 20366
7/07 19384 18928 20670 19141 20102
8/07 19190 19211 20782 19430 20313
9/07 20115 19929 21597 20519 21561
10/07 20594 20246 22148 21404 22532
11/07 19618 19399 21173 20261 21337
12/07 19568 19265 21231 20304 21556
===================================================================================================================================
AIM V.I. Dynamics Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.80%
ADVERTISING-1.41%
Focus Media Holding Ltd.-ADR (China)(b)(c) 30,264 $ 1,719,298
=======================================================================
AEROSPACE & DEFENSE-3.58%
BE Aerospace, Inc.(c) 25,831 1,366,460
- -----------------------------------------------------------------------
Precision Castparts Corp. 12,360 1,714,332
- -----------------------------------------------------------------------
Spirit AeroSystems Holdings Inc.-Class A(c) 37,461 1,292,404
=======================================================================
4,373,196
=======================================================================
AGRICULTURAL PRODUCTS-0.76%
Corn Products International, Inc. 25,123 923,270
=======================================================================
APPAREL RETAIL-3.38%
Abercrombie & Fitch Co.-Class A 21,312 1,704,321
- -----------------------------------------------------------------------
Aeropostale, Inc.(c) 62,648 1,660,172
- -----------------------------------------------------------------------
Guess?, Inc. 20,198 765,302
=======================================================================
4,129,795
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-3.93%
Coach, Inc.(c) 37,320 1,141,246
- -----------------------------------------------------------------------
Hanesbrands, Inc.(c) 67,547 1,835,252
- -----------------------------------------------------------------------
Polo Ralph Lauren Corp. 18,225 1,126,123
- -----------------------------------------------------------------------
Under Armour, Inc.-Class A(b)(c) 16,160 705,707
=======================================================================
4,808,328
=======================================================================
APPLICATION SOFTWARE-3.59%
ANSYS, Inc.(c) 31,308 1,298,030
- -----------------------------------------------------------------------
Cadence Design Systems, Inc.(c) 51,280 872,273
- -----------------------------------------------------------------------
Citrix Systems, Inc.(c) 16,253 617,776
- -----------------------------------------------------------------------
Solera Holdings Inc.(c) 64,414 1,596,179
=======================================================================
4,384,258
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.89%
FBR Capital Markets Corp. (Acquired 07/14/06;
Cost $690,000)(c)(d)(e) 46,000 440,680
- -----------------------------------------------------------------------
SEI Investments Co. 19,976 642,628
=======================================================================
1,083,308
=======================================================================
BIOTECHNOLOGY-1.90%
Cephalon, Inc.(c) 13,600 975,936
- -----------------------------------------------------------------------
Genzyme Corp.(c) 11,539 858,963
- -----------------------------------------------------------------------
United Therapeutics Corp.(c) 5,000 488,250
=======================================================================
2,323,149
=======================================================================
CASINOS & GAMING-2.33%
International Game Technology 28,859 1,267,776
- -----------------------------------------------------------------------
Scientific Games Corp.-Class A(c) 47,666 1,584,894
=======================================================================
2,852,670
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COAL & CONSUMABLE FUELS-1.09%
Cameco Corp. (Canada) 16,300 $ 649,080
- -----------------------------------------------------------------------
Peabody Energy Corp. 11,099 684,143
=======================================================================
1,333,223
=======================================================================
COMMUNICATIONS EQUIPMENT-1.01%
Infinera Corp.(c) 35,590 528,156
- -----------------------------------------------------------------------
Polycom, Inc.(c) 25,559 710,029
=======================================================================
1,238,185
=======================================================================
COMPUTER & ELECTRONICS RETAIL-0.73%
GameStop Corp.-Class A(c) 14,435 896,558
=======================================================================
COMPUTER STORAGE & PERIPHERALS-0.29%
SanDisk Corp.(c) 10,673 354,023
=======================================================================
CONSTRUCTION & ENGINEERING-1.74%
Foster Wheeler Ltd.(c) 13,732 2,128,735
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.32%
Joy Global Inc. 24,543 1,615,420
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.58%
Fidelity National Information Services, Inc. 17,147 713,144
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.63%
Corrections Corp. of America(c) 66,189 1,953,237
- -----------------------------------------------------------------------
IHS Inc.-Class A(c) 20,890 1,265,099
=======================================================================
3,218,336
=======================================================================
DRUG RETAIL-1.05%
Shoppers Drug Mart Corp. (Canada) 23,817 1,279,651
=======================================================================
EDUCATION SERVICES-0.88%
Apollo Group, Inc.-Class A(c) 15,334 1,075,680
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.66%
Cooper Industries, Ltd.-Class A 23,843 1,260,818
- -----------------------------------------------------------------------
General Cable Corp.(c) 27,206 1,993,655
=======================================================================
3,254,473
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.22%
Amphenol Corp.-Class A 32,100 1,488,477
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.20%
EnergySolutions Inc.(c) 9,174 247,606
=======================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.09%
Potash Corp. of Saskatchewan Inc. (Canada) 9,272 1,334,797
=======================================================================
</Table>
AIM V.I. Dynamics Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
FOOTWEAR-1.30%
Crocs, Inc.(c) 43,189 $ 1,589,787
=======================================================================
HEALTH CARE EQUIPMENT-5.23%
ArthroCare Corp.(b)(c) 18,000 864,900
- -----------------------------------------------------------------------
ev3 Inc.(c) 66,574 846,156
- -----------------------------------------------------------------------
Gen-Probe Inc.(c) 17,000 1,069,810
- -----------------------------------------------------------------------
Hologic, Inc.(b)(c) 18,146 1,245,541
- -----------------------------------------------------------------------
Kinetic Concepts, Inc.(c) 21,973 1,176,874
- -----------------------------------------------------------------------
Mindray Medical International Ltd.-ADR
(China) 27,700 1,190,269
=======================================================================
6,393,550
=======================================================================
HEALTH CARE FACILITIES-0.51%
Psychiatric Solutions, Inc.(c) 19,000 617,500
=======================================================================
HEALTH CARE SERVICES-0.79%
Express Scripts, Inc.(c) 13,300 970,900
=======================================================================
HEALTH CARE SUPPLIES-1.52%
Immucor, Inc.(c) 18,232 619,706
- -----------------------------------------------------------------------
Inverness Medical Innovations, Inc.(c) 22,000 1,235,960
=======================================================================
1,855,666
=======================================================================
HOME ENTERTAINMENT SOFTWARE-3.07%
Activision, Inc.(c) 47,742 1,417,937
- -----------------------------------------------------------------------
Electronic Arts Inc.(c) 15,900 928,719
- -----------------------------------------------------------------------
THQ Inc.(c) 49,671 1,400,226
=======================================================================
3,746,882
=======================================================================
HOUSEWARES & SPECIALTIES-1.08%
Jarden Corp.(c) 55,876 1,319,232
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.81%
KGEN Power Corp. (Acquired 01/12/07; Cost
$865,032)(c)(d)(f) 61,788 988,608
=======================================================================
INDUSTRIAL CONGLOMERATES-1.97%
McDermott International, Inc.(c) 40,697 2,402,344
=======================================================================
INDUSTRIAL MACHINERY-1.60%
Flowserve Corp. 9,585 922,077
- -----------------------------------------------------------------------
Kaydon Corp. 18,954 1,033,751
=======================================================================
1,955,828
=======================================================================
INTERNET RETAIL-0.54%
Orbitz Worldwide, Inc.(c) 77,196 656,166
=======================================================================
INTERNET SOFTWARE & SERVICES-0.52%
Akamai Technologies, Inc.(c) 10,002 346,069
- -----------------------------------------------------------------------
VistaPrint Ltd.(c) 6,777 290,395
=======================================================================
636,464
=======================================================================
INVESTMENT BANKING & BROKERAGE-2.16%
MF Global Ltd.(c) 43,311 1,362,997
- -----------------------------------------------------------------------
TD Ameritrade Holding Corp.(c) 63,924 1,282,316
=======================================================================
2,645,313
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
IT CONSULTING & OTHER SERVICES-1.71%
Cognizant Technology Solutions Corp.-Class
A(c) 34,664 $ 1,176,496
- -----------------------------------------------------------------------
Gartner, Inc.(c) 52,308 918,529
=======================================================================
2,095,025
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-1.66%
AMAG Pharmaceuticals, Inc.(c) 15,002 902,070
- -----------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 27,800 1,122,286
=======================================================================
2,024,356
=======================================================================
MANAGED HEALTH CARE-2.44%
Aveta, Inc. (Acquired 12/21/05-05/22/06; Cost
$1,300,095)(c)(d)(f) 90,000 720,000
- -----------------------------------------------------------------------
Humana Inc.(c) 17,600 1,325,456
- -----------------------------------------------------------------------
WellCare Health Plans Inc.(c) 21,947 930,772
=======================================================================
2,976,228
=======================================================================
METAL & GLASS CONTAINERS-4.50%
Crown Holdings, Inc.(c) 74,432 1,909,181
- -----------------------------------------------------------------------
Owens-Illinois, Inc.(c) 47,288 2,340,756
- -----------------------------------------------------------------------
Pactiv Corp.(c) 46,968 1,250,758
=======================================================================
5,500,695
=======================================================================
MULTI-LINE INSURANCE-0.53%
Genworth Financial Inc.-Class A 25,218 641,798
=======================================================================
OIL & GAS DRILLING-2.16%
Diamond Offshore Drilling, Inc. 7,600 1,079,200
- -----------------------------------------------------------------------
Noble Corp. 27,700 1,565,327
=======================================================================
2,644,527
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-4.54%
Cameron International Corp.(c) 32,556 1,566,920
- -----------------------------------------------------------------------
Compagnie Generale de Geophysique-Veritas
(France)(c)(g) 3,905 1,096,299
- -----------------------------------------------------------------------
National-Oilwell Varco Inc.(c) 21,470 1,577,186
- -----------------------------------------------------------------------
Smith International, Inc. 17,724 1,308,918
=======================================================================
5,549,323
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.12%
Carrizo Oil & Gas, Inc.(c) 22,058 1,207,675
- -----------------------------------------------------------------------
Southwestern Energy Co.(c) 24,800 1,381,856
=======================================================================
2,589,531
=======================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.04%
Williams Cos., Inc. (The) 35,400 1,266,612
=======================================================================
PHARMACEUTICALS-1.09%
Shire PLC (United Kingdom)(g) 57,900 1,327,722
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.39%
Meruelo Maddux Properties, Inc.(c) 117,727 470,908
=======================================================================
REGIONAL BANKS-0.61%
Signature Bank(c) 22,170 748,237
=======================================================================
</Table>
AIM V.I. Dynamics Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
RESTAURANTS-1.10%
Burger King Holdings Inc. 46,963 $ 1,338,915
=======================================================================
SEMICONDUCTOR EQUIPMENT-0.75%
MEMC Electronic Materials, Inc.(c) 10,292 910,739
=======================================================================
SEMICONDUCTORS-4.00%
Broadcom Corp.-Class A(c) 37,998 993,268
- -----------------------------------------------------------------------
Marvell Technology Group Ltd.(c) 57,651 805,961
- -----------------------------------------------------------------------
Maxim Integrated Products, Inc. 22,020 583,089
- -----------------------------------------------------------------------
NVIDIA Corp.(c) 37,997 1,292,658
- -----------------------------------------------------------------------
ON Semiconductor Corp.(c) 136,383 1,211,081
=======================================================================
4,886,057
=======================================================================
SOFT DRINKS-0.98%
Hansen Natural Corp.(c) 27,095 1,200,038
=======================================================================
SPECIALIZED FINANCE-1.41%
IntercontinentalExchange Inc.(c) 5,947 1,144,797
- -----------------------------------------------------------------------
KKR Financial Holdings LLC 41,133 577,919
=======================================================================
1,722,716
=======================================================================
SPECIALTY CHEMICALS-0.54%
Wacker Chemie A.G. (Germany)(g) 2,287 654,746
=======================================================================
SPECIALTY STORES-1.20%
Dick's Sporting Goods, Inc.(c) 35,560 987,146
- -----------------------------------------------------------------------
PetSmart, Inc. 6,938 163,251
- -----------------------------------------------------------------------
Ulta Salon Cosmetics & Fragrance Inc.(c) 18,099 310,398
=======================================================================
1,460,795
=======================================================================
STEEL-0.38%
Allegheny Technologies, Inc. 5,362 463,277
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
TIRES & RUBBER-1.12%
Goodyear Tire & Rubber Co. (The)(c) 48,665 $ 1,373,326
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.17%
American Tower Corp.-Class A(c) 29,497 1,256,572
- -----------------------------------------------------------------------
Crown Castle International Corp.(c) 33,654 1,400,007
=======================================================================
2,656,579
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $106,601,650) 117,055,970
=======================================================================
PREFERRED STOCK-0.79%
MORTGAGE REIT'S-0.79%
Thornburg Mortgage Inc.-Series F, $2.50 Conv.
Pfd. (Cost $1,007,500) 40,300 967,200
=======================================================================
MONEY MARKET FUNDS-3.23%
Liquid Assets Portfolio-Institutional
Class(h) 1,974,094 1,974,094
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(h) 1,974,094 1,974,094
=======================================================================
Total Money Market Funds (Cost
$3,948,188) 3,948,188
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.82% (Cost
$111,557,338) 121,971,358
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-2.54%
Liquid Assets Portfolio-Institutional Class
(Cost $3,105,670)(h)(i) 3,105,670 3,105,670
=======================================================================
TOTAL INVESTMENTS-102.36% (Cost $114,663,008) 125,077,028
=======================================================================
OTHER ASSETS LESS LIABILITIES-(2.36)% (2,883,259)
=======================================================================
NET ASSETS-100.00% $122,193,769
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) All or a portion of this security was out on loan at December 31, 2007.
(c) Non-income producing security.
(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 December 31, 2007 was $2,149,288,
which represented 1.76% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at December
31, 2007 represented 0.36% of the Fund's Net Assets. See Note 1A.
(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 December 31, 2007 was
$1,708,608, which represented 1.40% of the Fund's Net Assets.
(g) 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 December 31, 2007 was $3,078,767,
which represented 2.52% of the Fund's Net Assets. See Note 1A.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(i) 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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $107,609,150)* $118,023,170
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $7,053,858) 7,053,858
=============================================================
Total investments (Cost $114,663,008) 125,077,028
=============================================================
Foreign currencies, at value (Cost $173) 172
- -------------------------------------------------------------
Receivables for:
Investments sold 933,508
- -------------------------------------------------------------
Fund shares sold 256,310
- -------------------------------------------------------------
Dividends 41,769
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 19,308
=============================================================
Total assets 126,328,095
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 799,633
- -------------------------------------------------------------
Fund shares reacquired 85,683
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 27,349
- -------------------------------------------------------------
Due to securities lending agent 128,570
- -------------------------------------------------------------
Collateral upon return of securities loaned 2,977,100
- -------------------------------------------------------------
Accrued administrative services fees 81,507
- -------------------------------------------------------------
Accrued distribution fees -- Series II 6
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 311
- -------------------------------------------------------------
Accrued transfer agent fees 899
- -------------------------------------------------------------
Accrued operating expenses 33,268
=============================================================
Total liabilities 4,134,326
=============================================================
Net assets applicable to shares outstanding $122,193,769
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $167,105,014
- -------------------------------------------------------------
Undistributed net investment income (loss) (21,136)
- -------------------------------------------------------------
Undistributed net realized gain (loss) (55,304,075)
- -------------------------------------------------------------
Unrealized appreciation 10,413,966
=============================================================
$122,193,769
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $122,184,070
_____________________________________________________________
=============================================================
Series II $ 9,699
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,351,648
_____________________________________________________________
=============================================================
Series II 509
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 19.24
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 19.06
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $2,913,433 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$3,323) $ 504,347
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$35,585) 193,047
============================================================
Total investment income 697,394
============================================================
EXPENSES:
Advisory fees 984,521
- ------------------------------------------------------------
Administrative services fees 378,485
- ------------------------------------------------------------
Custodian fees 20,634
- ------------------------------------------------------------
Distribution fees -- Series II 31
- ------------------------------------------------------------
Transfer agent fees 13,760
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 21,210
- ------------------------------------------------------------
Other 44,755
============================================================
Total expenses 1,463,396
============================================================
Less: Fees waived and expense offset
arrangement(s) (6,728)
============================================================
Net expenses 1,456,668
============================================================
Net investment income (loss) (759,274)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
(losses) from securities sold to affiliates
of $(256,760)) 17,203,023
- ------------------------------------------------------------
Foreign currencies (12,893)
- ------------------------------------------------------------
Option contracts written 32,650
============================================================
17,222,780
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (2,754,263)
- ------------------------------------------------------------
Foreign currencies (44)
- ------------------------------------------------------------
Option contracts written 2,018
============================================================
(2,752,289)
============================================================
Net realized and unrealized gain 14,470,491
============================================================
Net increase in net assets resulting from
operations $13,711,217
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (759,274) $ (666,257)
- ------------------------------------------------------------------------------------------
Net realized gain 17,222,780 20,090,705
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (2,752,289) (3,354,694)
==========================================================================================
Net increase in net assets resulting from operations 13,711,217 16,069,754
==========================================================================================
Share transactions-net:
Series I (12,316,934) (6,931,540)
- ------------------------------------------------------------------------------------------
Series II (6,500) --
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (12,323,434) (6,931,540)
==========================================================================================
Net increase in net assets 1,387,783 9,138,214
==========================================================================================
NET ASSETS:
Beginning of year 120,805,986 111,667,772
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(21,136) and $(15,897), respectively) $122,193,769 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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. Dynamics Fund
K. CALL OPTIONS WRITTEN -- The Fund may write and/or 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 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.
When the Fund buys a call option, an amount equal to the premium paid by
the Fund is recorded as an investment on the Statement of Assets and
Liabilities. The amount of the investment is subsequently
"marked-to-market" to reflect the current value of the option purchased.
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.
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 Ltd. ("Invesco")
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. 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 year ended December 31, 2007, AIM waived advisory fees of $5,563.
AIM V.I. Dynamics 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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $328,485
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $2,966,101 $ 37,632,897 $ (38,624,904) $1,974,094 $ 78,798
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 2,966,101 37,632,897 (38,624,904) 1,974,094 78,664
=================================================================================================
Subtotal $5,932,202 $ 75,265,794 $ (77,249,808) $3,948,188 $157,462
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $ 27,992,660 $ (24,886,990) $3,105,670 $ 8,924
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 2,528,752 41,164,770 (43,693,522) -- 26,661
=================================================================================================
Subtotal $2,528,752 $ 69,157,430 $ (68,580,512) $3,105,670 $ 35,585
=================================================================================================
Total
Investments
in
Affiliates $8,460,954 $144,423,224 $(145,830,320) $7,053,858 $193,047
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $1,501,405, which resulted in net realized
(losses) of $(256,760), and securities purchases of $1,048,087.
AIM V.I. Dynamics 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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $1,165.
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 year ended December 31, 2007, the Fund paid legal fees of $3,911
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 SEC, 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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $2,913,433 were
on loan to brokers. The loans were secured by cash collateral of $2,977,100
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $35,585 for securities lending transactions, which are
net of compensation to counterparties.
AIM V.I. Dynamics Fund
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- -----------------------------------------------------------------------------------
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--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
There were no ordinary income or long-term capital gain distributions paid
during the years ended December 31, 2007 and 2006.
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments $ 10,304,528
- ----------------------------------------------------------------------------
Temporary book/tax differences (21,137)
- ----------------------------------------------------------------------------
Capital loss carryforward (55,194,636)
- ----------------------------------------------------------------------------
Shares of beneficial interest 167,105,014
============================================================================
Total net assets $122,193,769
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies of ($55).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 utilized $17,314,846 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2010 $55,194,636
_____________________________________________________________________________
=============================================================================
</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 year ended December 31, 2007 was $148,273,556 and
$159,741,278, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $18,344,023
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,039,440)
===============================================================================
Net unrealized appreciation of investment securities $10,304,583
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $114,772,445.
</Table>
AIM V.I. Dynamics Fund
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, partnerships and net operating losses, on December 31, 2007,
undistributed net investment income (loss) was increased by $754,035,
undistributed net realized gain (loss) was increased by $29,402 and shares of
beneficial interest decreased by $783,437. This reclassification had no effect
on the net assets of the Fund.
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007(a) 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,185,271 $ 41,876,286 4,310,698 $ 69,372,528
======================================================================================================================
Reacquired:
Series I (2,876,008) (54,193,220) (4,826,869) (76,304,068)
- ----------------------------------------------------------------------------------------------------------------------
Series II (329) (6,500) -- --
======================================================================================================================
(691,066) $(12,323,434) (516,171) $ (6,931,540)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 69% 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following proposal.
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements") . This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Dynamics Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.15 $ 14.77 $ 13.34 $ 11.77 $ 8.54
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11)(a) (0.09) (0.04) (0.09) (0.07)
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.20 2.47 1.47 1.66 3.30
=========================================================================================================================
Total from investment operations 2.09 2.38 1.43 1.57 3.23
=========================================================================================================================
Net asset value, end of period $ 19.24 $ 17.15 $ 14.77 $ 13.34 $ 11.77
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 12.19% 16.11% 10.72% 13.34% 37.82%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $122,184 $120,792 $111,655 $123,609 $169,269
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.11%(c) 1.12% 1.16% 1.14% 1.14%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.11%(c) 1.13% 1.17% 1.14% 1.15%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.58)%(c) (0.51)% (0.29)% (0.62)% (0.70)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 115% 142% 110% 64% 129%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 based on average daily net assets of $131,710,650.
<Table>
<Caption>
SERIES II
------------------------------------------------
APRIL 30, 2004
COMMENCEMENT
DATE) TO
YEAR ENDED DECEMBER 31, 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) (0.15)(a) (0.12) (0.07) (0.07)
- --------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.17 2.45 1.46 1.45
==============================================================================================================
Total from investment operations 2.02 2.33 1.39 1.38
==============================================================================================================
Net asset value, end of period $19.06 $17.04 $14.71 $13.32
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 11.85% 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 1.36%(c) 1.37% 1.41% 1.40%(d)
- --------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.36%(c) 1.38% 1.42% 1.40%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.83)%(c) (0.76)% (0.54)% (0.88)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 115% 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 based on average daily net assets of $12,313.
(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 16--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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Dynamics Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Dynamics Fund (one of the
funds constituting AIM Variable Insurance Funds, hereafter referred to as the
"Fund") at December 31, 2007, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Dynamics Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (7/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $982.60 $5.45 $1,019.71 $5.55 1.09%
Series II 1,000.00 981.50 6.69 1,018.45 6.82 1.34
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Dynamics Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Dynamics Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
SECTOR EQUITY
Sectors
AIM V.I. Financial
Services Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. FINANCIAL SERVICES FUND's investment
department at 800-410-4246 or on the AIM objective is capital growth.
Web site, AIMinvestments.com. On the home
page, scroll down and click on 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
click on Proxy Voting Activity. Next, IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
select the Fund from the drop-down menu.
The information is also available on the UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
SEC Web site, sec.gov. 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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Financial Services Fund
Management's discussion of Fund performance by returning excess capital to
shareholders in the form of dividends and
======================================================================================= share repurchases.
PERFORMANCE SUMMARY
We maintain a proprietary database of
For the year ended December 31, 2007, AIM V.I. Financial Services Fund, excluding intrinsic value estimates and screen
variable product issuer charges, underperformed the S&P 500 Index, the S&P 500 financial companies for those of
Financials Index and the Lipper Financial Services Fund Index. acceptable quality. Purchase candidates
are subject to fundamental analysis. We
Given the mandate of the Fund--to invest in the financials sector--the Fund's focus on the drivers of estimated
performance relative to its broad market index was heavily influenced by the intrinsic value such as normalized
performance of the financials sector versus the overall market. For the year, the earnings power, marginal returns on
financials sector underperformed the broad market. (triangle) Specific stocks such as economic equity (which adjusts for
FANNIE MAE, MERRILL LYNCH and MBIA contributed to the Fund's underperformance versus distortions present in accounting numbers)
all benchmarks. and sustainable growth. Additionally, we
strive to understand a company's ability
Your Fund's long-term performance appears later in this report. and willingness to grow capital returned
to shareholders in the future. Finally, we
FUND VS. INDEXES focus on quality, including competitive
position, management and financial
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If strength.
variable product issuer charges were included, returns would be lower.
The result is normally a 35- to
Series I Shares -22.22% 50-stock portfolio, with investments that
Series II Shares -22.39 we believe are attractive from both a
S&P 500 Index (triangle) (Broad Market Index) 5.49 valuation and capital discipline
S&P 500 Financials Index (triangle)(Style-Specific Index) -18.63 perspective representing top holdings. In
Lipper VUF Financial Services Funds Category Average (triangle)(Peer Group) -12.62 constructing a portfolio, we attempt to
Lipper Financial Services Funds Index (triangle)(Former Peer Group Index) -13.81 mitigate risk in multiple ways, including
by diversifying holdings across industries
SOURCE: (triangle)LIPPER INC. and businesses that react in different
======================================================================================= ways to changes in interest rates and
economic cycles. We believe a portfolio of
How we invest o Financial companies trading at a undervalued and capital-disciplined
significant discount to our estimate of quality financial companies that
Our goal is to create wealth for intrinsic value because of excessive profitably grow cash flows over time
shareholders. We generally take a short-term investor pessimism. Estimated provides the best opportunity for superior
two-to-three year investment horizon and intrinsic value is a measure based long-term investment results.
invest in two primary opportunities we primarily on the estimated future cash
believe have historically resulted in flows generated by the businesses. Market conditions and your Fund
superior investment returns within the
financials sector: o Reasonably valued financial companies The performance of the S&P 500 Financials
that demonstrate superior capital Index for the year ended December 31,
discipline 2007, was the second worst on record,
behind the recessionary year of 1990(1)
========================================== ========================================== (also the first official year for that
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* index). Longer data series indicate that
2007 was the third worst year for bank
By industry 1. Fannie Mae 6.3% stocks since 1939, with 1990 and 1974
2. JPMorgan Chase & Co. 6.1 faring worse.(2) Financial stocks broadly
Other Diversified Financial Services 15.4% 3. Marsh & McLemman Cos., Inc. 5.7 declined about 20% in the second half of
Asset Management & Custody Banks 11.9 4. Citigroup Inc. 5.5 the year as the prospect of losses in U.S.
Insurance Brokers 10.8 5. Capital One Financial Corp. 5.1 subprime mortgage loans became evident
Thrifts & Mortgage Finance 10.7 6. Merrill Lynch & Co., Inc. 4.9 after years of loosening lending
Investment Banking & Brokerage 9.8 7. Morgan Stanley 4.9 standards.
Regional Banks 8.6 8. Federated Investors, Inc.
Diversified Banks 6.3 -Class B 4.7 The popularity of securitization,
Multi-Line Insurance 5.9 9. Hartford Financial Services especially collateralized debt obligations
Consumer Finance 5.1 Group, Inc. (The) 4.0 (CDOs), exacerbated the problem by
Property & Casualty Insurance 4.0 10. Fifth Third Bancorp 3.9 distancing lenders from accountability for
4 Other Industries, Each with loan quality. CDOs also increased exposure
Less than 3% of Total Net Assets 8.0 Total Net Assets $88.83 million to problem mortgage loans of some market
Money Market Funds Plus participants beyond the lenders. The toxic
Other Assets Less Liabilities 3.5 Total Number of Holdings* 32 mix eroded trust, both in the bond market
and among financial companies, causing a
The Fund's holdings are subject to change, "liquidity" crisis that pres-
and there is no assurance that the Fund
will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ==========================================
AIM V.I. Financial Services Fund
sured asset prices, created funding result. We liquidated the Fund's position capital and risks are spreading beyond the
challenges for financial institutions and in MBIA. The Fund continued to own SCA financials sector. All are hallmarks of a
constricted lending. The decline in home because we believed it was worth more than potential bottom. We expect turnover to
prices accelerated during 2007. its stock price even in the event that its increase in 2008 as we capitalize on new
book of insurance were run off. opportunities being created by the current
The U.S. Federal Reserve Board (the bear market in financial stocks.
Fed) implemented several initiatives to Perhaps the biggest reason that the
restore confidence in money markets portfolio did not perform as well as we Regardless of the macroeconomic
including reducing the federal funds expected amid the turmoil were the sharp environment, we remain focused on
target rate by 100 basis points (1.00%) declines in Citigroup and Fannie Mae. We identifying financial companies that we
beginning in September.(3) As the year were surprised by the extent of believe are undervalued and that exhibit
ended, investors feared that the historic Citigroup's CDO losses, which came at a capital discipline. We also remain
decline in home prices and the Fed's time when the company lacked an excess committed shareholders of the Fund. Thank
seemingly slow response to the crisis had capital cushion to absorb sizable losses. you for your investment in AIM V.I.
put the economy on a path to recession. As a result of the incident, Citigroup Financial Services Fund.
also has a new CEO, Wall Street veteran
In this incredibly difficult Vikram Pandit. We have long been critical Sources: (1) Bloomberg L.P.; (2) The Wall
investment backdrop for financial stocks, of weakness in financial controls at Street Transcript; (3) U.S. Federal
we were disappointed with the performance Citigroup but chose to tolerate the risk Reserve Board
of the Fund. On a favorable note, because of a global banking franchise that
investments in property and casualty has among the best growth opportunities of The views and opinions expressed in
insurance, such as ACE LIMITED and AON, any large financial company in the world management's discussion of Fund
and in asset management and and because the company hired a performance are those of A I M Advisors,
administration, such as BANK OF NEW YORK world-class chief financial officer in Inc. These views and opinions are subject
MELLON, FEDERATED and STATE STREET, posted Gary Crittenden earlier in the year. We to change at any time based on factors
gains for the year. Additionally, the Fund met with Gary shortly after he was hired such as market and economic conditions.
did not have any investments in mortgage and were impressed with his plans to bring These views and opinions may not be relied
originators, subprime lenders or mortgage financial discipline to Citigroup. The upon as investment advice or
insurance, all industries that suffered environment simply became hostile before recommendations, or as an offer for a
mightily in the eye of the storm. he could act. We believe Citigroup is a particular security. The information is
unique opportunity. not a complete analysis of every aspect of
Significant detractors from any market, country, industry, security or
performance included CITIGROUP, MERRILL Fannie Mae has been impacted by the Fund. Statements of fact are from
LYNCH, FANNIE MAE and some exposure to investor concerns about mortgage losses as sources considered reliable, but A I M
bond insurance stocks. Merrill Lynch well as accounting complexities that Advisors, Inc. makes no representation or
incurred large losses in CDOs, which the create volatility in regulatory capital warranty as to their completeness or
company owned as a result of an aggressive but seem to misrepresent the economic accuracy. Although historical performance
push into the securitization business. The performance of the company. Accounting and is no guarantee of future results, these
company's chief executive officer (CEO), capital standards required of the company insights may help you understand our
Stan O'Neal, lost his job as a seem to be in conflict, which we believe investment management philosophy.
consequence. The Fund's position in is inconsistent with sound regulatory
Merrill Lynch had been reduced by about a policy and will ultimately be resolved. Michael J. Simon
third in the first half of 2007, before More importantly, we expect mortgage Chartered Financial
the stock lost about 40% of its value, credit losses to be manageable and expect [SIMON Analyst, senior portfolio
over caution about rapid growth in the Fannie Mae will ultimately emerge an even PHOTO] manager, is lead manager
company's trading assets. In retrospect, more dominate player in the mortgage of AIM V.I. Financial
we did not act aggressively enough. industry. Services Fund. He began his investment
Merrill Lynch remains the premiere retail career in 1989 and joined AIM in 2001. Mr.
brokerage franchise and the new CEO, At the close of the year, the Fund Simon earned his B.B.A. in finance from
former New York Stock Exchange chief John continued to have significant holdings in Texas Christian University and his M.B.A.
Thain, is well regarded. We are committed the largest diversified U.S. financial from the University of Chicago.
to the remaining position which we believe companies as turnover remained low in
is undervalued. 2007. However, we believe a broader set of Meggan M. Walsh
opportunities have emerged within the [WALSH Chartered Financial
At the beginning of the year, the sector that are among the best we have PHOTO] Analyst, senior portfolio
Fund held small positions in bond insurers seen in our careers. As expected, the manager, is manager of
MBIA and SECURITY CAPITAL ASSURANCE (SCA), onset of the credit cycle has driven AIM V.I. Financial
both of which suffered significant greater dispersion of valuation with the Services Fund. She began her investment
declines amid the prospect for CDO losses sector. We expect financial stocks to career in 1987 and joined AIM in 1991. Ms.
and the consequent need to raise capital. remain volatile as the economy flirts with Walsh earned her bachelor's degree in
When we made our initial investment, we recession and credit losses ultimately finance from the University of Maryland
believed SCA was undervalued and MBIA had peak, the timing of which is impossible to and her M.B.A. from Loyola College.
a history of returning capital to pinpoint. But financial stocks have fallen Assisted by the Financial Services Team
shareholders. But, we also understood that significantly, credit concerns are
the businesses were subject to above widespread, stressed companies are raising ==========================================
average risk and kept the positions small FOR A DISCUSSION OF THE RISKS OF INVESTING
as a IN YOUR FUND, INDEXES USED IN THIS REPORT
AND YOUR FUND'S LONG-TERM PERFORMANCE,
PLEASE TURN THE PAGE.
==========================================
AIM V.I. Financial Services Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE OF THE FUND'S SERIES BASED ON EXPENSES INCURRED DURING THE
AVERAGE ANNUAL TOTAL RETURNS I AND SERIES II SHARE CLASSES WILL DIFFER PERIOD COVERED BY THIS REPORT.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
As of 12/31/07 AIM V.I. FINANCIAL SERVICES FUND, A
SERIES I SHARES THE PERFORMANCE DATA QUOTED REPRESENT SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
Inception (9/20/99) 4.46% PAST PERFORMANCE AND CANNOT GUARANTEE FUNDS, IS CURRENTLY OFFERED THROUGH
5 Years 6.20 COMPARABLE FUTURE RESULTS; CURRENT INSURANCE COMPANIES ISSUING VARIABLE
1 Year -22.22 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE PRODUCTS. YOU CANNOT PURCHASE SHARES OF
CONTACT YOUR VARIABLE PRODUCT ISSUER OR THE FUND DIRECTLY. PERFORMANCE FIGURES
SERIES II SHARES FINANCIAL ADVISOR FOR THE MOST RECENT GIVEN REPRESENT THE FUND AND ARE NOT
Inception 4.21% MONTH-END VARIABLE PRODUCT PERFORMANCE. INTENDED TO REFLECT ACTUAL VARIABLE
5 Years 5.95 PERFORMANCE FIGURES REFLECT FUND EXPENSES, PRODUCT VALUES. THEY DO NOT REFLECT SALES
1 Year -22.39 REINVESTED DISTRIBUTIONS AND CHANGES IN CHARGES, EXPENSES AND FEES ASSESSED IN
========================================== NET ASSET VALUE. INVESTMENT RETURN AND CONNECTION WITH A VARIABLE PRODUCT. SALES
PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CHARGES, EXPENSES AND FEES, WHICH ARE
SERIES II SHARES' INCEPTION DATE IS APRIL MAY HAVE A GAIN OR LOSS WHEN YOU SELL DETERMINED BY THE VARIABLE PRODUCT
30, 2004. RETURNS SINCE THAT DATE ARE SHARES. ISSUERS, WILL VARY AND WILL LOWER THE
HISTORICAL. ALL OTHER RETURNS ARE THE TOTAL RETURN.
BLENDED RETURNS OF THE HISTORICAL THE TOTAL ANNUAL FUND OPERATING
PERFORMANCE OF SERIES II SHARES SINCE EXPENSE RATIO SET FORTH IN THE MOST RECENT THE MOST RECENT MONTH-END PERFORMANCE
THEIR INCEPTION AND THE RESTATED FUND PROSPECTUS AS OF THE DATE OF THIS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
HISTORICAL PERFORMANCE OF SERIES I SHARES REPORT FOR SERIES I AND SERIES II SHARES PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
(FOR PERIODS PRIOR TO INCEPTION OF SERIES WAS 1.13% AND 1.38%, RESPECTIVELY. THE AUTOMATED INFORMATION LINE, 866-702-4402.
II SHARES) ADJUSTED TO REFLECT THE RULE EXPENSE RATIOS PRESENTED ABOVE MAY VARY AS MENTIONED ABOVE, FOR THE MOST RECENT
12B-1 FEES APPLICABLE TO SERIES II SHARES. FROM THE EXPENSE RATIOS PRESENTED IN OTHER MONTH-END PERFORMANCE INCLUDING VARIABLE
THE INCEPTION DATE OF SERIES I SHARES IS SECTIONS OF THIS REPORT THAT ARE PRODUCT CHARGES, PLEASE CONTACT YOUR
SEPTEMBER 20, 1999. VARIABLE PRODUCT ISSUER OR FINANCIAL
ADVISOR.
====================================================================================================================================
Principal risks of investing in the Fund extensive government regulation, which may to be more volatile than other mutual
change frequently. The profitability of funds, and the value of the Fund's
Since a large percentage of the Fund's businesses in this sector depends heavily investments may tend to rise and fall more
assets may be invested in securities of a on the availability and cost of money and rapidly.
limited number of companies, each may fluctuate significantly in response to
investment has a greater effect on the changes to interest rates and general About indexes used in this report
Fund's overall performance, and any change economic conditions.
in the value of those securities could The S&P 500--REGISTERED TRADEMARK-- INDEX
significantly affect the value of your Foreign securities have additional is a market capitalization-weighted index
investment in the Fund. risks, including exchange rate changes, covering all major areas of the U.S.
political and economic upheaval, the economy. It is not the 500 largest
Investing in developing countries can relative lack of information, relatively companies, but rather the most widely held
add additional risk, such as high rates of low market liquidity, and the potential 500 companies chosen with respect to
inflation or sharply devalued currencies lack of strict financial and accounting market size, liquidity, and their
against the U.S. dollar. Transaction costs controls and standards. industry.
are often higher, and there may be delays
in settlement procedures. There is no guarantee that the The S&P 500 FINANCIALS INDEX is a
investment techniques and risk analyses market capitalization-weighted index of
Prices of equity securities change in used by the Fund's portfolio managers will companies involved in activities such as
response to many factors including the produce the desired results. banking, consumer finance, investment
historical and prospective earnings of the banking and brokerage, asset management,
issuer, the value of its assets, general The prices of securities held by the insurance and investment, and real estate,
economic conditions, interest rates, Fund may decline in response to market including REITs.
investor perceptions and market liquidity. risks.
The Fund has elected to use the
The financial services sector is The Fund's investments are LIPPER VARIABLE UNDERLYING FUNDS (VUF)
subject to concentrated in a comparatively narrow FINANCIAL SERVICES FUNDS CATEGORY AVERAGE
segment of the economy. Consequently, the as its peer
Fund may tend
Continued
AIM V.I. Financial Services Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
group instead of the Lipper Financial performance of the Fund may deviate ues may differ from the net asset values
Services Funds Index. In 2006, Lipper significantly from the performance of the and returns reported in the Financial
began publishing VUF indexes, allowing the indexes. Highlights. Additionally, the returns and
Fund to be compared with the Lipper VUF net asset values shown throughout this
Financial Services Funds Category Average. A direct investment cannot be made in report are at the Fund level only and do
The unmanaged Lipper VUF Financial an index. Unless otherwise indicated, not include variable product issuer
Services Funds Category Average represents index results include reinvested charges. If such charges were included,
the average of all the variable insurance dividends, and they do not reflect sales the total returns would be lower.
underlying Financial Services Funds charges. Performance of an index of funds
tracked by Lipper Inc. These funds invest reflects fund expenses; performance of a Industry classifications used in this
at least 65% of their portfolios in equity market index does not. report are generally according to the
securities of companies engaged in Global Industry Classification Standard,
providing financial services. Other information which was developed by and is the
exclusive property and a service mark of
The LIPPER FINANCIAL SERVICES FUNDS The returns shown in the management's Morgan Stanley Capital International Inc.
INDEX is an equally weighted discussion of Fund performance are based and Standard & Poor's.
representation of the largest funds in the on net asset values calculated for
Lipper Financial Services Funds category. shareholder transactions. Generally The Chartered Financial
accepted accounting principles require Analyst --REGISTERED TRADEMARK--
The Fund is not managed to track the adjustments to be made to the net assets (CFA --REGISTERED TRADEMARK--) designation
performance of any particular index, of the Fund at period end for financial is a globally recognized standard for
including the indexes defined here, and reporting purposes, and as such, the net measuring the competence and integrity of
consequently, the asset values for shareholder transactions investment professionals.
and the returns based on those net asset
val-
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 9/20/99, INDEX DATA FROM 9/30/99
AIM V.I. FINANCIAL LIPPER VUF FINANCIAL LIPPER FINANCIAL
SERVICES FUND-SERIES I S&P 500 FINANCIALS SERVICES FUNDS SERVICES FUNDS
DATE SHARES S&P 500 INDEX(1) INDEX(1) CATEGORY AVERAGE(1) INDEX(1)
9/20/99 $ 10000
9/99 9950 $10000 $10000 $10000 $10000
10/99 11150 10633 11669 11317 11240
11/99 11009 10849 11097 10869 10763
12/99 11100 11487 10877 10860 10478
1/00 10640 10910 10533 10451 9999
2/00 9560 10703 9392 9585 9030
3/00 10990 11750 11135 11221 10498
4/00 10781 11396 10785 10924 10113
5/00 11391 11163 11508 11376 10709
6/00 11081 11438 10810 11227 10317
7/00 12062 11259 11927 12157 11118
8/00 13012 11958 13073 13374 12135
9/00 13532 11327 13383 13696 12526
10/00 13523 11279 13325 13576 12596
11/00 12583 10390 12539 12611 12070
12/00 13855 10441 13672 13886 13279
1/01 13505 10811 13635 13669 13138
2/01 12815 9826 12739 13016 12529
3/01 12414 9204 12355 12564 12104
4/01 12764 9919 12815 13110 12490
5/01 13365 9985 13332 13574 12989
6/01 13275 9742 13327 13478 12985
7/01 13015 9646 13111 13304 12832
8/01 12275 9043 12312 12691 12204
9/01 11603 8313 11585 11797 11571
10/01 11333 8472 11370 11579 11248
11/01 12235 9121 12182 12329 12022
12/01 12487 9201 12449 12670 12378
1/02 12356 9067 12254 12431 12351
2/02 12205 8892 12076 12339 12307
3/02 12950 9227 12879 13052 12959
4/02 12538 8667 12535 12931 12841
5/02 12558 8604 12514 12923 12873
6/02 12015 7991 11920 12280 12268
7/02 11100 7368 10975 11288 11388
8/02 11271 7417 11199 11488 11684
9/02 10145 6611 9890 10192 10431
10/02 10869 7193 10784 10891 10983
11/02 11151 7616 11228 11399 11390
12/02 10628 7168 10626 10900 10892
1/03 10455 6981 10449 10690 10692
2/03 10121 6876 10122 10420 10412
3/03 10121 6943 10083 10294 10350
4/03 11163 7514 11318 11404 11344
5/03 11771 7910 11916 12103 12070
6/03 11811 8011 11946 12217 12163
7/03 12398 8152 12494 12661 12659
8/03 12266 8311 12368 12685 12725
9/03 12316 8223 12451 12815 12788
10/03 13166 8688 13308 13707 13730
11/03 13106 8764 13271 13878 13861
12/03 13769 9223 13923 14522 14376
1/04 14267 9393 14367 14986 14826
2/04 14644 9523 14748 15402 15239
3/04 14440 9380 14602 15252 15084
4/04 13729 9233 13928 14542 14280
5/04 13892 9359 14184 14830 14550
6/04 13984 9541 14255 14896 14669
7/04 13586 9225 13963 14497 14343
8/04 13972 9262 14432 14896 14713
9/04 13932 9362 14309 14973 14872
10/04 13882 9506 14381 15170 15093
11/04 14329 9890 14807 15795 15736
12/04 14963 10226 15440 16465 16383
1/05 14543 9977 15106 16042 15963
2/05 14523 10187 15026 16079 15947
3/05 13990 10007 14455 15582 15469
====================================================================================================================================
SOURCE: (1)LIPPER INC.
====================================================================================================================================
[MOUNTAIN CHART]
4/05 13907 9817 14471 15426 15226
5/05 14327 10129 14867 15741 15706
6/05 14532 10144 15080 16050 16095
7/05 14798 10521 15318 16415 16582
8/05 14460 10425 15050 16216 16257
9/05 14501 10509 15190 16384 16310
10/05 15106 10334 15669 16667 16518
11/05 15802 10724 16404 17482 17282
12/05 15846 10728 16439 17618 17354
1/06 16189 11012 16587 18003 17772
2/06 16386 11042 16923 18287 17981
3/06 16355 11180 16973 18496 18186
4/06 16957 11330 17708 19079 18722
5/06 16221 11004 17056 18370 17999
6/06 16025 11018 16951 18268 17903
7/06 16335 11086 17371 18468 18065
8/06 16605 11350 17573 18845 18237
9/06 17176 11642 18305 19525 18856
10/06 17643 12021 18750 19970 19276
11/06 17695 12249 18866 20209 19512
12/06 18454 12421 19595 20870 20113
1/07 18527 12609 19768 21120 20276
2/07 18029 12363 19179 20587 19845
3/07 17912 12501 19038 20490 19677
4/07 18781 13055 19825 21248 20244
5/07 19246 13510 20281 21785 20754
6/07 18505 13285 19440 21085 20073
7/07 16969 12874 17925 19677 18616
8/07 17054 13067 18201 19781 18792
9/07 17308 13555 18612 20408 19199
10/07 16874 13770 18276 20510 19048
11/07 15146 13195 16861 19009 17930
12/07 14351 13103 15945 18173 17336
====================================================================================================================================
AIM V.I. Financial Services Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.51%
ASSET MANAGEMENT & CUSTODY BANKS-11.87%
Bank of New York Mellon Corp. (The) 51,745 $ 2,523,086
- ----------------------------------------------------------------------
Blackstone Group L.P. (The)(b) 33,065 731,729
- ----------------------------------------------------------------------
FBR Capital Markets Corp.(c) 88,911 851,767
- ----------------------------------------------------------------------
Federated Investors, Inc.-Class B 100,701 4,144,853
- ----------------------------------------------------------------------
State Street Corp. 28,257 2,294,469
======================================================================
10,545,904
======================================================================
CONSUMER FINANCE-5.11%
Capital One Financial Corp.(b) 96,010 4,537,433
======================================================================
DIVERSIFIED BANKS-6.29%
U.S. Bancorp 86,501 2,745,542
- ----------------------------------------------------------------------
Wachovia Corp. 74,649 2,838,901
======================================================================
5,584,443
======================================================================
DIVERSIFIED CAPITAL MARKETS-2.15%
UBS A.G.-(Switzerland) 41,580 1,912,680
======================================================================
INSURANCE BROKERS-10.84%
Aon Corp. 51,140 2,438,866
- ----------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 191,985 5,081,843
- ----------------------------------------------------------------------
National Financial Partners Corp. 46,203 2,107,319
======================================================================
9,628,028
======================================================================
INVESTMENT BANKING & BROKERAGE-9.76%
Merrill Lynch & Co., Inc. 80,807 4,337,720
- ----------------------------------------------------------------------
Morgan Stanley 81,510 4,328,996
======================================================================
8,666,716
======================================================================
LIFE & HEALTH INSURANCE-2.94%
Prudential Financial, Inc. 7,853 730,643
- ----------------------------------------------------------------------
StanCorp Financial Group, Inc. 37,372 1,882,801
======================================================================
2,613,444
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
MULTI-LINE INSURANCE-5.92%
American International Group, Inc. 29,858 $ 1,740,722
- ----------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 40,402 3,522,650
======================================================================
5,263,372
======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-15.40%
Bank of America Corp. 80,942 3,339,667
- ----------------------------------------------------------------------
Citigroup Inc. 165,829 4,882,006
- ----------------------------------------------------------------------
JPMorgan Chase & Co. 125,027 5,457,428
======================================================================
13,679,101
======================================================================
PROPERTY & CASUALTY INSURANCE-4.01%
ACE Ltd. 51,896 3,206,135
- ----------------------------------------------------------------------
Security Capital Assurance Ltd.(b) 91,487 355,884
======================================================================
3,562,019
======================================================================
REGIONAL BANKS-8.56%
Fifth Third Bancorp 138,560 3,482,013
- ----------------------------------------------------------------------
Popular, Inc.(b) 123,280 1,306,768
- ----------------------------------------------------------------------
SunTrust Banks, Inc. 33,106 2,068,794
- ----------------------------------------------------------------------
Zions Bancorp. 15,919 743,258
======================================================================
7,600,833
======================================================================
SPECIALIZED CONSUMER SERVICES-1.87%
H&R Block, Inc. 89,645 1,664,708
======================================================================
SPECIALIZED FINANCE-1.04%
Moody's Corp. 25,856 923,059
======================================================================
THRIFTS & MORTGAGE FINANCE-10.75%
Fannie Mae 140,316 5,609,834
- ----------------------------------------------------------------------
Freddie Mac 56,553 1,926,761
- ----------------------------------------------------------------------
Hudson City Bancorp, Inc. 134,176 2,015,323
======================================================================
9,551,918
======================================================================
Total Common Stocks & Other Equity
Interests (Cost $89,116,989) 85,733,658
======================================================================
</Table>
AIM V.I. Financial Services Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
MONEY MARKET FUNDS-1.23%
Liquid Assets Portfolio-Institutional
Class(d) 545,593 $ 545,593
- ----------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 545,593 545,593
======================================================================
Total Money Market Funds (Cost
$1,091,186) 1,091,186
======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-97.74% (Cost
$90,208,175) 86,824,844
======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-1.65%
Liquid Assets Portfolio-Institutional Class
(Cost $1,469,878)(d)(e) 1,469,878 1,469,878
======================================================================
TOTAL INVESTMENTS-99.39% (Cost $91,678,053) 88,294,722
======================================================================
OTHER ASSETS LESS LIABILITIES-0.61% 537,485
======================================================================
NET ASSETS-100.00% $88,832,207
______________________________________________________________________
======================================================================
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) All or a portion of this security was out on loan at December 31, 2007.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(e) 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 6.
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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $89,116,989)* $85,733,658
- -----------------------------------------------------------
Investments in affiliated money market funds
(Cost $2,561,064) 2,561,064
===========================================================
Total investments (Cost $91,678,053) 88,294,722
===========================================================
Receivables for:
Investments sold 1,536,567
- -----------------------------------------------------------
Fund shares sold 400,157
- -----------------------------------------------------------
Dividends 209,329
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 20,326
===========================================================
Total assets 90,461,101
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 20,770
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 30,799
- -----------------------------------------------------------
Collateral upon return of securities loaned 1,469,878
- -----------------------------------------------------------
Accrued administrative services fees 62,364
- -----------------------------------------------------------
Accrued distribution fees -- Series II 2,250
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 599
- -----------------------------------------------------------
Accrued transfer agent fees 1,663
- -----------------------------------------------------------
Accrued operating expenses 40,571
===========================================================
Total liabilities 1,628,894
===========================================================
Net assets applicable to shares outstanding $88,832,207
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $85,629,486
- -----------------------------------------------------------
Undistributed net investment income 1,983,468
- -----------------------------------------------------------
Undistributed net realized gain 4,602,584
- -----------------------------------------------------------
Unrealized appreciation (depreciation) (3,383,331)
===========================================================
$88,832,207
___________________________________________________________
===========================================================
NET ASSETS:
Series I $85,143,804
- -----------------------------------------------------------
Series II $ 3,688,403
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 6,943,088
- -----------------------------------------------------------
Series II 303,112
___________________________________________________________
===========================================================
Series I:
Net asset value per share $ 12.26
___________________________________________________________
===========================================================
Series II:
Net asset value per share $ 12.17
___________________________________________________________
===========================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $1,429,758 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $34,440) $ 3,196,535
- -----------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$8,567) 162,869
- -----------------------------------------------------------
Interest 1,058
===========================================================
Total investment income 3,360,462
===========================================================
EXPENSES:
Advisory fees 925,203
- -----------------------------------------------------------
Administrative services fees 357,474
- -----------------------------------------------------------
Custodian fees 6,770
- -----------------------------------------------------------
Distribution fees -- Series II 7,905
- -----------------------------------------------------------
Transfer agent fees 13,920
- -----------------------------------------------------------
Trustees' and officer's fees and benefits 20,629
- -----------------------------------------------------------
Other 49,994
===========================================================
Total expenses 1,381,895
===========================================================
Less: Fees waived (2,119)
===========================================================
Net expenses 1,379,776
===========================================================
Net investment income 1,980,686
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 5,618,683
- -----------------------------------------------------------
Foreign currencies 23,904
===========================================================
5,642,587
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (34,537,669)
- -----------------------------------------------------------
Foreign currencies 83
===========================================================
(34,537,586)
===========================================================
Net realized and unrealized gain (loss) (28,894,999)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(26,914,313)
___________________________________________________________
===========================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,980,686 $ 1,919,264
- ------------------------------------------------------------------------------------------
Net realized gain 5,642,587 7,599,322
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (34,537,586) 10,902,597
==========================================================================================
Net increase (decrease) in net assets resulting from
operations (26,914,313) 20,421,183
==========================================================================================
Distributions to shareholders from net investment income:
Series I (1,843,313) (2,166,144)
- ------------------------------------------------------------------------------------------
Series II (73,636) (20,378)
==========================================================================================
Total distributions from net investment income (1,916,949) (2,186,522)
==========================================================================================
Distributions to shareholders from net realized gains:
Series I (6,958,807) (834,392)
- ------------------------------------------------------------------------------------------
Series II (281,396) (7,888)
==========================================================================================
Total distributions from net realized gains (7,240,203) (842,280)
==========================================================================================
Decrease in net assets resulting from distributions (9,157,152) (3,028,802)
==========================================================================================
Share transactions-net:
Series I (26,100,103) (12,475,511)
- ------------------------------------------------------------------------------------------
Series II 3,247,596 1,586,646
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (22,852,507) (10,888,865)
==========================================================================================
Net increase (decrease) in net assets (58,923,972) 6,503,516
==========================================================================================
NET ASSETS:
Beginning of year 147,756,179 141,252,663
==========================================================================================
End of year (including undistributed net investment income
of $1,983,468 and $1,895,827, respectively) $ 88,832,207 $147,756,179
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Financial Services Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
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.
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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. Financial Services 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 -- 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
AIM V.I. Financial Services Fund
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 annual rate of the Fund's average daily net assets as follows:
<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 Ltd. ("Invesco")
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. 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 year ended December 31, 2007, AIM waived advisory fees of $2,119.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $307,474
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 year ended December 31, 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 A I M
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 year ended December 31, 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. Financial Services 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 year ended
December 31, 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 12/31/07 INCOME
- ----------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 5,826,336 $16,087,971 $(21,368,714) $ 545,593 $ 77,284
- ----------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 5,826,337 16,087,971 (21,368,715) 545,593 77,018
================================================================================================================
Subtotal $11,652,673 $32,175,942 $(42,737,429) $1,091,186 $154,302
________________________________________________________________________________________________________________
================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- ----------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $105,818,362 $(104,348,484) $1,469,878 $ 8,567
================================================================================================================
Total Investments in
Affiliates $11,652,673 $137,994,304 $(147,085,913) $2,561,064 $162,869
________________________________________________________________________________________________________________
================================================================================================================
</Table>
* Net of compensation to counterparties.
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 year ended December 31, 2007, the Fund paid legal fees of $3,932
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 SEC, 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 is a party to 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 year ended December 31, 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--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 by the
securities lending provider. 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
AIM V.I. Financial Services Fund
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 December 31, 2007, securities with an aggregate value of $1,429,758 were
on loan to brokers. The loans were secured by cash collateral of $1,469,878
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $8,567 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $2,161,740 $2,186,522
- --------------------------------------------------------------------------------------
Long-term capital gain 6,995,412 842,280
======================================================================================
Total distributions $9,157,152 $3,028,802
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ---------------------------------------------------------------------------
Undistributed ordinary income $ 2,254,281
- ---------------------------------------------------------------------------
Undistributed long-term gain 5,546,886
- ---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (4,251,056)
- ---------------------------------------------------------------------------
Temporary book/tax differences (24,077)
- ---------------------------------------------------------------------------
Post-October Capital loss deferral (323,313)
- ---------------------------------------------------------------------------
Shares of beneficial interest 85,629,486
===========================================================================
Total net assets $88,832,207
___________________________________________________________________________
===========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
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 year ended December 31, 2007 was $10,437,951 and
$33,749,909, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 12,868,399
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (17,119,455)
==============================================================================
Net unrealized appreciation (depreciation) of investment
securities $ (4,251,056)
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $92,545,778.
</Table>
AIM V.I. Financial Services Fund
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, on December 31, 2007, undistributed net investment income was
increased by $23,904 and undistributed net realized gain was decreased by
$23,904. This reclassification had no effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
Changes in Shares Outstanding
- ----------------------------------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------------------
2007 (a) 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,170,982 $ 19,006,293 1,717,516 $ 28,153,085
- ----------------------------------------------------------------------------------------------------------------------
Series II 251,992 4,101,308 94,755 1,577,115
======================================================================================================================
Issued as reinvestment of dividends:
Series I 666,827 8,802,120 175,406 3,000,536
- ----------------------------------------------------------------------------------------------------------------------
Series II 27,101 355,032 1,660 28,266
======================================================================================================================
Reacquired:
Series I (3,284,263) (53,908,516) (2,756,103) (43,629,132)
- ----------------------------------------------------------------------------------------------------------------------
Series II (72,050) (1,208,744) (1,101) (18,735)
======================================================================================================================
(1,239,411) $(22,852,507) (767,867) $(10,888,865)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 78% 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--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposals.
- New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM")
and each of AIM Funds Management Inc., Invesco Asset Management
Deutschland, GmbH, Invesco Asset Management Limited, Invesco Asset
Management (Japan) Limited, Invesco Australia Limited, Invesco Global
Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc. and Invesco Senior Secured Management, Inc.
(collectively, the "Affiliated Sub-Advisers") (the "New Sub-advisory
Arrangements"). This proposal is intended to benefit the Fund and its
shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM
would pay all of the sub-advisory fees of the sub-advisers, the new
sub-advisory arrangements would not affect the fees the Fund pays pursuant
to the advisory agreement.
- For AIM V.I. Financial Services, changing the Fund sub-classification from
diversified to non-diversified.
If approved by shareholders, the New Sub-advisory Arrangements are expected
to become effective on or about May 1, 2008.
AIM V.I. Financial Services 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
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.41 $ 15.26 $ 14.61 $ 13.54 $ 10.50
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.27(a) 0.23(a) 0.19(a) 0.15 0.08
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.04) 2.28 0.66 1.02 3.02
========================================================================================================================
Total from investment operations (3.77) 2.51 0.85 1.17 3.10
========================================================================================================================
Less distributions:
Dividends from net investment income (0.29) (0.26) (0.20) (0.10) (0.06)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.09) (0.10) - - -
========================================================================================================================
Total distributions (1.38) (0.36) (0.20) (0.10) (0.06)
========================================================================================================================
Net asset value, end of period $ 12.26 $ 17.41 $ 15.26 $ 14.61 $ 13.54
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) (22.22)% 16.52% 5.84% 8.68% 29.58%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $85,144 $146,092 $141,241 $203,879 $210,352
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets 1.11%(c) 1.12% 1.12% 1.12% 1.09%
========================================================================================================================
Ratio of net investment income to average net assets 1.61%(c) 1.44% 1.30% 0.89% 0.87%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 9% 14% 22% 67% 65%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 based on average daily net assets of $120,198,422.
<Table>
<Caption>
SERIES II
-----------------------------------------------------
APRIL 30, 2004
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
------------------------------ TO 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 0.22(a) 0.20(a) 0.15(a) 0.12
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.00) 2.26 0.67 1.07
===================================================================================================================
Total from investment operations (3.78) 2.46 0.82 1.19
===================================================================================================================
Less distributions:
Dividends from net investment income (0.29) (0.26) (0.18) (0.10)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.09) (0.10) - -
===================================================================================================================
Total distributions (1.38) (0.36) (0.18) (0.10)
===================================================================================================================
Net asset value, end of period $ 12.17 $17.33 $15.23 $14.59
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (22.39)% 16.22% 5.61% 8.85%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 3,688 $1,664 $ 11 $ 11
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets 1.36%(c) 1.37% 1.37% 1.38%(d)
===================================================================================================================
Ratio of net investment income to average net assets 1.36%(c) 1.19% 1.05% 0.63%(d)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate(e) 9% 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 based on average daily net assets of $3,161,956.
(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 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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Financial Services Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Financial Services Fund
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2007 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Financial Services Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL (5% ANNUAL RETURN
ACTUAL BEFORE EXPENSES)
------------------------------ ------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $775.60 $5.15 $1,019.41 $5.85 1.15%
Series II 1,000.00 775.20 6.26 1,018.15 7.12 1.40
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Financial Services Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
FEDERAL AND STATE INCOME TAX
<Table>
Long-Term Capital Gain Dividends $6,995,411
Corporate Dividends Received
Deduction* 100%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Financial Services Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm);
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Financial Services Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
SECTOR EQUITY
Sectors
AIM V.I. Global Health
Care Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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, AIM V.I. GLOBAL HEALTH CARE FUND's investment
upon request, from our Client Services objective is capital growth.
department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home
page, scroll down and click on 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
to AIMinvestments.com, access the About Us IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
tab, click on Required Notices and then
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu. UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
The information is also available on the ARE FROM A I M MANAGEMENT GROUP INC.
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Global Health Care Fund
Management's discussion of Fund performance especially products that fill otherwise
unfilled market segments.
=======================================================================================
PERFORMANCE SUMMARY We may sell a holding when:
While the year was positive for health care stocks, performance relative to other o We identify a more attractive investment
economic sectors was significantly lower. However, for the year ended December 31, opportunity.
2007, the Fund outperformed the broader market as measured by the MSCI World Index.
Excluding variable product issuer charges, the Fund also outperformed the MSCI World o We see a deterioration of a company's
Health Care Index due primarily to strong security selection in health care equipment, fundamentals.
an overweight position in life sciences tools and services and an underweight position
in pharmaceuticals. The Fund also benefited from select positions within biotechnology. o A company fails to capitalize on a
It is important to note that the style specific benchmark is more than 60% weighted in market opportunity.
large-cap pharmaceuticals while the Fund is more diversified.
o A change in management occurs.
Your Fund's long-term performance appears later in this report.
o A stock's price target has been met.
FUND VS. INDEXES
Market conditions and your Fund
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If
variable product issuer charges were included, returns would be lower. Subprime loan concerns, record high crude
oil prices, a weak housing market and a
Series I Shares 11.85% weak U.S. dollar increased fears of
Series II Shares 11.52 recession and worries about a potentially
MSCI World Index(triangle) (Broad Market Index) 9.04 negative effect on consumer spending.
MSCI World Health Care Index(triangle) (Style-Specific Index) 3.94 These factors affected investor sentiment
Lipper VUF Health/Biotechnology Funds Category Average(triangle) which caused market volatility to increase
(Peer Group) 10.89 during the year. Yet, despite concerns
Lipper Health/Biotechnology Funds Index(triangle) (Former Peer over a slowing economy, several major
Group Index) 10.16 market indexes ended the year in positive
SOURCES: (triangle)LIPPER INC. territory after setting all-time closing
======================================================================================= highs during the year.(1) Strong global
growth, steady corporate earnings and
How we invest of the health care sector: continued merger and acquisition activity
pharmaceuticals, biotechnology, medical drove equity markets higher for much of
We seek health care stocks of all market technology and health services. Suitable 2007. Against this backdrop, materials,
capitalizations from around the world that investments in this universe are energy and utilities were among the best
we believe are attractively priced and identified as having strong fundamentals performing sectors of the S&P 500
have the potential to benefit from and earnings prospects combined with Index.(1) Conversely, financials, consumer
long-term earnings and cash flow growth. healthy growth prospects. We assess the discretionary and health care were the
long-term commercial potential of each weakest performing sectors.(1)
We typically invest in four broad company's current and prospective
segments products,
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By country 1. Pharmaceuticals 29.3% 1. Roche Holding A. G. 4.1%
U.S.A. 70.0% 2. Biotechnology 25.3 2. Genzyme Corp. 3.5
Switzerland 6.8 3. Life Sciences Tools & Services 11.9 3. Amgen Inc. 3.3
France 4.3 4. Health Care Equipment 9.5 4. Gilead Sciences, Inc. 3.0
Germany 3.6 5. Managed Health Care 6.0 5. Novartis A.G.-ADR 2.6
United Kingdom 2.9 6. Schering-Plough Corp. 2.6
Countries Less Than 2.0% Total Net Assets $244.26 million 7. UnitedHealth Group Inc. 2.5
of the Portfolio 6.0 8. Johnson & Johnson 2.5
Money Market Funds Plus Total Number of Holdings* 99 9. Wyeth 2.0
Other Assets Less Liabilities 6.4 10. Medtronic, Inc. 2.0
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Global Health Care Fund
On an absolute basis, holdings in Vital Images, a leading provider of Derek Taner Chartered Financial
health care equipment and life sciences health care visualization technology, was [TANER Analyst, portfolio manager, is
tools and services contributed the most to also among the top detractors from Fund PHOTO] manager of AIM V.I. Global
Fund performance during the year. On the performance during the year. The company's Health Care Fund. Mr. Taner
other hand, holdings in health care stock price declined toward the end of the began his investment career in 1993 as a
technology were the primary detractors year as the firm lowered its revenue fixed income analyst, assistant portfolio
from performance. Relative to the MSCI outlook and announced weak backlog due to manager and manager of a health care
World Health Care Index, strong security delays in a new product launch. We fund. Mr. Taner joined AIM in 2005. He
selection in health care equipment, an believed this was a temporary issue and earned a B.S. in accounting and an M.B.A.
overweight position in life sciences tools continued to own the stock. from the Haas School of Business at the
and services, as well as strong security University of California at Berkeley
selection and an underweight position in During the year, we sold our position
pharmaceutical stocks drove our in Allergan, a specialty pharmaceutical Assisted by the Global Health Care Team
outperformance. The Fund also benefited and medical device focused firm, as the
from strong security selection within stock had reached our price target. On the
biotechnology; however, performance was other hand, we purchased Medtronic, a
partially offset by an overweight position medical device maker focused on treating
in this industry. Biopharmaceutical chronic diseases such as diabetes and
company Onyx Pharmaceuticals was the top heart disease. We believed Medtronic could
contributor to Fund performance during the benefit from accelerating growth and
year. Onyx benefited from the potential of profit margin improvement, as well as a
increased opportunities with its flagship relatively inexpensive share price.
drug Nexavar --REGISTERED TRADEMARK--
which is currently used to treat advanced We maintained our foreign exposure with
kidney cancer in 50 countries, including moderate weightings in Switzerland, the
the U.S. Currently, the company is seeking U.K., France and Germany. We trimmed our
approval for the same drug to be used to Swiss holdings following their strength in
treat liver cancer. the prior year and added new German and
U.K. holdings as we identified what we
Cytyc, an international provider of considered attractive buying
surgical and diagnostic products targeting opportunities.
women's health issues, was also among the
top contributors to performance during the During the year, we maintained a
year. The company has been working to positive outlook on the health care
employ its existing assets to invest in sector. Historically, the health care
other companies also focused on women's sector has performed well in an
health. The latest merger, completed on environment of decelerating earnings
October 22, 2007, resulted in Cytyc growth for the broader market and has
becoming the wholly owned subsidiary of benefited from a rotation into defensive
Hologic (not a Fund holding) and the growth sectors.(1)
creation of one of the largest companies
focused on women's health in the world. As always, we thank you for your
continued investment in AIM V.I. Global
Biotechnology firm Amgen was the top Health Care Fund.
detractor from Fund performance. Shares of
Amgen have struggled following Food and Source: (1) Lipper Inc.
Drug Administration concerns regarding the
safety of its anemia drugs, Aranesp The views and opinions expressed in
- --REGISTERED TRADEMARK-- and Epogen management's discussion of Fund
- --REGISTERED TRADEMARK--. However, we performance are those of A I M Advisors,
believed the pressure on Amgen's base Inc. These views and opinions are subject
business appeared to stabilize. Moreover, to change at any time based on factors
we believed the company might benefit from such as market and economic conditions.
future cost cutting measures and its These views and opinions may not be relied
product development pipeline. upon as investment advice or
recommendations, or as an offer for a
Additionally, the stock remained particular security. The information is
relatively inexpensive in comparison to not a complete analysis of every aspect of
other biotechnology stocks. any market, country, industry, security or
the Fund. Statements of fact are from
sources considered reliable, but A I M
Advisors, Inc. makes no representation or ==========================================
warranty as to their completeness or FOR A DISCUSSION OF THE RISKS OF INVESTING
accuracy. Although historical performance IN YOUR FUND, INDEXES USED IN THIS REPORT
is no guarantee of future results, these AND YOUR FUND'S LONG-TERM PERFORMANCE,
insights may help you understand our PLEASE TURN THE PAGE.
investment management philosophy. ==========================================
AIM V.I. Global Health Care Fund
Your Fund's long-term performance
========================================== SHARE CLASSES WILL DIFFER PRIMARILY DUE TO AIM V.I. GLOBAL HEALTH CARE FUND, A
AVERAGE ANNUAL TOTAL RETURNS DIFFERENT CLASS EXPENSES. SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
FUNDS, IS CURRENTLY OFFERED THROUGH
As of 12/31/07 THE PERFORMANCE DATA QUOTED REPRESENT INSURANCE COMPANIES ISSUING VARIABLE
SERIES I SHARES PAST PERFORMANCE AND CANNOT GUARANTEE PRODUCTS. YOU CANNOT PURCHASE SHARES OF
Inception (5/21/97) 9.00% COMPARABLE FUTURE RESULTS; CURRENT THE FUND DIRECTLY. PERFORMANCE FIGURES
10 Years 8.49 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE GIVEN REPRESENT THE FUND AND ARE NOT
5 Years 11.84 CONTACT YOUR VARIABLE PRODUCT ISSUER OR INTENDED TO REFLECT ACTUAL VARIABLE
1 Year 11.85 FINANCIAL ADVISOR FOR THE MOST RECENT PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES MONTH-END VARIABLE PRODUCT PERFORMANCE. CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years 8.21% PERFORMANCE FIGURES REFLECT FUND EXPENSES, CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years 11.54 REINVESTED DISTRIBUTIONS AND CHANGES IN CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year 11.52 NET ASSET VALUE. INVESTMENT RETURN AND DETERMINED BY THE VARIABLE PRODUCT
========================================== PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU ISSUERS, WILL VARY AND WILL LOWER THE
MAY HAVE A GAIN OR LOSS WHEN YOU SELL TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS APRIL SHARES.
30, 2004. RETURNS SINCE THAT DATE ARE THE MOST RECENT MONTH-END PERFORMANCE
HISTORICAL. ALL OTHER RETURNS ARE THE THE TOTAL ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
BLENDED RETURNS OF THE HISTORICAL RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
PERFORMANCE OF SERIES II SHARES SINCE PROSPECTUS AS OF THE DATE OF THIS REPORT AUTOMATED INFORMATION LINE, 866-702-4402.
THEIR INCEPTION AND THE RESTATED FOR SERIES I AND SERIES II SHARES WAS AS MENTIONED ABOVE, FOR THE MOST RECENT
HISTORICAL PERFORMANCE OF SERIES I SHARES 1.11% AND 1.36%, RESPECTIVELY. THE EXPENSE MONTH-END PERFORMANCE INCLUDING VARIABLE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, PLEASE CONTACT YOUR
II SHARES) ADJUSTED TO REFLECT THE RULE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS VARIABLE PRODUCT ISSUER OR FINANCIAL
12B-1 FEES APPLICABLE TO SERIES II SHARES. OF THIS REPORT THAT ARE BASED ON EXPENSES ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS INCURRED DURING THE PERIOD COVERED BY THIS
MAY 21, 1997. THE PERFORMANCE OF THE REPORT.
FUND'S SERIES I AND SERIES II
====================================================================================================================================
PRINCIPAL RISKS OF INVESTING IN THE FUND products and services offered by health with the overall securities markets.
care companies. Also, the products and Rising interest rates and market price
Prices of equity securities change in services offered by health care companies fluctuations will affect the performance
response to many factors including the may be subject to rapid obsolescence of the Fund's investments in synthetic
historical and prospective earnings of the caused by scientific advances and instruments.
issuer, the value of its assets, general technological innovations, which can cause
economic conditions, interest rates, Fund shares to rise and fall more than the The prices of initial public offering
investor perceptions and market liquidity. value of shares of a fund that invests (IPO) securities may go up and down more
more broadly. than prices of equity securities of
Foreign securities have additional companies with longer trading histories.
risks, including exchange rate changes, The Fund's investments are concentrated In addition, companies offering securities
political and economic upheaval, the in a comparatively narrow segment of the in IPOs may have less experienced
relative lack of information, relatively economy. Consequently, the Fund may tend management or limited operating histories.
low market liquidity, and the potential to be more volatile than other mutual There can be no assurance that the Fund
lack of strict financial and accounting funds, and the value of the Fund's will have favorable investment
controls and standards. investments may tend to rise and fall more opportunities.
rapidly.
The value of convertible securities in About indexes used in this report
which the Fund invests may be affected by There is no guarantee that the
market interest rates--the risk that the investment techniques and risk analyses The MSCI World Index --SERVICE MARK-- is a
issuer may default on interest or used by the Fund's portfolio managers will free float-adjusted market capitalization
principal payments and the value of the produce the desired results. index that is designed to measure global
underlying common stock into which these developed market equity performance.
securities may be converted may decline as Investing in developing countries can
a result. add additional risk, such as high rates of The S&P 500 --REGISTERED TRADEMARK--
inflation or sharply devalued currencies Index is a market capitalization-weighted
The value of the Fund's shares is against the U.S. dollar. Transaction costs index covering all major areas of the U.S.
particularly vulnerable to factors are often higher, and there may be delays economy. It is not the 500 largest
affecting the health care industry, such in settlement procedures. companies, but rather the most widely held
as substantial government regulation that 500 companies chosen with respect to
may impact the demand for The Fund invests in synthetic market size, liquidity, and their
instruments, the value of which may not industry.
correlate perfectly
Continued
AIM V.I. Global Health Care Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
The MSCI World Health Care Index is a free of the largest funds in the Lipper Health/ principles require adjustments to be made
float-adjusted market capitalization index Biotechnology Funds category. These funds to the net assets of the Fund at period
that represents the health care segment in invest at least 65% of their portfolios in end for financial reporting purposes, and
global developed market equity equity securities of companies engaged in as such, the net asset values for
performance. health-care, medicine, and biotechnology. shareholder transactions and the returns
based on those net asset values may differ
The Fund has elected to use the Lipper The Fund is not managed to track the from the net asset values and returns
Variable Underlying Funds (VUF) Health/ performance of any particular index, reported in the Financial Highlights.
Biotechnology Funds Category Average as including the indexes defined here, and Additionally, the returns and net asset
its peer group instead of the Lipper consequently, the performance of the Fund values shown throughout this report are at
Health/ Biotechnology Funds Index. In may deviate significantly from the the Fund level only and do not include
2006, Lipper began publishing VUF indexes, performance of the indexes. variable product issuer charges. If such
allowing the Fund to be compared with the charges were included, the total returns
Lipper VUF Health/Biotechnology Funds A direct investment cannot be made in would be lower.
Category Average. The unmanaged Lipper VUF an index. Unless otherwise indicated,
Health/ Biotechnology Funds Category index results include reinvested Industry classifications used in this
Average represents the average of all the dividends, and they do not reflect sales report are generally according to the
variable insurance underlying charges. Performance of an index of funds Global Industry Classification Standard,
Health/Biotechnology Funds tracked by reflects fund expenses; performance of a which was developed by and is the
Lipper Inc. These funds invest at least market index does not. exclusive property and a service mark of
65% of their portfolios in equity Morgan Stanley Capital International Inc.
securities of companies engaged in Other information and Standard & Poor's.
healthcare, medicine and biotechnology.
The returns shown in the management's The Chartered Financial Analyst
The Lipper Health/Biotechnology Funds discussion of Fund performance are based --REGISTERED TRADEMARK-- (CFA --REGISTERED
Index is an equally weighted on net asset values calculated for TRADEMARK--) designation is a globally
representation shareholder transactions. Generally recognized standard for measuring the
accepted accounting competence and integrity of investment
professionals.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 5/21/97, INDEX DATA FROM 5/31/97
AIM V.I. GLOBAL HEALTH LIPPER VUF HEALTH/ LIPPER
CARE FUND-SERIES I BIOTECHNOLOGY FUNDS HEALTH/BIOTECHNOLOGY
DATE SHARES MSCI WORLD INDEX(1) CATEGORY AVERAGE(1) FUNDS INDEX(1)
5/21/97 $10000
5/97 10000 $10000 $10000 $10000
6/97 10000 10497 10000 10505
7/97 9930 10979 9930 10848
8/97 10250 10243 10250 10556
9/97 10610 10797 10610 11402
10/97 10610 10227 10610 11117
11/97 10910 10407 10910 11199
12/97 11040 10532 11040 11252
1/98 11589 10823 11590 11486
2/98 12049 11554 12050 12130
3/98 12699 12040 12700 12586
4/98 12999 12156 13000 12678
5/98 12909 12002 12719 12309
6/98 13629 12285 13269 12666
7/98 13639 12263 13097 12524
8/98 12289 10626 11453 10696
9/98 13618 10812 12719 12007
10/98 14068 11788 13183 12466
11/98 14798 12487 13755 13110
12/98 15768 13095 14722 14177
1/99 15871 13380 14718 14409
2/99 15623 13022 14335 14036
3/99 15984 13562 14337 14396
4/99 15108 14095 13521 13698
5/99 14531 13578 13261 13625
6/99 15108 14209 13850 14286
7/99 14830 14165 13715 14303
8/99 15367 14138 13916 14695
9/99 14428 13999 13119 13634
10/99 15171 14724 13563 14280
11/99 15514 15137 14093 14881
12/99 16536 16360 14443 15644
1/00 17507 15421 15365 16761
2/00 21068 15461 18378 19085
3/00 17187 16528 15633 17120
4/00 16309 15827 14720 16945
5/00 16433 15424 14895 17252
6/00 19664 15942 16868 20199
7/00 18435 15491 16472 19575
8/00 21056 15993 17779 21330
9/00 22180 15141 18807 22265
10/00 21892 14885 18760 21988
11/00 20386 13980 18211 21314
12/00 21587 14204 19096 22477
1/01 19385 14478 17646 20619
2/01 19301 13252 17203 20411
3/01 16956 12380 15233 18090
4/01 18279 13292 16385 19494
5/01 18941 13119 17001 20230
6/01 18961 12706 17217 20485
7/01 18620 12536 16841 19855
8/01 18454 11933 16610 19585
9/01 17803 10880 15936 18528
10/01 18547 11088 16555 19148
11/01 19415 11742 17404 20111
12/01 18868 11814 17260 20125
1/02 17934 11455 16410 18927
2/02 17571 11355 16012 18315
3/02 17821 11877 16405 18824
4/02 17229 11452 15538 17871
5/02 17064 11471 15024 17350
6/02 16059 10773 13785 15944
7/02 15156 9864 13362 15361
8/02 15062 9881 13194 15164
9/02 15031 8793 12663 14654
10/02 15092 9441 13173 15197
11/02 14553 9948 13389 15459
====================================================================================================================================
SOURCE: (1)LIPPER INC.
====================================================================================================================================
[MOUNTAIN CHART]
12/02 14252 9465 12916 14851
1/03 14160 9177 12905 14794
2/03 13932 9016 12687 14469
3/03 14553 8986 13192 14985
4/03 15227 9783 13838 15731
5/03 15807 10339 14937 17074
6/03 16532 10517 15420 17474
7/03 16605 10729 15783 18068
8/03 16212 10960 15523 17836
9/03 16346 11026 15552 17911
10/03 16855 11679 15755 18151
11/03 17497 11856 16196 18640
12/03 18212 12598 16887 19385
1/04 18886 12801 17571 20219
2/04 19156 13015 17810 20475
3/04 18938 12929 17641 20396
4/04 18855 12664 17961 20726
5/04 18834 12770 17875 20641
6/04 18949 13042 17883 20702
7/04 17715 12616 16665 19225
8/04 17882 12671 16860 19369
9/04 18078 12911 17167 19886
10/04 17975 13227 16856 19533
11/04 18182 13922 17376 20303
12/04 19591 14453 18524 21660
1/05 18896 14128 17896 20923
2/05 18875 14575 17795 20827
3/05 18397 14294 17471 20442
4/05 18728 13981 17920 20995
5/05 19215 14229 18376 21588
6/05 19360 14352 18596 21920
7/05 20345 14854 19649 23162
8/05 20717 14966 19901 23416
9/05 20883 15354 20104 23630
10/05 20376 14982 19607 23080
11/05 20812 15481 20103 23710
12/05 21184 15824 20512 24146
1/06 22065 16531 21154 24914
2/06 22365 16506 21527 25220
3/06 22263 16869 21368 25057
4/06 21619 17381 20687 24193
5/06 20914 16787 20089 23362
6/06 20810 16783 20087 23408
7/06 21049 16887 20525 23704
8/06 21765 17326 21116 24410
9/06 21795 17532 21159 24443
10/06 22107 18176 21684 25091
11/06 22242 18621 21699 25179
12/06 22293 18999 21779 25304
1/07 22832 19224 22419 26070
2/07 22584 19124 22092 25645
3/07 22800 19474 22181 25705
4/07 23920 20332 23482 27153
5/07 24271 20902 23786 27551
6/07 23640 20741 23069 26764
7/07 23028 20282 22389 26057
8/07 23505 20266 23067 26781
9/07 24356 21230 23959 27840
10/07 25082 21881 24689 28642
11/07 25300 20987 24597 28471
12/07 24948 20716 24135 27876
====================================================================================================================================
AIM V.I. Global Health Care Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-69.99%
BIOTECHNOLOGY-25.03%
Acadia Pharmaceuticals Inc.(b)(c) 115,020 $ 1,273,271
- -------------------------------------------------------------------------
Altus Pharmaceuticals Inc.(b)(c) 39,664 205,460
- -------------------------------------------------------------------------
Amgen Inc.(c) 173,225 8,044,569
- -------------------------------------------------------------------------
Amylin Pharmaceuticals, Inc.(b)(c) 33,599 1,243,163
- -------------------------------------------------------------------------
Array BioPharma Inc.(b)(c) 54,508 458,957
- -------------------------------------------------------------------------
Avigen, Inc.(c) 128,697 546,962
- -------------------------------------------------------------------------
Biogen Idec Inc.(c) 42,268 2,405,895
- -------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(b)(c) 98,288 3,479,395
- -------------------------------------------------------------------------
Celgene Corp.(b)(c) 84,910 3,923,691
- -------------------------------------------------------------------------
Cephalon, Inc.(b)(c) 33,636 2,413,719
- -------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(b)(c) 36,665 751,999
- -------------------------------------------------------------------------
Genentech, Inc.(c) 32,504 2,180,043
- -------------------------------------------------------------------------
Genzyme Corp.(c) 115,663 8,609,954
- -------------------------------------------------------------------------
Gilead Sciences, Inc.(b)(c) 158,932 7,312,461
- -------------------------------------------------------------------------
Human Genome Sciences, Inc.(b)(c) 120,261 1,255,525
- -------------------------------------------------------------------------
ImClone Systems Inc.(c) 33,752 1,451,336
- -------------------------------------------------------------------------
Incyte Corp.(b)(c) 73,439 738,062
- -------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc.(b)(c) 58,767 493,643
- -------------------------------------------------------------------------
Medarex, Inc.(b)(c) 99,022 1,031,809
- -------------------------------------------------------------------------
Myriad Genetics, Inc.(b)(c) 11,976 555,926
- -------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc.(b)(c) 42,900 2,386,098
- -------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(c) 35,206 1,707,843
- -------------------------------------------------------------------------
PDL BioPharma Inc.(b)(c) 89,395 1,566,201
- -------------------------------------------------------------------------
Theravance, Inc.(b)(c) 18,238 355,641
- -------------------------------------------------------------------------
United Therapeutics Corp.(c) 43,481 4,245,920
- -------------------------------------------------------------------------
Vanda Pharmaceuticals Inc.(b)(c) 31,403 216,053
- -------------------------------------------------------------------------
Vertex Pharmaceuticals Inc.(b)(c) 55,432 1,287,685
- -------------------------------------------------------------------------
ZymoGenetics, Inc.(b)(c) 84,613 987,434
=========================================================================
61,128,715
=========================================================================
DRUG RETAIL-1.01%
CVS Caremark Corp. 62,193 2,472,172
=========================================================================
HEALTH CARE DISTRIBUTORS-0.55%
Animal Health International, Inc.(b)(c) 109,940 1,352,262
=========================================================================
HEALTH CARE EQUIPMENT-8.60%
American Medical Systems Holdings, Inc.(b)(c) 156,110 2,257,351
- -------------------------------------------------------------------------
Covidien Ltd. 45,888 2,032,380
- -------------------------------------------------------------------------
Dexcom Inc.(b)(c) 131,470 1,160,880
- -------------------------------------------------------------------------
Hospira, Inc.(b)(c) 70,503 3,006,248
- -------------------------------------------------------------------------
Medtronic, Inc. 95,718 4,811,744
- -------------------------------------------------------------------------
NxStage Medical, Inc.(b)(c) 59,277 899,232
- -------------------------------------------------------------------------
ResMed Inc.(b)(c) 39,267 2,062,695
- -------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
HEALTH CARE EQUIPMENT-(CONTINUED)
Respironics, Inc.(c) 56,463 $ 3,697,197
- -------------------------------------------------------------------------
Thoratec Corp.(b)(c) 59,054 1,074,192
=========================================================================
21,001,919
=========================================================================
HEALTH CARE FACILITIES-1.03%
Assisted Living Concepts Inc.-Class A(b)(c) 184,371 1,382,783
- -------------------------------------------------------------------------
Tenet Healthcare Corp.(b)(c) 223,191 1,133,810
=========================================================================
2,516,593
=========================================================================
HEALTH CARE SERVICES-3.80%
DaVita, Inc.(c) 28,053 1,580,787
- -------------------------------------------------------------------------
Express Scripts, Inc.(c) 52,724 3,848,852
- -------------------------------------------------------------------------
HMS Holdings Corp.(b)(c) 60,102 1,995,987
- -------------------------------------------------------------------------
Laboratory Corp. of America Holdings(b)(c) 24,729 1,867,781
=========================================================================
9,293,407
=========================================================================
HEALTH CARE SUPPLIES-0.56%
Cooper Cos., Inc. (The)(b) 35,701 1,356,638
=========================================================================
HEALTH CARE TECHNOLOGY-0.40%
Vital Images, Inc.(b)(c) 54,380 982,647
=========================================================================
LIFE SCIENCES TOOLS & SERVICES-9.38%
AMAG Pharmaceuticals, Inc.(b)(c) 28,951 1,740,823
- -------------------------------------------------------------------------
Applera Corp.-Applied Biosystems Group 76,985 2,611,331
- -------------------------------------------------------------------------
Charles River Laboratories International,
Inc.(b)(c) 48,825 3,212,685
- -------------------------------------------------------------------------
Invitrogen Corp.(c) 25,681 2,398,862
- -------------------------------------------------------------------------
Millipore Corp.(b)(c) 41,434 3,032,140
- -------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 118,286 4,775,206
- -------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(c) 68,404 3,945,543
- -------------------------------------------------------------------------
Varian Inc.(c) 18,356 1,198,647
=========================================================================
22,915,237
=========================================================================
MANAGED HEALTH CARE-5.96%
Aetna Inc. 41,324 2,385,635
- -------------------------------------------------------------------------
Aveta, Inc. (Acquired 12/21/05; Cost
$1,655,802)(c)(d)(e) 122,652 981,216
- -------------------------------------------------------------------------
Health Net Inc.(c) 42,821 2,068,254
- -------------------------------------------------------------------------
Triple-S Management Corp(c) 29,192 589,970
- -------------------------------------------------------------------------
UnitedHealth Group Inc. 105,828 6,159,190
- -------------------------------------------------------------------------
WellPoint Inc.(c) 26,919 2,361,604
=========================================================================
14,545,869
=========================================================================
PERSONAL PRODUCTS-0.70%
Herbalife Ltd.(b) 42,683 1,719,271
=========================================================================
PHARMACEUTICALS-12.97%
Adams Respiratory Therapeutics, Inc.(b)(c) 42,497 2,538,771
- -------------------------------------------------------------------------
ARYx Therapeutics, Inc.(c) 82,000 635,500
- -------------------------------------------------------------------------
</Table>
AIM V.I. Global Health Care Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
PHARMACEUTICALS-(CONTINUED)
Biodel Inc.(b)(c) 32,612 $ 757,577
- -------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc.(c) 44,474 660,884
- -------------------------------------------------------------------------
Endo Pharmaceuticals Holdings Inc.(c) 41,415 1,104,538
- -------------------------------------------------------------------------
Inspire Pharmaceuticals, Inc.(b)(c) 95,438 570,719
- -------------------------------------------------------------------------
Johnson & Johnson 91,194 6,082,640
- -------------------------------------------------------------------------
Lilly (Eli) and Co. 44,323 2,366,405
- -------------------------------------------------------------------------
MAP Pharmaceuticals Inc.(c) 46,933 821,797
- -------------------------------------------------------------------------
Matrixx Initiatives, Inc.(c) 48,949 680,880
- -------------------------------------------------------------------------
Medicines Co. (The)(c) 37,176 712,292
- -------------------------------------------------------------------------
Pfizer Inc. 154,589 3,513,808
- -------------------------------------------------------------------------
Schering-Plough Corp. 234,128 6,237,170
- -------------------------------------------------------------------------
Wyeth 113,249 5,004,473
=========================================================================
31,687,454
=========================================================================
Total Domestic Common Stocks (Cost
$161,522,096) 170,972,184
=========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-23.63%
BRAZIL-1.33%
Amil Participacoes S.A. (Life & Health
Insurance) (Acquired 10/26/07; Cost
$1,814,341)(c)(e) 230,700 2,113,777
- -------------------------------------------------------------------------
Drogasil S.A. (Drug Retail) 141,520 1,141,547
=========================================================================
3,255,324
=========================================================================
CANADA-1.11%
Cardiome Pharma Corp. (Pharmaceuticals)(b)(c) 54,800 488,816
- -------------------------------------------------------------------------
MDS Inc. (Life Sciences Tools &
Services)(b)(c) 115,680 2,231,645
=========================================================================
2,720,461
=========================================================================
FRANCE-4.34%
Ipsen S.A. (Pharmaceuticals)(f) 56,431 3,388,429
- -------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(b)(f) 39,226 3,578,653
- -------------------------------------------------------------------------
Sanofi-Aventis-ADR (Pharmaceuticals) 79,734 3,630,289
=========================================================================
10,597,371
=========================================================================
GERMANY-3.64%
Celesio A.G. (Health Care Distributors)(f) 34,484 2,122,786
- -------------------------------------------------------------------------
Gerresheimer A.G. (Life Sciences Tools &
Services) (Acquired 06/08/07; Cost
$2,032,560)(c)(e)(f) 37,839 2,098,284
- -------------------------------------------------------------------------
Merck KGaA (Pharmaceuticals)(f) 19,199 2,461,733
- -------------------------------------------------------------------------
Rhoen-Klinikum A.G. (Health Care
Facilities)(f) 70,296 2,194,483
=========================================================================
8,877,286
=========================================================================
ITALY-0.24%
Gentium Spa-ADR (Biotechnology)(b)(c) 41,700 580,464
=========================================================================
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
JAPAN-0.69%
Shionogi & Co., Ltd. (Pharmaceuticals)(f) 95,507 $ 1,688,203
=========================================================================
NETHERLANDS-0.78%
QIAGEN N.V. (Life Sciences Tools &
Services)(b)(c) 89,901 1,892,416
=========================================================================
RUSSIA-0.34%
Pharmstandard-GDR (Pharmaceuticals) (Acquired
05/04/07; Cost $448,140)(c)(e)(g) 30,800 840,852
=========================================================================
SPAIN-0.96%
Laboratorios Almirall S.A.
(Pharmaceuticals)(c)(f) 107,708 2,345,303
=========================================================================
SWITZERLAND-6.75%
Novartis A.G.-ADR (Pharmaceuticals) 117,303 6,370,726
- -------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(f) 58,790 10,115,489
=========================================================================
16,486,215
=========================================================================
TURKEY-0.50%
EastPharma Ltd. (Pharmaceuticals) (Acquired
07/13/07; Cost $1,241,329)(c)(e)(g) 114,132 1,226,919
=========================================================================
UNITED KINGDOM-2.95%
Hikma Pharmaceuticals PLC (Pharmaceuticals) 163,658 1,538,877
- -------------------------------------------------------------------------
Shire PLC-ADR (Pharmaceuticals)(b) 33,393 2,302,447
- -------------------------------------------------------------------------
Smith & Nephew PLC (Health Care Equipment)(f) 200,733 2,303,531
- -------------------------------------------------------------------------
Whatman PLC (Industrial Machinery) 276,210 1,052,327
=========================================================================
7,197,182
=========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $52,274,293) 57,707,996
=========================================================================
MONEY MARKET FUNDS-6.70%
Liquid Assets Portfolio-Institutional
Class(h) 8,182,071 8,182,071
- -------------------------------------------------------------------------
Premier Portfolio-Institutional Class(h) 8,182,071 8,182,071
=========================================================================
Total Money Market Funds (Cost
$16,364,142) 16,364,142
=========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.32%
(Cost $230,160,531) 245,044,322
=========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-9.51%
Liquid Assets Portfolio-Institutional Class
(Cost $23,232,691)(h)(i) 23,232,691 23,232,691
=========================================================================
TOTAL INVESTMENTS-109.83% (Cost $253,393,222) 268,277,013
=========================================================================
OTHER ASSETS LESS LIABILITIES-(9.83)% (24,012,364)
=========================================================================
NET ASSETS-100.00% $244,264,649
_________________________________________________________________________
=========================================================================
</Table>
AIM V.I. Global Health Care Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) All or a portion of this security was out on loan at December 31, 2007.
(c) Non-income producing security.
(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 December 31, 2007 represented 0.40% of the
Fund's Net Assets.
(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 aggregate value of these securities at December 31, 2007 was $7,261,048,
which represented 2.97% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(f) 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 December 31, 2007 was $32,296,894,
which represented 13.22% of the Fund's Net Assets. See Note 1A.
(g) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at December 31, 2007 was $2,067,771, which represented 0.85% of
the Fund's Net Assets. See Note 1A.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(i) 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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $213,796,389)* $228,680,180
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $39,596,833) 39,596,833
=============================================================
Total investments (Cost $253,393,222) 268,277,013
=============================================================
Foreign currencies, at value (Cost $2,497) 2,419
- -------------------------------------------------------------
Cash 17,780
- -------------------------------------------------------------
Receivables for:
Investments sold 960,566
- -------------------------------------------------------------
Fund shares sold 239,431
- -------------------------------------------------------------
Dividends 77,328
- -------------------------------------------------------------
Foreign currency contracts outstanding 159,940
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 27,387
=============================================================
Total assets 269,761,864
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 2,003,917
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 47,520
- -------------------------------------------------------------
Collateral upon return of securities loaned 23,232,691
- -------------------------------------------------------------
Accrued administrative services fees 151,284
- -------------------------------------------------------------
Accrued distribution fees -- Series II 12,612
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 367
- -------------------------------------------------------------
Accrued transfer agent fees 3,097
- -------------------------------------------------------------
Accrued operating expenses 45,727
=============================================================
Total liabilities 25,497,215
=============================================================
Net assets applicable to shares outstanding $244,264,649
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $190,451,611
- -------------------------------------------------------------
Undistributed net investment income (loss) (48,349)
- -------------------------------------------------------------
Undistributed net realized gain 38,816,549
- -------------------------------------------------------------
Unrealized appreciation 15,044,838
=============================================================
$244,264,649
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $223,447,964
_____________________________________________________________
=============================================================
Series II $ 20,816,685
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 9,288,845
_____________________________________________________________
=============================================================
Series II 874,016
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 24.06
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 23.82
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $22,450,898 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$182,379) $ 1,933,965
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$96,543) 1,102,209
- ------------------------------------------------------------
Interest 80,581
============================================================
Total investment income 3,116,755
============================================================
EXPENSES:
Advisory fees 2,337,147
- ------------------------------------------------------------
Administrative services fees 848,807
- ------------------------------------------------------------
Custodian fees 33,264
- ------------------------------------------------------------
Distribution fees -- Series II 202,031
- ------------------------------------------------------------
Transfer agent fees 26,889
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 26,286
- ------------------------------------------------------------
Other 55,606
============================================================
Total expenses 3,530,030
============================================================
Less: Fees waived and expense offset
arrangement(s) (25,752)
============================================================
Net expenses 3,504,278
============================================================
Net investment income (loss) (387,523)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
from securities sold to affiliates of
$1,150,459) 49,970,958
- ------------------------------------------------------------
Foreign currencies 61,651
============================================================
50,032,609
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (15,641,798)
- ------------------------------------------------------------
Foreign currencies 646
- ------------------------------------------------------------
Foreign currency contracts 159,940
============================================================
(15,481,212)
============================================================
Net realized and unrealized gain 34,551,397
____________________________________________________________
============================================================
Net increase in net assets resulting from
operations $34,163,874
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (387,523) $ (614,780)
- -------------------------------------------------------------------------------------------
Net realized gain 50,032,609 9,884,135
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (15,481,212) 7,632,407
===========================================================================================
Net increase in net assets resulting from operations 34,163,874 16,901,762
===========================================================================================
Share transactions-net:
Series I (37,376,785) (34,311,775)
- -------------------------------------------------------------------------------------------
Series II (85,677,899) 92,818,635
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (123,054,684) 58,506,860
===========================================================================================
Net increase (decrease) in net assets (88,890,810) 75,408,622
___________________________________________________________________________________________
===========================================================================================
NET ASSETS:
Beginning of year 333,155,459 257,746,837
===========================================================================================
End of year (including undistributed net investment income
(loss) of $(48,349) and $(34,023), respectively) $ 244,264,649 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 -- 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
AIM V.I. Global Health Care Fund
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 annual rate of the Fund's average daily net assets as follows:
<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 Ltd. ("Invesco")
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. 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 year ended December 31, 2007, AIM waived advisory fees of $19,932.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$81,687 for accounting and fund administrative services and reimbursed $767,120
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio--Institutional
Class $11,818,248 $132,377,988 $(136,014,165) $ 8,182,071 $ 503,617
- --------------------------------------------------------------------------------------------------
Premier
Portfolio--Institutional
Class 11,818,249 132,377,988 (136,014,166) 8,182,071 502,049
==================================================================================================
Subtotal $23,636,497 $264,755,976 $(272,028,331) $16,364,142 $1,005,666
__________________________________________________________________________________________________
==================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio--Institutional
Class $ -- $179,870,639 $(156,637,948) $23,232,691 $ 57,585
- --------------------------------------------------------------------------------------------------
Premier
Portfolio--Institutional
Class 10,037,792 104,288,386 (114,326,178) -- 38,958
==================================================================================================
Subtotal $10,037,792 $284,159,025 $(270,964,126) $23,232,691 $ 96,543
==================================================================================================
Total
Investments
in
Affiliates $33,674,289 $548,915,001 $(542,992,457) $39,596,833 $1,102,209
__________________________________________________________________________________________________
==================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $9,542,918, which resulted in net realized gains
of $1,150,459, and securities purchases of $779,462.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $5,820.
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 year ended December 31, 2007, the Fund paid legal fees of $4,571
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 SEC, 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. Global Health Care Fund
The Fund is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $22,450,898 were
on loan to brokers. The loans were secured by cash collateral of $23,232,691
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $96,543 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO UNREALIZED
--------------------------------- VALUE APPRECIATION
SETTLEMENT DATE DELIVER RECEIVE 12/31/07 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
02/08/08 CHF 9,910,000 USD 8,722,034 $ 8,765,614 $(43,580)
- ---------------------------------------------------------------------------------------------------------------------------------
02/08/08 EUR 8,150,000 USD 11,927,135 11,901,091 26,044
- ---------------------------------------------------------------------------------------------------------------------------------
02/08/08 GBP 1,870,000 USD 3,888,946 3,711,470 177,476
=================================================================================================================================
Total open foreign currency contracts $159,940
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
Currency Abbreviations:
<Table>
CHF - Swiss Franc
EUR - Euro
GBP - British Pound Sterling
USD - U.S. Dollar
</Table>
AIM V.I. Global Health Care Fund
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
There were no ordinary income or long-term capital gain distributions during the
years ended December 31, 2007 and 2006.
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 8,765,267
- ----------------------------------------------------------------------------
Undistributed long-term gain 30,353,278
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 14,742,842
- ----------------------------------------------------------------------------
Temporary book/tax differences (37,400)
- ----------------------------------------------------------------------------
Post-October currency loss deferral (10,949)
- ----------------------------------------------------------------------------
Shares of beneficial interest 190,451,611
============================================================================
Total net assets $244,264,649
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation on foreign currencies of $1,107.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 utilized $10,698,032 of capital loss carryforward in the
current period to offset net realized gain for federal tax purposes.
The Fund does not have a capital loss carryforward as of December 31, 2007
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 year ended December 31, 2007 was $192,627,954 and
$304,994,473, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $30,718,700
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (15,976,965)
===============================================================================
Net unrealized appreciation of investment securities $14,741,735
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $253,535,278.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on December 31, 2007, undistributed net
investment income (loss) was increased by $373,197 and undistributed net
realized gain was decreased by $373,197. This reclassification had no effect on
the net assets of the Fund.
AIM V.I. Global Health Care Fund
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2007(A) 2006
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,565,542 $ 36,237,613 2,987,617 $ 61,430,551
- -----------------------------------------------------------------------------------------------------------------------
Series II 2,076,812 46,171,584 4,597,663 93,373,802
=======================================================================================================================
Reacquired:
Series I (3,226,676) (73,614,398) (4,650,072) (95,742,326)
- -----------------------------------------------------------------------------------------------------------------------
Series II (5,774,963) (131,849,483) (26,046) (555,167)
=======================================================================================================================
(5,359,285) $(123,054,684) 2,909,162 $ 58,506,860
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) There are entities that are 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust
approved certain proposals to be presented for shareholder approval at a special
meeting of the shareholders of the Trust intended to be held on February 29,
2008 (the "Special Meeting"). At the Special Meeting, shareholders of record as
of the close of business on November 30, 2007, are entitled to vote their
respective shares on several proposals that including, among others the
following proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Global Health Care Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.51 $ 20.44 $ 18.90 $ 17.57 $ 13.75
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.04)(a) (0.06) (0.03) (0.03)
- -----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.56 1.11 1.60 1.36 3.85
=============================================================================================================================
Total from investment operations 2.55 1.07 1.54 1.33 3.82
=============================================================================================================================
Net asset value, end of period $ 24.06 $ 21.51 $ 20.44 $ 18.90 $ 17.57
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 11.85% 5.24% 8.15% 7.57% 27.78%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $223,448 $235,509 $257,736 $354,889 $340,711
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets: 1.06%(c)(d) 1.10% 1.08%(d) 1.11% 1.07%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.06)%(c) (0.19)% (0.24)% (0.17)% (0.20)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 66% 79% 82% 175% 114%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</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 based on average daily net assets of $230,872,385.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
were 1.07% and 1.09% for the years ended December 31, 2007 and December
31, 2005, respectively.
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES II
-----------------------------------------------------------
APRIL 30, 2004,
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
------------------------------------ TO 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) (0.07)(a) (0.09)(a) (0.09) (0.05)
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.53 1.11 1.57 0.72
=========================================================================================================================
Total from investment operations 2.46 1.02 1.48 0.67
=========================================================================================================================
Net asset value, end of period $ 23.82 $ 21.36 $ 20.34 $ 18.86
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 11.52% 5.01% 7.85% 3.68%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $20,817 $97,646 $ 11 $ 10
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets: 1.31%(c)(d) 1.35% 1.33%(d) 1.36%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(c) (0.44)% (0.49)% (0.42)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 66% 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 based on average daily net assets of $80,812,344.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
were 1.32% and for the 1.34% years ended December 31, 2007 and December
31, 2005, respectively.
(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 16--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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Global Health Care Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Global Health Care Fund,
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2007 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Global Health Care Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,054.80 $ 5.54 $1,019.81 $5.45 1.07%
Series II 1,000.00 1,052.60 6.83 1,018.55 6.72 1.32
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Global Health Care Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Global Health Care Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
SECTOR EQUITY
Real Estate
AIM V.I. Global
Real Estate Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. GLOBAL REAL ESTATE FUND'S INVESTMENT
how to vote proxies relating to portfolio OBJECTIVE IS HIGH TOTAL RETURN THROUGH
securities is available without charge, GROWTH OF CAPITAL AND CURRENT INCOME.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
to AIMinvestments.com, access the About Us IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
tab, click on Required Notices and then
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu. UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
The information is also available on the ARE FROM A I M MANAGEMENT GROUP INC.
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Global Real Estate Fund
Management's discussion of Fund performance o Attractive valuations relative to peer
investment alternatives.
=======================================================================================
PERFORMANCE SUMMARY We attempt to control risk by
diversifying property types and geographic
The year was a volatile one for AIM V.I. Global Real Estate Fund as investors attempted location as well as limiting the size of
to digest the impact of the credit market downturn and prospects for slower global any one holding.
economic growth. The Fund underper-formed its broad market index, the MSCI World Index,
as real estate securities were among the weakest performing industries during the year. We will consider selling a holding
However, the Fund outperformed the FTSE EPRA/NAREIT Global Real Estate Index, its style when:
specific index, due primarily to an overweight position and security selection within
Hong Kong, security selection in Australia, and being underweight the U.S market. o Relative valuation falls below desired
levels.
Your Fund's long-term performance appears later in this report.
o Risk/return relationships change
FUND VS. INDEXES significantly.
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If o Company fundamentals change (property
variable product issuer charges were included, returns would be lower. type, geography or management changes).
Series I Shares -5.54% o A more attractive investment opportunity
Series II Shares -5.76 is identified.
MSCI World Index(triangle) (Broad Market Index) 9.04
S&P 500 Index(triangle) (Former Broad Market Index) 5.49 Market conditions and your Fund
FTSE EPRA/NAREIT Global Real Estate Index(square) (Style-Specific Index) -6.96
MSCI U.S. REIT Index(square) (Former Style-Specific Index) -16.82 The year was characterized by extremes.
Lipper VUF Real Estate Funds Category Average(triangle) (Peer Group) -14.73 Subprime loan concerns and record high
Lipper Real Estate Funds Index(triangle) (Former Peer Group Index) -13.50 crude oil prices, a weakened housing
market and U.S. dollar, and subsequently
SOURCES: (triangle)LIPPER INC.; (square)A I M MANAGEMENT GROUP INC., BLOOMBERG L.P. the potentially negative impact on
======================================================================================= consumer spending, caused market
volatility to increase during the year.
How we invest non-U.S. property types we believe will Yet, despite concerns over a slowing
benefit from long-term sector trends. We economy, several major market indexes
Your Fund holds primarily real estate use a fundamentals-driven investment ended the year in positive territory and,
investment trusts (REITs) and other process, including property market cycle in fact, were propelled toward all-time
property-related securities from the U.S. analysis, property evaluation, and closing highs during the year.(1) Strong
and abroad whose value is driven by management and structure review to global growth, steady corporate earnings
tangible assets. Our goal is to create a identify securities with: and continued merger and acquisition
global Fund focused on total return that activity drove equity markets. Against
will perform at or above index levels with o Quality underlying properties. this backdrop, materials, energy and
comparable levels of risk. Our investment utilities were among the best performing
strategy focuses on identifying U.S. and o Solid management teams and flexible sectors of the MSCI World Index.(1)
balance sheets. Conversely, financials, consumer
discretionary and health care were the
weakest performing sectors.(1)
Real estate securities, both globally
and domestically, were among the weaker
performing markets for the year, and thus
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* TOTAL NET ASSETS AND HOLDINGS
By property type 1. Sun Hung Kai Properties Ltd. 5.3% Total Net Assets $146.42 million
2. Westfield Group 4.6
Diversified 42.3% 3. Unibail-Rodamco 3.5 Total Number of Holdings* 84
Retail 20.5 4. Mitsubishi Estate Co. Ltd. 3.3
Office 14.1 5. Mitsui Fudosan Co., Ltd. 3.1
Residential 9.0 6. GPT Group 3.0
Healthcare 4.6 7. Stockland 2.9
Industrial 2.5 8. Simon Property Group, Inc. 2.8
Lodging-Resorts 2.4 9. New World Development Co., Ltd. 2.8
Self Storage 1.9 10. ProLogis 2.5
Specialty 1.4
Money Market Funds
Plus Other Assets Less Liabilities 1.3
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Global Real Estate Fund financial health, inadequate disclosures Joe V. Rodriguez, Jr.
underperformed the broad domestic and and overall business platform. [RODRIGUEZ Director of Securities
global markets as measured by the S&P 500 PHOTO] Management, INVESCO Real
Index and the MSCI World Index, Conversely, Capital & Regional Estate, is lead manager of
respectively.(1,2) U.S. REITs, in Properties and SL Green Realty detracted AIM V.I. Global Real Estate Fund. He
particular, had enjoyed four years of from Fund performance during the year. oversees all phases of the unit including
strong double-digit gains, widely Real estate securities in Europe, and the securities research and administration.
surpassing the S&P 500 Index.(1,2) Strong U.K. in particular, have been highly Mr. Rodriguez began his investment career
investor inflows and privatizations within sensitive to recent economic and credit in 1983 and joined INVESCO in 1990. He has
the U.S. REIT market helped REITs to reach market concerns. This was the case for served on the editorial boards of the
all time closing highs in February 2007.(2) U.K. property company Capital & Regional. National Association of Real Estate
Following February, however, the U.S. REIT SL Green, which is focused on commercial Investment Trusts (NAREIT) as well as the
market experienced a downturn in the wake office properties located in New York Institutional Real Estate Securities
of ongoing concerns in the sub prime City, suffered as a result of negative Newsletter. Mr. Rodriguez earned his
lending markets, widening debt spreads and sentiment regarding financial service firm B.B.A. in economics and finance as well as
perceptions of slower future economic employment during the year. We believed his M.B.A. in finance from Baylor
growth. After outperforming the U.S. REIT tenant demand remained positive, University.
market by a wide margin for much of the particularly in tight markets such as
year, performance within the global real London and New York City where relatively Mark D. Blackburn Chartered
estate securities market weakened at the little new space is coming on-line. We [BLACKBURN Financial Analyst, Director
end of the period, as concerns regarding continued to hold both companies in the PHOTO] of Investments, INVESCO Real
the impact of the credit downturn and its portfolio. Estate, is manager of AIM
effect on global economic growth rose.2 V.I. Global Real Estate Fund. He joined
We continued to be encouraged by INVESCO in 1998 and has approximately 21
On an absolute basis, holdings in Hong economic and real estate fundamentals years of experience in institutional
Kong and Australia benefited performance internationally and remained committed to investing and risk management. Mr.
during the year, while holdings in the U.K owning quality real estate companies that Blackburn earned a B.S. in accounting from
and the U.S. detracted from performance. we believe could benefit from global Louisiana State University and an M.B.A.
Strong stock selection in Hong Kong and growth opportunities. We continued to from Southern Methodist University. He is
Australia, an overweight position in Hong control risk by holding a portfolio a certified public accountant.
Kong and an underweight in the U.S. diversified by property type and
benefited Fund performance relative to the geographic location. Paul S. Curbo Chartered
FTSE EPRA/NAREIT Global Real Estate Index. [CURBO Financial Analyst, portfolio
On the other hand, security selection We thank you for your continued PHOTO] manager, INVESCO Real
within the U.K. and Japan, as well as an investment in AIM V.I. Global Real Estate Estate, is manager of AIM
overweight position to the U.K., hurt Fund and encourage everyone to follow a V.I. Global Real Estate Fund. He joined
relative performance. disciplined asset allocation strategy and INVESCO in 1998 and has 15 years of real
rebalance regularly. estate experience. Mr. Curbo earned a
Robust economic growth and healthy B.B.A. in finance from The University of
fundamentals led to strong demand for Sources: (1)Lipper Inc.; (2)A I M Texas.
shares in most Asian markets. In fact, one Management Group Inc., Bloomberg L.P.
of the top contributors to performance James W. Trowbridge Portfolio
over the period was a diversified property THE VIEWS AND OPINIONS EXPRESSED IN [TROWBRIDGE manager, INVESCO Real Estate,
developer in mainland China and Hong Kong, MANAGEMENT'S DISCUSSION OF FUND PHOTO] is manager of AIM V.I. Global
Hang Lung Properties. PERFORMANCE ARE THOSE OF A I M ADVISORS, Real Estate Fund. Mr.
INC. THESE VIEWS AND OPINIONS ARE SUBJECT Trowbridge joined INVESCO Real Estate in
At times, value is found in not owning TO CHANGE AT ANY TIME BASED ON FACTORS 1989 and has 33 years of real estate
a particular security. This was the case SUCH AS MARKET AND ECONOMIC CONDITIONS. investment experience. Mr. Trowbridge
with Centro Properties Group (not a Fund THESE VIEWS AND OPINIONS MAY NOT BE RELIED earned his B.S. in finance from Indiana
holding), an Australian Listed Property UPON AS INVESTMENT ADVICE OR University.
Trust, which was part of the FTSE RECOMMENDATIONS, OR AS AN OFFER FOR A
EPRA/NAREIT Global Real Estate Index. Over PARTICULAR SECURITY. THE INFORMATION IS Ping Ying Wang Chartered
the past few years, Centro purchased NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF [YING WANG Financial Analyst, portfolio
billions of dollars of relatively lower ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR PHOTO] manager, INVESCO Real
quality retail assets, which they THE FUND. STATEMENTS OF FACT ARE FROM Estate, is manager of AIM
generally financed with short-term debt. SOURCES CONSIDERED RELIABLE, BUT A I M V.I. Global Real Estate Fund. She has 11
Centro has struggled to refinance this ADVISORS, INC. MAKES NO REPRESENTATION OR years of real estate experience. She
short-term debt against rising credit WARRANTY AS TO THEIR COMPLETENESS OR earned a B.S. in international finance
spreads and reduced liquidity. Our ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE from the People's University of China and
fundamental process helped us to avoid IS NO GUARANTEE OF FUTURE RESULTS, THESE a Ph.D. in finance from the University of
this particular company as we were INSIGHTS MAY HELP YOU UNDERSTAND OUR Texas at Dallas.
concerned with Centro's precarious INVESTMENT MANAGEMENT PHILOSOPHY.
Assisted by the Real Estate Team
==========================================
FOR A DISCUSSION OF THE RISKS OF INVESTING
IN YOUR FUND, INDEXES USED IN THIS REPORT
AND YOUR FUND'S LONG-TERM PERFORMANCE,
PLEASE TURN THE PAGE.
==========================================
AIM V.I. Global Real Estate Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE DATA QUOTED REPRESENT THROUGH INSURANCE COMPANIES ISSUING
AVERAGE ANNUAL TOTAL RETURNS PAST PERFORMANCE AND CANNOT GUARANTEE VARIABLE PRODUCTS. YOU CANNOT PURCHASE
COMPARABLE FUTURE RESULTS; CURRENT SHARES OF THE FUND DIRECTLY. PERFORMANCE
As of 12/31/07 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE FIGURES GIVEN REPRESENT THE FUND AND ARE
CONTACT YOUR VARIABLE PRODUCT ISSUER OR NOT INTENDED TO REFLECT ACTUAL VARIABLE
SERIES I SHARES FINANCIAL ADVISOR FOR THE MOST RECENT PRODUCT VALUES. THEY DO NOT REFLECT SALES
Inception (3/31/98) 13.18% MONTH-END VARIABLE PRODUCT PERFORMANCE. CHARGES, EXPENSES AND FEES ASSESSED IN
5 Years 23.88 PERFORMANCE FIGURES REFLECT FUND EXPENSES, CONNECTION WITH A VARIABLE PRODUCT. SALES
1 Year -5.54 REINVESTED DISTRIBUTIONS AND CHANGES IN CHARGES, EXPENSES AND FEES, WHICH ARE
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND DETERMINED BY THE VARIABLE PRODUCT
Inception 12.90% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU ISSUERS, WILL VARY AND WILL LOWER THE
5 Years 23.59 MAY HAVE A GAIN OR LOSS WHEN YOU SELL TOTAL RETURN.
1 Year -5.76 SHARES.
========================================== THE MOST RECENT MONTH-END PERFORMANCE
THE TOTAL ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
SERIES II SHARES' INCEPTION DATE IS APRIL RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
30, 2004. RETURNS SINCE THAT DATE ARE PROSPECTUS AS OF THE DATE OF THIS REPORT AUTOMATED INFORMATION LINE, 866-702-4402.
HISTORICAL. ALL OTHER RETURNS ARE THE FOR SERIES I AND SERIES II SHARES WAS AS MENTIONED ABOVE, FOR THE MOST RECENT
BLENDED RETURNS OF THE HISTORICAL 1.16% AND 1.41%, RESPECTIVELY. THE EXPENSE MONTH-END PERFORMANCE INCLUDING VARIABLE
PERFORMANCE OF SERIES II SHARES SINCE RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, PLEASE CONTACT YOUR
THEIR INCEPTION AND THE RESTATED EXPENSE RATIOS PRESENTED IN OTHER SECTIONS VARIABLE PRODUCT ISSUER OR FINANCIAL
HISTORICAL PERFORMANCE OF SERIES I SHARES OF THIS REPORT THAT ARE BASED ON EXPENSES ADVISOR.
(FOR PERIODS PRIOR TO INCEPTION OF SERIES INCURRED DURING THE PERIOD COVERED BY THIS
II SHARES) ADJUSTED TO REFLECT THE RULE REPORT. HAD THE ADVISOR NOT WAIVED FEES AND/OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. REIMBURSED EXPENSES IN THE PAST,
THE INCEPTION DATE OF SERIES I SHARES IS AIM V.I. GLOBAL REAL ESTATE FUND, A PERFORMANCE WOULD HAVE BEEN LOWER.
MARCH 31, 1998. THE PERFORMANCE OF THE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
FUND'S SERIES I AND SERIES II SHARE FUNDS, IS CURRENTLY OFFERED
CLASSES WILL DIFFER PRIMARILY DUE
TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
Principal risks of investing in the Fund and the potential lack of strict financial The Fund invests in synthetic
and accounting controls and standards. instruments, the value of which may not
The value of convertible securities in correlate perfectly with the overall
which the Fund invests may be affected by The prices of initial public offering securities markets. Rising interest rates
market interest rates--the risk that the (IPO) securities may go up and down more and market price fluctuations will affect
issuer may default on interest or than prices of equity securities of the performance of the Fund's investments
principal payments and the value of the companies with longer trading histories. in synthetic instruments.
underlying common stock into which these In addition, companies offering securities
securities may be converted may decline as in IPOs may have less experienced About indexes used in this report
a result. management or limited operating histories.
There can be no assurance that the fund The Fund has elected to use the MSCI World
The Fund may invest in debt securities, will have favorable IPO investment Index--SERVICE MARK-- instead of the S&P
such as notes and bonds, which carry opportunities. 500 Index--REGISTERED TRADEMARK-- due to
interest rate and credit risk. the change in the Fund's investment style
There is no guarantee that the from domestic to global. The MSCI World
Investing in developing countries can investment techniques and risk analyses Index is a free float-adjusted market
add additional risk, such as high rates of used by the Fund's portfolio managers will capitalization index that is designed to
inflation or sharply devalued currencies produce the desired results. measure global developed market equity
against the U.S. dollar. Transaction costs performance. The S&P 500 Index is a market
are often higher, and there may be delays Because the Fund focuses its capitalization-weighted index covering all
in settlement procedures. investments in real estate investment major areas of the U.S. economy. It is not
trusts (REITs), real estate operating the 500 largest companies, but rather the
Prices of equity securities change in companies and other companies related to most widely held 500 companies chosen with
response to many factors including the the real estate industry, the value of respect to market size, liquidity, and
historical and prospective earnings of the shares may rise and fall more than the their industry.
issuer, the value of its assets, general value of shares of a fund that invests in
economic conditions, interest rates, a broader range of companies. The Fund has elected to use the FTSE
investor perceptions and market liquidity. European Public Real Estate
The Fund may use enhanced investment Association/National Association of Real
Foreign securities have additional techniques such as short sales. Short Estate Investment Trusts Global Real
risks, including exchange rate changes, sales carry the risk of buying a security Estate Index as its style specific Index
political and economic upheaval, the back at a higher price at which the Fund's instead of the MSCI
relative lack of information, relatively exposure is unlimited.
low market liquidity,
Continued
AIM V.I. Global Real Estate Fund
Past performance cannot guarantee types of charts in illustrating changes in ment. In this chart, each segment
comparable future results. value during the early years shown in the represents a doubling, or 100% change, in
chart. The vertical axis, the one that the value of the investment. In other
This chart, which is a logarithmic indicates the dollar value of an words, the space between $5,000 and
chart, presents the fluctuations in the investment, is constructed with each $10,000 is the same size as the space
value of the Fund and its indexes. We segment representing a percent change in between $10,000 and $20,000 and so on.
believe that a logarithmic chart is more the value of the invest-
effective than other
====================================================================================================================================
Continued from previous page
U.S. REIT Index due to change in the panies engaged in the real estate returns based on those net asset values
fund's investment style from domestic to industry. The Lipper Real Estate Funds may differ from the net asset values and
global. The FTSE EPRA/NAREIT Global Real Index is an equally weighted returns reported in the Financial
Estate Index is designed to track the representation of the largest funds in the Highlights. Additionally, the returns and
performance of listed real estate Lipper Real Estate Funds category. These net asset values shown throughout this
companies and REITs worldwide. It is funds primarily invest their equity report are at the Fund level only and do
compiled by FTSE Group (an independent portfolio in securities of domestic and not include variable product issuer
company, originally a joint venture of the foreign companies engaged in the real charges. If such charges were included,
Financial Times and the London Stock estate industry. the total returns would be lower.
Exchange, whose sole business is the
creation and management of indexes and The Fund is not managed to track the Property type classifications used in
associated data services); NAREIT and performance of any particular index, this report are generally according to
EPRA. The MSCI US REIT Index is an including the indexes defined here, and FTSE EPRA/NAREIT Global Real Estate Index,
unmanaged index comprised of the most consequently, the performance of the Fund which is exclusively owned by the FTSE
actively traded real estate investment may deviate significantly from the Group, the European Public Real Estate
trusts and is designed to be a measure of performance of the indexes. Association (EPRA), the National
real estate equity performance. Association of Real Estate Investment
A direct investment cannot be made in Trusts (NAREIT) and Euronext Indices BV.
The Fund has elected to use the Lipper an index. Unless otherwise indicated,
Variable (VUF) Real Estate Funds Category index results include reinvested The Chartered Financial
Average as its peer group instead of the dividends, and they do not reflect sales Analyst--REGISTERED TRADEMARK--
Lipper Real Estate Funds Index. In 2006, charges. Performance of an index of funds (CFA--REGISTERED TRADEMARK--) des-
Lipper began publishing VUF indexes, reflects fund expenses; performance of a ignation is a globally recognized standard
allowing the Fund to be compared with the market index does not. for measuring the competence and integrity
Lipper VUF Real Estate Funds Category of investment professionals.
Average. The unmanaged Lipper VUF Real Other information
Estate Funds Category Average represents
the average of all the variable insurance The returns shown in the management's
underlying funds in the Lipper Real Estate discussion of Fund performance are based
Funds Category. These funds invest at on net asset values calculated for
least 65% of their portfolio in equity shareholder transactions. Generally
securities of domestic and foreign accepted accounting principles require
com- adjustments to be made to the net assets
of the Fund at period end for financial
reporting purposes, and as such, the net
asset values for shareholder transactions
and the
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND AND INDEX DATA FROM 3/31/98
AIM V.I. FTSE LIPPER VUF
GLOBAL REAL EPRA/NAREIT REAL
ESTATE GLOBAL REAL ESTATE LIPPER
FUND-SERIES I S&P 500 MSCI WORLD MSCI U.S. REIT ESTATE FUNDS CATEGORY REAL ESTATE
DATE SHARES INDEX(1) INDEX(1) INDEX(2) INDEX(2) AVERAGE(1) FUNDS INDEX(1)
3/31/1998 $10000 $10000 $10000 $10000 $10000 $10000 $10000
4/98 9710 10102 10096 9646 9690 9691 9689
5/98 9610 9929 9968 9562 9227 9590 9563
6/98 9500 10332 10203 9561 8966 9527 9462
7/98 8920 10223 10185 8890 8456 8915 8859
8/98 7830 8746 8826 8053 7557 8034 7946
9/98 8180 9307 8980 8551 8004 8454 8315
10/98 8090 10062 9790 8390 8765 8327 8218
11/98 8400 10672 10371 8522 9027 8493 8398
12/98 8412 11287 10876 8370 8899 8454 8294
1/99 8207 11758 11113 8145 8665 8247 8109
2/99 8074 11393 10816 8011 8619 8142 7969
3/99 7972 11849 11264 7967 8875 8058 7898
4/99 8892 12308 11707 8738 9750 8901 8745
5/99 9087 12017 11277 8923 9530 9099 8923
6/99 8974 12682 11802 8757 9743 8951 8845
7/99 8565 12288 11765 8481 9617 8593 8501
8/99 8565 12227 11742 8400 9521 8487 8360
9/99 8228 11892 11627 8048 9121 8151 8026
10/99 8043 12645 12230 7865 8998 7944 7816
11/99 7972 12902 12572 7748 9238 7831 7696
12/99 8441 13661 13588 7989 9688 8170 8001
1/00 8473 12974 12808 8039 9282 8144 7930
2/00 8538 12729 12841 7911 8915 8016 7794
3/00 9029 13973 13727 8201 9448 8389 8132
4/00 9423 13553 13145 8752 9448 8863 8537
5/00 9135 13275 12811 8833 9140 8953 8635
6/00 9764 13602 13241 9052 9789 9300 9004
7/00 10587 13390 12867 9873 10233 10022 9664
8/00 10448 14221 13284 9468 10507 9734 9393
9/00 10587 13470 12576 9759 10522 10077 9705
10/00 10245 13413 12363 9296 9984 9680 9292
11/00 10213 12357 11611 9459 10137 9851 9435
12/00 10859 12417 11797 10131 11029 10489 10046
1/01 10934 12858 12025 10174 11195 10457 10101
2/01 10538 11686 11007 10000 11181 10270 9954
3/01 10077 10946 10282 10082 10472 10212 9909
4/01 10559 11796 11040 10316 10732 10460 10132
5/01 10527 11875 10896 10547 10829 10626 10354
6/01 10891 11586 10553 11183 11102 11177 10917
7/01 10570 11472 10412 10941 10902 10966 10722
8/01 10591 10755 9911 11346 11170 11293 11055
9/01 10163 9886 9036 10893 10011 10808 10528
10/01 9960 10075 9209 10528 9906 10450 10184
11/01 10452 10847 9752 11142 10403 11006 10723
12/01 10775 10943 9813 11431 10609 11298 11062
1/02 10732 10783 9514 11405 10499 11282 11108
2/02 10970 10575 9431 11630 10628 11486 11334
3/02 11619 10973 9865 12380 11179 12172 11980
4/02 11813 10308 9511 12459 11506 12275 12103
5/02 12018 10232 9527 12617 11852 12452 12247
6/02 12256 9504 8948 12979 11787 12707 12516
7/02 11759 8763 8193 12251 11197 12022 11800
8/02 11867 8820 8207 12272 11044 12030 11825
9/02 11380 7863 7303 11826 10600 11572 11404
10/02 11121 8554 7841 11232 10459 11035 10902
11/02 11446 9057 8263 11750 10855 11501 11343
12/02 11463 8525 7861 11847 10908 11639 11464
1/03 11135 8302 7622 11521 10676 11326 11164
2/03 11299 8177 7488 11728 10729 11524 11336
3/03 11582 8257 7464 11974 10719 11803 11598
4/03 12008 8936 8125 12479 11166 12271 12102
5/03 12752 9407 8588 13184 12012 12949 12816
6/03 13221 9527 8735 13487 12266 13222 13120
7/03 13833 9695 8912 14203 12744 13913 13721
8/03 13964 9884 9103 14289 13109 14058 13869
9/03 14413 9779 9158 14795 13720 14512 14312
10/03 14620 10332 9700 15044 14132 14744 14631
====================================================================================================================================
SOURCES: (1) LIPPER INC., (2)A I M MANAGEMENT GROUP INC., BLOOMBERG L.P.
====================================================================================================================================
[MOUNTAIN CHART]
11/03 15419 10423 9847 15707 14643 15398 15272
12/03 15913 10969 10464 16201 15347 15892 15730
1/04 16513 11170 10632 16911 16050 16488 16292
2/04 16868 11325 10810 17194 16614 16852 16649
3/04 17889 11155 10738 18153 17417 17814 17558
4/04 15492 10980 10518 15462 15515 15390 15249
5/04 16513 11130 10606 16572 16296 16407 16147
6/04 17101 11347 10832 17042 16698 16919 16644
7/04 17278 10971 10478 17132 16832 17052 16713
8/04 18466 11015 10524 18508 17771 18268 17876
9/04 18554 11134 10723 18471 17963 18282 17976
10/04 19686 11304 10986 19482 18757 19264 18803
11/04 20595 11762 11563 20308 20073 20177 19640
12/04 21734 12162 12004 21302 21173 21326 20783
1/05 20020 11865 11734 19469 20205 19632 19407
2/05 20554 12115 12106 20048 20637 20159 19976
3/05 20145 11901 11872 19717 20131 19862 19608
4/05 21362 11675 11612 20889 20787 20822 20398
5/05 21986 12046 11818 21571 21181 21504 21084
6/05 22918 12063 11921 22654 22000 22557 22064
7/05 24600 12512 12337 24277 23088 24142 23485
8/05 23702 12398 12430 23344 22859 23240 22673
9/05 23873 12498 12753 23477 23337 23361 22740
10/05 23362 12290 12444 22918 22640 22864 22211
11/05 24476 12754 12858 23911 23450 23891 23172
12/05 24831 12759 13143 23886 24423 24111 23334
1/06 26445 13096 13730 25721 26042 25709 24797
2/06 26916 13132 13709 26205 26630 26206 25170
3/06 28402 13295 14011 27506 27839 27602 26331
4/06 27706 13474 14436 26484 27706 26755 25645
5/06 26974 13086 13943 25720 26766 26005 24933
6/06 28283 13104 13939 27105 27736 27304 26014
7/06 29120 13184 14026 28077 28731 28038 26619
8/06 30191 13498 14390 29144 29816 29022 27530
9/06 30886 13845 14562 29713 30487 29595 28055
10/06 32594 14296 15096 31573 32217 31366 29655
11/06 34373 14568 15466 33068 33842 32934 31003
12/06 35401 14772 15780 32466 34767 32746 30674
1/07 37214 14995 15967 35295 36439 35294 32881
2/07 37522 14703 15884 34425 36701 34647 32230
3/07 37571 14867 16174 33586 36931 33911 31686
4/07 37646 15525 16888 33578 37210 33959 31821
5/07 38091 16066 17361 33532 37514 34042 32067
6/07 35062 15800 17227 30371 34770 31056 29476
7/07 33558 15310 16845 27963 33046 28863 27498
8/07 34914 15540 16833 29807 34009 30304 28636
9/07 37180 16120 17633 31103 36041 31691 29913
10/07 38411 16376 18174 31480 36971 32290 30527
11/07 35491 15692 17431 28497 34119 29355 27845
12/07 33439 15583 17206 27007 32348 27873 26532
====================================================================================================================================
AIM V.I. Global Real Estate Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
FOREIGN REAL ESTATE INVESTMENT TRUSTS, COMMON
STOCKS & OTHER EQUITY INTERESTS-64.02%
AUSTRALIA-13.21%
CFS Retail Property Trust (Retail)(b)(c) 976,500 $ 1,995,666
- -----------------------------------------------------------------------
GPT Group (Diversified)(b) 1,253,600 4,414,848
- -----------------------------------------------------------------------
Mirvac Group (Diversified)(b) 361,100 1,893,871
- -----------------------------------------------------------------------
Stockland (Diversified)(b)(c) 581,200 4,267,655
- -----------------------------------------------------------------------
Westfield Group (Retail)(b)(c) 370,800 6,777,496
=======================================================================
19,349,536
=======================================================================
CANADA-3.59%
Boardwalk Real Estate Investment Trust
(Residential) 64,600 2,900,727
- -----------------------------------------------------------------------
Cominar Real Estate Investment Trust
(Diversified)(c) 19,700 404,428
- -----------------------------------------------------------------------
Primaris Retail Real Estate Investment Trust
(Retail) 48,600 895,997
- -----------------------------------------------------------------------
RioCan Real Estate Investment Trust (Retail) 48,100 1,059,584
=======================================================================
5,260,736
=======================================================================
CHINA-0.44%
Kowloon Development Co. Ltd. (Residential) 248,000 642,487
=======================================================================
FINLAND-0.80%
Citycon Oyj (Retail)(b)(c) 131,913 699,061
- -----------------------------------------------------------------------
Sponda Oyj (Diversified)(b) 40,440 479,657
=======================================================================
1,178,718
=======================================================================
FRANCE-5.97%
Gecina S.A. (Diversified)(c) 6,900 1,080,660
- -----------------------------------------------------------------------
Klepierre (Retail)(b) 40,000 2,027,184
- -----------------------------------------------------------------------
Orco Property Group (Diversified)(b)(c) 3,900 462,625
- -----------------------------------------------------------------------
Unibail-Rodamco (Diversified)(b) 23,800 5,171,063
=======================================================================
8,741,532
=======================================================================
HONG KONG-15.21%
China Overseas Land & Investment Ltd.
(Residential)(b) 648,000 1,328,771
- -----------------------------------------------------------------------
China Overseas Land & Investment Ltd.-Wts.,
expiring 08/27/08 (Residential)(d) 57,833 31,597
- -----------------------------------------------------------------------
China Resources Land Ltd. (Residential)(b) 579,800 1,264,510
- -----------------------------------------------------------------------
Hang Lung Properties Ltd. (Diversified)(b) 807,000 3,608,559
- -----------------------------------------------------------------------
Hongkong Land Holdings Ltd. (Office)(b) 323,000 1,585,598
- -----------------------------------------------------------------------
Kerry Properties Ltd. (Diversified)(b) 336,900 2,686,892
- -----------------------------------------------------------------------
New World Development Co., Ltd.
(Diversified)(b) 1,156,400 4,059,086
- -----------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Diversified)(b) 366,000 7,699,880
=======================================================================
22,264,893
=======================================================================
ITALY-0.68%
Beni Stabili S.p.A. (Office)(b) 499,200 539,571
- -----------------------------------------------------------------------
Risanamento S.p.A. (Diversified)(b)(c) 84,200 451,756
=======================================================================
991,327
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
JAPAN-11.49%
AEON Mall Co., Ltd. (Retail)(b)(c) 20,500 $ 539,409
- -----------------------------------------------------------------------
Japan Real Estate Investment Corp.
(Office)(b) 35 433,642
- -----------------------------------------------------------------------
Kenedix Realty Investment Corp.
(Diversified)(b) 57 376,823
- -----------------------------------------------------------------------
Mitsubishi Estate Co. Ltd. (Diversified)(b) 203,000 4,877,881
- -----------------------------------------------------------------------
Mitsui Fudosan Co., Ltd. (Diversified)(b) 212,000 4,592,831
- -----------------------------------------------------------------------
Nippon Building Fund Inc. (Office)(b)(c) 115 1,613,867
- -----------------------------------------------------------------------
Nippon Commercial Investment Corp.
(Diversified)(b) 87 384,474
- -----------------------------------------------------------------------
Nomura Real Estate Office Fund, Inc.
(Office)(b) 105 989,899
- -----------------------------------------------------------------------
NTT Urban Development Corp. (Office)(b) 498 795,144
- -----------------------------------------------------------------------
Sumitomo Realty & Development Co., Ltd.
(Diversified)(b) 25,000 616,398
- -----------------------------------------------------------------------
Tokyo Tatemono Co., Ltd. (Office)(b)(c) 128,000 1,207,826
- -----------------------------------------------------------------------
TOKYU REIT, Inc. (Diversified)(b) 43 401,912
=======================================================================
16,830,106
=======================================================================
NETHERLANDS-0.21%
Plaza Centers N.V. (Retail)(d) 66,400 303,439
=======================================================================
NEW ZEALAND-0.29%
Goodman Property Trust (Diversified)(b) 384,100 426,525
=======================================================================
NORWAY-0.81%
Norwegian Property A.S.A. (Office)(b) 97,900 1,188,298
=======================================================================
SINGAPORE-2.59%
Ascott Group Ltd. (The) (Lodging-Resorts)(b) 329,000 276,992
- -----------------------------------------------------------------------
Capitaland Ltd. (Diversified)(b) 390,000 1,676,902
- -----------------------------------------------------------------------
CapitaMall Trust (Retail)(b) 460,000 1,093,889
- -----------------------------------------------------------------------
Keppel Land Ltd. (Diversified)(b) 147,000 739,726
=======================================================================
3,787,509
=======================================================================
SWEDEN-0.75%
Fabege A.B. (Office)(b) 107,900 1,092,829
=======================================================================
UNITED KINGDOM-7.98%
Big Yellow Group PLC (Self Storage)(b) 41,500 358,212
- -----------------------------------------------------------------------
British Land Co. PLC (Diversified)(b) 148,800 2,768,450
- -----------------------------------------------------------------------
Capital & Regional PLC (Retail)(b) 72,300 567,858
- -----------------------------------------------------------------------
Derwent London PLC (Office)(b) 64,700 1,802,328
- -----------------------------------------------------------------------
Land Securities Group PLC (Diversified)(b) 103,000 3,057,214
- -----------------------------------------------------------------------
Quintain Estates & Development PLC
(Diversified)(b) 64,300 652,086
- -----------------------------------------------------------------------
Shaftesbury PLC (Diversified)(b) 89,800 889,256
- -----------------------------------------------------------------------
Unite Group PLC (Specialty)(b) 159,900 1,117,132
- -----------------------------------------------------------------------
Workspace Group PLC (Office)(b) 88,100 472,207
=======================================================================
11,684,743
=======================================================================
Total Foreign Real Estate Investment
Trusts,
Common Stocks & Other Equity Interests
(Cost $81,428,171) 93,742,678
=======================================================================
</Table>
AIM V.I. Global Real Estate Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
DOMESTIC REAL ESTATE INVESTMENT TRUSTS &
COMMON STOCKS-34.71%
DIVERSIFIED-2.60%
Vornado Realty Trust 34,700 $ 3,051,865
- -----------------------------------------------------------------------
Washington Real Estate Investment Trust 24,000 753,840
=======================================================================
3,805,705
=======================================================================
HEALTHCARE-4.57%
HCP, Inc. 94,300 3,279,754
- -----------------------------------------------------------------------
Health Care REIT, Inc. 18,400 822,296
- -----------------------------------------------------------------------
Ventas, Inc. 57,100 2,583,775
=======================================================================
6,685,825
=======================================================================
INDUSTRIAL-2.54%
ProLogis 58,614 3,714,955
=======================================================================
LODGING-RESORTS-2.19%
Host Hotels & Resorts Inc. 134,489 2,291,693
- -----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 20,900 920,227
=======================================================================
3,211,920
=======================================================================
OFFICE-6.14%
Alexandria Real Estate Equities, Inc. 17,600 1,789,392
- -----------------------------------------------------------------------
Boston Properties, Inc. 14,000 1,285,340
- -----------------------------------------------------------------------
Brandywine Realty Trust 41,621 746,264
- -----------------------------------------------------------------------
Brookfield Properties Corp.(c) 42,050 810,786
- -----------------------------------------------------------------------
Douglas Emmett, Inc. 53,100 1,200,591
- -----------------------------------------------------------------------
SL Green Realty Corp. 33,800 3,158,948
=======================================================================
8,991,321
=======================================================================
RESIDENTIAL-4.75%
AvalonBay Communities, Inc. 11,300 1,063,782
- -----------------------------------------------------------------------
BRE Properties, Inc. 18,800 761,964
- -----------------------------------------------------------------------
Camden Property Trust 25,600 1,232,640
- -----------------------------------------------------------------------
Equity Residential 53,900 1,965,733
- -----------------------------------------------------------------------
Essex Property Trust, Inc. 17,300 1,686,577
- -----------------------------------------------------------------------
Mid-America Apartment Communities, Inc. 5,900 252,225
=======================================================================
6,962,921
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
RETAIL-9.63%
CBL & Associates Properties, Inc. 38,600 $ 922,926
- -----------------------------------------------------------------------
Developers Diversified Realty Corp. 51,000 1,952,790
- -----------------------------------------------------------------------
Federal Realty Investment Trust 25,300 2,078,395
- -----------------------------------------------------------------------
General Growth Properties, Inc.(c) 53,400 2,199,012
- -----------------------------------------------------------------------
Kimco Realty Corp.(c) 51,300 1,867,320
- -----------------------------------------------------------------------
Macerich Co. (The) 13,400 952,204
- -----------------------------------------------------------------------
Simon Property Group, Inc. 47,500 4,125,850
=======================================================================
14,098,497
=======================================================================
SELF STORAGE-1.66%
Public Storage 33,100 2,429,871
=======================================================================
SPECIALTY-0.63%
Digital Realty Trust, Inc. 23,900 917,043
=======================================================================
Total Domestic Real Estate Investment
Trusts & Common Stocks (Cost
$44,948,751) 50,818,058
=======================================================================
MONEY MARKET FUNDS-2.19%
Liquid Assets Portfolio-Institutional
Class(e) 1,599,562 1,599,562
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 1,599,562 1,599,562
=======================================================================
Total Money Market Funds (Cost
$3,199,124) 3,199,124
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.92% (Cost
$129,576,046) 147,759,860
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-6.72%
Liquid Assets Portfolio-Institutional Class
(Cost $9,838,609)(e)(f) 9,838,609 9,838,609
=======================================================================
TOTAL INVESTMENTS-107.64% (Cost $139,414,655) 157,598,469
=======================================================================
OTHER ASSETS LESS LIABILITIES-(7.64%) (11,179,355)
=======================================================================
NET ASSETS-100.00% $146,419,114
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) 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.
(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 December 31, 2007 was $86,423,759,
which represented 59.02% of the Fund's Net Assets. See Note 1A.
(c) All or a portion of this security was out on loan at December 31, 2007.
(d) Non-income producing security.
(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 7.
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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $126,376,922)* $144,560,736
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $13,037,733) 13,037,733
=============================================================
Total investments (Cost $139,414,655) 157,598,469
=============================================================
Foreign currencies, at value (Cost $41,880) 42,043
- -------------------------------------------------------------
Cash 1,099
- -------------------------------------------------------------
Receivables for:
Fund shares sold 472,205
- -------------------------------------------------------------
Dividends 712,855
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 14,525
=============================================================
Total assets 158,841,196
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 4,132
- -------------------------------------------------------------
Fund shares reacquired 2,402,091
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 20,614
- -------------------------------------------------------------
Due to securities lending agent 768,459
- -------------------------------------------------------------
Collateral upon return of securities loaned 9,070,150
- -------------------------------------------------------------
Accrued administrative services fees 94,302
- -------------------------------------------------------------
Accrued distribution fees -- Series II 1,550
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 629
- -------------------------------------------------------------
Accrued transfer agent fees 1,747
- -------------------------------------------------------------
Accrued operating expenses 58,408
=============================================================
Total liabilities 12,422,082
=============================================================
Net assets applicable to shares outstanding $146,419,114
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $117,708,826
- -------------------------------------------------------------
Undistributed net investment income (245,443)
- -------------------------------------------------------------
Undistributed net realized gain 10,768,939
- -------------------------------------------------------------
Unrealized appreciation 18,186,792
=============================================================
$146,419,114
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $143,772,955
_____________________________________________________________
=============================================================
Series II $ 2,646,159
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,571,869
_____________________________________________________________
=============================================================
Series II 122,194
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 21.88
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 21.66
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $8,642,588 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$366,143) $ 4,329,969
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$25,303) 205,658
============================================================
Total investment income 4,535,627
============================================================
EXPENSES:
Advisory fees 1,549,674
- ------------------------------------------------------------
Administrative services fees 485,490
- ------------------------------------------------------------
Custodian fees 123,082
- ------------------------------------------------------------
Distribution fees -- Series II 3,059
- ------------------------------------------------------------
Transfer agent fees 16,489
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 22,120
- ------------------------------------------------------------
Other 66,613
============================================================
Total expenses 2,266,527
============================================================
Less: Fees waived and expense offset
arrangement(s) (158,857)
============================================================
Net expenses 2,107,670
============================================================
Net investment income 2,427,957
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 15,246,243
- ------------------------------------------------------------
Foreign currencies (118,887)
============================================================
15,127,356
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (26,944,052)
- ------------------------------------------------------------
Foreign currencies (4,410)
============================================================
(26,948,462)
============================================================
Net realized and unrealized gain (loss) (11,821,106)
============================================================
Net increase (decrease) in net assets resulting
from operations $(9,393,149)
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,427,957 $ 1,746,818
- ------------------------------------------------------------------------------------------
Net realized gain 15,127,356 22,784,354
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (26,948,462) 24,881,911
==========================================================================================
Net increase (decrease) in net assets resulting from
operations (9,393,149) 49,413,083
==========================================================================================
Distributions to shareholders from net investment income:
Series I (9,098,630) (1,802,157)
- ------------------------------------------------------------------------------------------
Series II (158,255) (2,803)
==========================================================================================
Total distributions from net investment income (9,256,885) (1,804,960)
==========================================================================================
Distributions to shareholders from net realized gains:
Series I (21,716,323) (6,223,841)
- ------------------------------------------------------------------------------------------
Series II (378,839) (9,875)
==========================================================================================
Total distributions from net realized gains (22,095,162) (6,233,716)
==========================================================================================
Decrease in net assets resulting from distributions (31,352,047) (8,038,676)
==========================================================================================
Share transactions-net:
Series I (8,779,766) 51,326,244
- ------------------------------------------------------------------------------------------
Series II 3,015,866 188,721
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (5,763,900) 51,514,965
==========================================================================================
Net increase (decrease) in net assets (46,509,096) 92,889,372
==========================================================================================
NET ASSETS:
Beginning of year 192,928,210 100,038,838
==========================================================================================
End of year (including undistributed net investment income
of $(245,443) and $2,317,639, respectively) $146,419,114 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 -- 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.
AIM V.I. Global Real Estate Fund
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 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 annual rate of the Fund's average daily net assets as follows:
<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 Real Estate"), AIM pays Invesco Real Estate
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 Ltd. ("Invesco")
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 year ended December 31, 2007, AIM waived advisory fees of $158,211.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $435,490
for services provided by insurance companies.
AIM V.I. Global Real Estate Fund
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $1,658,878 $ 33,292,521 $ (33,351,837) $ 1,599,562 $ 90,276
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 1,658,879 33,292,521 (33,351,838) 1,599,562 90,079
=================================================================================================
Subtotal $3,317,757 $ 66,585,042 $ (66,703,675) $ 3,199,124 $180,355
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $102,794,343 $ (92,955,734) $ 9,838,609 $ 25,303
=================================================================================================
Total
Investments
in
Affiliates $3,317,757 $169,379,385 $(159,659,409) $13,037,733 $205,658
_________________________________________________________________________________________________
=================================================================================================
</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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $646.
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 year ended December 31, 2007, the Fund paid legal fees of $4,112
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 SEC, 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.
AIM V.I. Global Real Estate Fund
The Fund is a party to 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 year ended December 31, 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--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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $8,642,588 were
on loan to brokers. The loans were secured by cash collateral of $9,070,150
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $25,303 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- ---------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $11,622,307 $2,692,485
- ---------------------------------------------------------------------------------------
Long-term capital gain 19,729,740 5,346,191
=======================================================================================
Total distributions $31,352,047 $8,038,676
_______________________________________________________________________________________
=======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 9,289,072
- ----------------------------------------------------------------------------
Undistributed long-term gain 10,163,000
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 12,273,239
- ----------------------------------------------------------------------------
Temporary book/tax differences (16,920)
- ----------------------------------------------------------------------------
Post-October currency loss deferral (20,180)
- ----------------------------------------------------------------------------
Post-October PFIC MTM deferral (2,977,923)
- ----------------------------------------------------------------------------
Shares of beneficial interest 117,708,826
============================================================================
Total net assets $146,419,114
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the recognition of income for tax purposes on certain passive foreign investment
companies. The tax-basis net unrealized appreciation on investments amount
includes appreciation on foreign currencies of $2,978.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
AIM V.I. Global Real Estate Fund
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 year ended December 31, 2007 was $102,586,893 and
$133,708,790, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $19,783,480
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,513,219)
===============================================================================
Net unrealized appreciation of investment securities $12,270,261
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $145,328,208.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and passive foreign investment companies, on December 31, 2007,
undistributed net investment income was increased by $4,265,846 and
undistributed net realized gain was decreased by $4,265,846. This
reclassification had no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007(A) DECEMBER 31, 2006
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,348,323 $ 69,998,283 3,140,879 $ 79,652,136
- -------------------------------------------------------------------------------------------------------------------------
Series II 99,437 2,780,132 9,339 226,643
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,296,380 30,814,953 286,030 8,025,998
- -------------------------------------------------------------------------------------------------------------------------
Series II 22,826 537,094 454 12,678
=========================================================================================================================
Reacquired:
Series I (3,775,973) (109,593,002) (1,471,561) (36,351,890)
- -------------------------------------------------------------------------------------------------------------------------
Series II (10,949) (301,360) (1,862) (50,600)
=========================================================================================================================
(19,956) $ (5,763,900) 1,963,279 $ 51,514,965
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 71% 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--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
agreements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Global Real Estate 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
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.74 $ 21.06 $ 19.13 $ 14.34 $ 10.49
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.38(a) 0.33(a) 0.38(a) 0.32(a) 0.20
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.52) 8.61 2.34 4.92 3.87
======================================================================================================================
Total from investment operations (1.14) 8.94 2.72 5.24 4.07
======================================================================================================================
Less distributions:
Dividends from net investment income (1.69) (0.28) (0.22) (0.14) (0.22)
- ----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (4.03) (0.98) (0.57) (0.31) --
======================================================================================================================
Total distributions (5.72) (1.26) (0.79) (0.45) (0.22)
======================================================================================================================
Net asset value, end of period $ 21.88 $ 28.74 $ 21.06 $ 19.13 $ 14.34
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (5.54)% 42.60% 14.24% 36.58% 38.82%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $143,773 $192,617 $99,977 $79,391 $26,087
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.13%(c) 1.15% 1.21% 1.31% 1.35%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.22%(c) 1.30% 1.36% 1.42% 1.62%
======================================================================================================================
Ratio of net investment income to average net assets 1.31%(c) 1.32% 1.91% 1.96% 3.02%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 57% 84% 51% 34% 126%
______________________________________________________________________________________________________________________
======================================================================================================================
</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 based on average daily net assets of $184,656,664.
<Table>
<Caption>
SERIES II
-------------------------------------------------------
APRIL 30, 2004
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE) TO
----------------------------- 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) 0.29 0.27 0.34 0.20
- ---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.49) 8.58 2.31 5.41
=====================================================================================================================
Total from investment operations (1.20) 8.85 2.65 5.61
=====================================================================================================================
Less distributions:
Dividends from net investment income (1.68) (0.28) (0.22) (0.14)
- ---------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (4.03) (0.98) (0.57) (0.31)
=====================================================================================================================
Total distributions (5.71) (1.26) (0.79) (0.45)
=====================================================================================================================
Net asset value, end of period $21.66 $28.57 $20.98 $19.12
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) (5.76)% 42.30% 13.85% 40.23%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,646 $ 311 $ 62 $ 14
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.38%(c) 1.40% 1.45% 1.45%(d)
- ---------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.47%(c) 1.55% 1.61% 1.66%(d)
=====================================================================================================================
Ratio of net investment income to average net assets 1.06%(c) 1.07% 1.67% 1.82%(d)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate(e) 57% 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 based on average daily net assets of $1,223,726.
(d) Annualized.
(e) 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 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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Global Real Estate Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Global Real Estate Fund
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2007 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Global Real Estate Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
EXPENSES)
ACTUAL EXPENSES
BEGINNING ENDING EXPENSES ENDING PAID ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $ 953.90 $5.81 $1,019.26 $6.01 1.18%
Series II 1,000.00 953.10 7.04 1,018.00 7.27 1.43
</Table>
(1) The actual ending account value is based on the actual total return of
the Fund for the period July 1, 2007, through December 31, 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 184/365 to reflect the most recent fiscal half year.
AIM V.I. Global Real Estate Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Long-Term Capital Gain Dividends $19,729,741
Corporate Dividends Received Deduction* 0%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
DISTRIBUTION INFORMATION
Shareholders were sent a notice from the Fund that set forth an estimate on a
per share basis of the source or sources from which the distribution was paid in
December of 2007. Subsequently, certain of these estimates have been corrected.
Listed below is a written statement of the sources of this distribution, as
corrected, on a generally accepted accounting principles ("GAAP") basis.
<Table>
<Caption>
GAIN FROM SALE OF
NET INCOME SECURITIES RETURN OF PRINCIPAL
- ------------------------------------------------------------------------------------------------------------------
12/10/07 Series I $0.8664 $4.0334 $0.8235
- ------------------------------------------------------------------------------------------------------------------
12/10/07 Series II $0.8616 $4.0334 $0.8233
__________________________________________________________________________________________________________________
==================================================================================================================
<Caption>
TOTAL DISTRIBUTION
- --------
12/10/07 $5.7233
- --------
12/10/07 $5.7183
________
========
</Table>
Please note that the information in the preceding chart is for financial
accounting purposes only. Shareholders should be aware that the tax treatment of
distributions likely differs from GAAP treatment. The tax treatment of
distributions was set forth in a Form 1099-DIV for the 2007 calendar year. This
information is being provided to comply with certain U.S. Securities and
Exchange Commission requirements.
AIM V.I. Global Real Estate Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Global Real Estate Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, Inc. and INVESCO Group
Services, Inc.; Director, INVESCO Funds
Group, Inc.; Secretary, INVESCO North
American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
Invesco
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers Institutional
Suite 100 11 Greenway Plaza Inc. LLP (NA), Inc.
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street Invesco
Houston, TX 77046-1173 Suite 100 Suite 2900 Alternatives
Houston, TX 77046-1173 Houston, TX 77002-5678 Group
Division
Three
Galleria
Tower,
Suite
500
13155
Noel
Road
Dallas,
TX
75240-5042
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
FIXED INCOME
INTERMEDIATE-TERM TAXABLE
INVESTMENT GRADE
AIM V.I. Government
Securities Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. GOVERNMENT SECURITIES FUND's investment objective is
securities is available without charge, a high level of current income consistent with reasonable
upon request, from our Client Services concern for safety of principal.
department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home
page, scroll down and click on 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
tab, click on Required Notices and then IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu.
The information is also available on the UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
SEC Web site, sec.gov. 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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- -- REGISTERED TRADEMARK -- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Government Securities Fund
Management's discussion of Fund performance three sectors represented in our
style-specific benchmark--U.S. Treasuries,
======================================================================================= U.S. agency bonds and U.S. agency mortgage
PERFORMANCE SUMMARY backed securities (MBS). The Fund seeks to
limit risk through various controls, such
For the year ended December 31, 2007, AIM V.I. Government Securities Fund as sector and issuer ratings and duration
underperformed its broad market and style-specific indexes. Our defensive duration relative to its benchmark index. This
structure in the later part of the year was a major detractor from performance. While duration band places limits on how much
yields declined across the yield curve, the U.S. Federal Reserve Board (the Fed) principal risk we take relative to our
reduced interest rates more aggressively than we anticipated, causing short term benchmark.
interest rates to decline most steeply.
After our top-down strategic decisions,
Your Fund's long-term performance appears later in this report. we identify securities we believe are
undervalued given the prevailing market
FUND VS. INDEXES environment or potential future
developments.
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If
variable product issuer charges were included, returns would be lower. Instances in which we sell a security
include, but are not limited to, when:
Series I Shares 6.34%
Series II Shares 6.11 o A change in the economic or market
Lehman Brothers U.S. Aggregate Bond Index(triangle)(Broad Market Index) 6.97 outlook indicates assets should be
Lehman Brothers U.S. Government Index(triangle)(Style-Specific Index) 8.66 reallocated.
Lehman Brothers Intermediate U.S. Government and Mortgage Index(square)
(Former Style-Specific Index) 7.56 o A mortgage security is prepaying faster
Lipper VUF General U.S. Government Funds Index(triangle)(Peer Group Index) 6.89 or slower than we would like.
Lipper Intermediate U.S. Government Funds Index(triangle)
(Former Peer Group Index) 7.35 o A security is likely to be called, and
we prefer to own one with a longer
SOURCES: (triangle) LIPPER INC.; maturity date.
(square) A I M MANAGEMENT GROUP INC., LEHMAN BROTHERS INC.
======================================================================================= o A security has become fully valued.
How we invest movements, while short duration bonds tend Market conditions and your Fund
to be less sensitive to interest rate
We seek to enhance returns by using changes. The U.S. economy expanded throughout 2007.
calculated risks in sector allocation, The annualized rate of growth in gross
duration management and security selection We begin by assessing the overall economic domestic product accelerated from 0.6% to
to take advantage of prevailing market environment and its impact on the level 3.8% to 4.9%(1) in the first, second and
conditions and future developments. and direction of interest rates. We third quarters of 2007, respectively.
Duration is a measure of a debt security's develop a short-term strategic outlook and Initial estimates suggested the economy
sensitivity to interest rate changes, look to take advantage of tactical expanded at an annualized rate of 0.6%(1)
expressed in terms of years. Longer opportunities when they arise. This in the fourth quarter.
duration bonds usually are more sensitive strategic outlook helps determine the
to interest rate Fund's allocation strategy among the Inflation, as measured by the core
Consumer Price Index (which excludes
volatile food and
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 FIXED INCOME ISSUERS* TOP NET ASSETS AND HOLDINGS*
By security type, based on total 1. Federal National Mortgage Total Net Assets $1.19 billion
investments Association (FNMA) 34.3% Total Number of Holdings* 880
2. Federal Home Loan Mortgage
U.S. Mortgage-Backed Securities 73.1% Corp. (FHLMC) 10.9
U.S. Government Agency Securities 20.0 3. Government National Mortgage
Repurchase Agreements 5.5 Association (GNMA) 7.6
U.S. Treasury Securities 0.9 4. Federal Home Loan Bank (FHLB) 3.8
Foreign Sovereign Debt 0.5 5. Freddie Mac REMICS 3.2
6. Federal Farm Credit Bank 1.6
The Fund's holdings are subject to change, 7. Fannie Mae REMICS 1.0
and there is no assurance that the Fund 8. Federal Agricultural Mortgage
will continue to hold any particular Corp. 1.0
security. 9. Tennessee Valley Authority 0.9
10. Private Export Funding Corp. 0.6
* Excluding repurchase agreements.
========================================== ========================================== ==========================================
AIM V.I. Government Securities Fund
energy prices), increased at an annual the yield curve to a more normal shape.(4) ing to absolute and relative Fund
rate of 2.4%(2) in December, up from a As a result, we slightly benefited from returns.4 However, our positioning in the
2.1%(2) pace in the third quarter. the portfolio's longer duration during the U.S. agency market detracted from
first two quarters. performance as we focused on callable
The spillover from the housing and agency bonds, which performed poorly
sub-prime markets and credit risk Beginning in the summer, we moved to a versus other areas of the agency bond
repricing dramatically diminished defensive duration positioning to minimize market.(4)
liquidity and reduced credit availability. the Fund's interest rate sensitivity. The
Consequently, the Fed began adding market began to anticipate that the Fed We thank you for your investment in AIM
liquidity to the system by cutting the would lower interest rates, but we V.I. Government Securities Fund.
discount rate by one-half a percentage believed its interest rate reductions
point on August 173 and by lowering its would be more measured. Unfortunately, the Sources: (1) Bureau of Economic Analysis;
federal fund target rate by one-half a Fed cut rates more aggressively than we (2) Bureau of Labor Statistics; (3) U.S.
percentage point on September 18(3). While expected and short term interest rates Federal Reserve board; (4) Lehman Brothers
the September rate cut was larger than experienced the steepest decline. Being Inc.; (5) Lipper Inc.
expected, two subsequent quarter-point underweight duration in the later part of
cuts on October 31 and December 11 were the year, when bond yields rallied The views and opinions expressed in
fully anticipated by markets.(3) dramatically, was a major detractor from management's discussion of Fund
relative performance. performance are those of A I M Advisors,
Treasury yields fell and the U.S. Inc. These views and opinions are subject
Treasury yield curve steepened by the end For duration management purposes we to change at any time based on factors
of the year as investors fled risky assets used five- and 10-year U.S. Treasury such as market and economic conditions.
and turned instead to the relative safety futures. In our view, gaining exposure to These views and opinions may not be relied
of government securities.(4) the U.S. Treasury market through U.S. upon as investment advice or
Treasury futures is a more effective way recommendations, or as an offer for a
Despite concerns about the implications to use the Fund's cash than buying actual particular security. The information is
of the credit crunch on the broader bonds. U.S. Treasury futures offer a not a complete analysis of every aspect of
economy, for the year ended December 31, variety of standardized contracts, are any market, country, industry, security or
2007, the Lehman Brothers U.S. Aggregate exchange traded and provide a high level the Fund. Statements of fact are from
Bond index, which represents the of liquidity. sources considered reliable, but A I M
performance of investment-grade fixed Advisors, Inc. makes no representation or
income investments, returned 6.97%.(5) It Over the year, a large percentage of warranty as to their completeness or
outperformed the S&P 500 Index, which the Fund's assets were invested in MBS, accuracy. Although historical performance
represents the performance of the U.S. although by the end of the year we reduced is no guarantee of future results, these
stock market, and which returned 5.49% for that percentage substantially. We did so insights may help you understand our
the year.(5) to diversify the Fund's assets across investment management philosophy.
different government-related securities,
Effective May 1, 2007, along with the including U.S. Treasuries and U.S. agency Jan H. Friedli
changes in the Fund's portfolio management obligations. [FRIEDLI Senior portfolio manager, is
team, the Fund changed its style-specific PHOTO] manager of AIM V.I.
benchmark from the Lehman Brothers For the second half of the year, we Government Securities Fund.
Intermediate U.S. Government and Mortgage maintained an underweight exposure to MBS. Mr. Friedli graduated
Index to the Lehman Brothers U.S. We favored higher coupon MBS for their cum laude from Villanova University with a
Government Index. We believe this change incremental yield advantage. Affected by B.S. in computer science before earning an
in indexes better reflects the Fund's the weak housing market and M.B.A. with honors from the University of
value-oriented management style in which subprime-related problems, mortgage bonds Chicago.
we utilize diversified strategies and underperformed U.S. Treasury
invest in all sectors of the government securities.(4) While stronger performance Brendan Gau
bond market. by higher-coupon mortgage bonds relative [GAU Chartered Financial Analyst,
to lower-coupon MBS benefited our relative PHOTO] portfolio manager, is manager
During the year, fixed income markets performance, the Fund's strategy in the of AIM V.I. Government
were focused on the benchmark 10-year MBS market had a negative impact on Securities Fund.
Treasury note, which finished 2007 with a absolute returns. He earned a B.A. degree in mathematics,
slight gain, as yields for Treasuries of physics and economics from Rice
all maturities dropped during the year.(4) During the year, we increased our University.
We started off the year with an overweight exposure to the U.S. Treasury and U.S.
duration positioning to take advantage of agency markets. The flight to quality Assisted by the Taxable Investment Grade
the continuing rally of long-term bond increased demand for and market value of Bond Team
yields. By the middle of the year, short government securities, including U.S.
term yields had decreased while long term Treasuries. As a result, U.S. Treasury ==========================================
yields had increased, both by a small securities finished 2007 ahead of other FOR A DISCUSSION OF THE RISKS OF INVESTING
amount, restoring major bond sectors, positively contribut- IN YOUR FUND, INDEXES USED IN THIS REPORT
AND YOUR FUND'S LONG-TERM PERFORMANCE,
PLEASE TURN THE PAGE.
==========================================
AIM V.I. Government Securities Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. GOVERNMENT SECURITIES FUND, A
AVERAGE ANNUAL TOTAL RETURNS PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
As of 12/31/07 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
SERIES I SHARES FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
Inception (5/5/93) 4.91% MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
10 Years 4.71 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
5 Years 3.02 REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
1 Year 6.34 NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
SERIES II SHARES PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
10 Years 4.45% MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
5 Years 2.78 SHARES. DETERMINED BY THE VARIABLE PRODUCT
1 Year 6.11 ISSUERS, WILL VARY AND WILL LOWER THE
========================================== THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
RATIO SET FORTH IN THE MOST RECENT FUND
SERIES II SHARES' INCEPTION DATE IS PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
SEPTEMBER 19, 2001. RETURNS SINCE THAT FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
DATE ARE HISTORICAL. ALL OTHER RETURNS ARE 0.73% AND 0.98%, RESPECTIVELY.(1) THE PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
THE BLENDED RETURNS OF THE HISTORICAL TOTAL ANNUAL FUND OPERATING EXPENSE RATIO AUTOMATED INFORMATION LINE, 866-702-4402.
PERFORMANCE OF SERIES II SHARES SINCE SET FORTH IN THE MOST RECENT FUND AS MENTIONED ABOVE, FOR THE MOST RECENT
THEIR INCEPTION AND THE RESTATED PROSPECTUS AS OF THE DATE OF THIS REPORT MONTH-END PERFORMANCE INCLUDING VARIABLE
HISTORICAL PERFORMANCE OF SERIES I SHARES FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, PLEASE CONTACT YOUR
(FOR PERIODS PRIOR TO INCEPTION OF SERIES 0.77% AND 1.02%, RESPECTIVELY. THE VARIABLE PRODUCT ISSUER OR FINANCIAL
II SHARES) ADJUSTED TO REFLECT THE RULE EXPENSE RATIOS PRESENTED ABOVE MAY VARY ADVISOR.
12B-1 FEES APPLICABLE TO SERIES II SHARES. FROM THE EXPENSE RATIOS PRESENTED IN
THE INCEPTION DATE OF SERIES I SHARES IS OTHER SECTIONS OF THIS REPORT THAT ARE (1) Total annual operating expenses less
MAY 5, 1993. BASED ON EXPENSES INCURRED DURING any contractual fee waivers and/or
THE PERIOD COVERED BY THIS REPORT. expense reimbursements by the advisor
THE PERFORMANCE OF THE FUND'S SERIES I in effect through at least April 30,
AND SERIES II SHARE CLASSES WILL DIFFER 2009. See current prospectus for more
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. information.
==================================================================================================================================
Principal risks of investing in the Fund fying changes in the value of the The Fund may invest in obligations
portfolio's securities. Derivatives are issued by agencies and instrumentalities
Portfolio turnover is greater than most subject to counter-party risk--the risk of the U.S. government that may vary in
funds, which may affect the Fund's that the other party will not complete the the level of support they receive from the
performance due to higher brokerage transaction with the Fund. U.S. government. The U.S. government may
commissions. Active trading may also choose not to provide financial support to
increase short-term gains and losses, There is no guarantee that the U.S. government-sponsored agencies or
which may also result in taxable gain investment techniques and risk analyses instrumentalities if it is not legally
distributions to the Fund's shareholders. used by the Fund's portfolio managers obligated to do so. In this case, if the
will produce the desired results. issuer defaulted, the fund holding
High-coupon, U.S. government agency The prices of securities held by the securities of such issuer might not be
mortgage-backed securities provide a Fund may decline in response to market able to recover its investment from the
higher coupon than current prevailing risks. U.S. government.
market interest rates, and the Fund may
purchase such securities at a premium. If Reinvestment risk is the risk that a About indexes used in this report
these securities experience a faster bond's cash flows will be reinvested at an
principal prepayment rate than expected, interest rate below that on the original The LEHMAN BROTHERS U.S. AGGREGATE BOND
both the market value and income from such bond. INDEX covers U.S. investment-grade
securities will decrease. fixed-rate bonds with components for
Reverse repurchase agreements and government and corporate securities,
Interest rate risk refers to the risk dollar-roll transactions involve the risk mortgage pass-throughs, and asset-backed
that bond prices generally fall as that the market value of securities to be securities.
interest rates rise; conversely, bond purchased by the Fund may decline below
prices generally rise as interest rates the price at which the Fund is obligated The LEHMAN BROTHERS U.S. GOVERNMENT
fall. to repurchase the securities or that the INDEX consists of securities issued by the
other party may default on its obligation, U.S. government including public
The Fund may use enhanced investment such that the Fund is delayed or prevented obligations of the U.S. Treasury with a
techniques such as leveraging and from completing the transaction. remaining maturity
derivatives. Leveraging entails risks such
as magni- Continued
AIM V.I. Government Securities Fund
Past performance cannot guarantee types of charts in illustrating changes in ment. In this chart, each segment
comparable future results. value during the early years shown in the represents a doubling, or 100% change, in
chart. The vertical axis, the one that the value of the investment. In other
This chart, which is a logarithmic indicates the dollar value of an words, the space between $5,000 and
chart, presents the fluctuations in the investment, is constructed with each $10,000 is the same size as the space
value of the Fund and its indexes. We segment representing a percent change in between $10,000 and $20,000, and so on.
believe that a logarithmic chart is more the value of the invest-
effective than other
==================================================================================================================================
Continued from previous page
of one year or more or publicly issued began publishing VUF indexes, allowing the level only and do not include variable
debt of U.S. government agencies, Fund to be compared with the Lipper VUF product issuer charges. If such charges
quasi-federal corporations, and corporate General U.S. Government Funds Index. The were included, the total returns would be
or foreign debt guaranteed by the U.S. unmanaged Lipper VUF General U.S. lower.
government. Government Funds Index is an unmanaged
index of the largest variable insurance The Chartered Financial Analyst
The LEHMAN BROTHERS INTERMEDIATE U.S. underlying funds, based on total year-end --REGISTERED TRADEMARK-- (CFA --REGISTERED
GOVERNMENT AND MORTGAGE INDEX includes net asset value, in the Lipper General TRADEMARK--) designation is a globally
securities in the intermediate maturity U.S. Government Funds category. These recognized standard for measuring the
range of the U.S. government Index that funds invest at least 65% of their assets competence and integrity of investment
must have between one year and 10 years to in U.S. government and agency issues. professionals.
final maturity regardless of call
features, and fixed-rate mortgage Other information
securities with a weighted average of at
least one year and issued by Government The returns shown in the management's
National Mortgage Association, Federal discussion of Fund performance are based
Home Loan Mortgage Corporation or Federal on net asset values calculated for
National Mortgage Association. shareholder transactions. Generally
accepted accounting principles require
The S&P 500 --REGISTERED TRADEMARK-- adjustments to be made to the net assets
INDEX is a market capitalization-weighted of the Fund at period end for financial
index covering all major areas of the U.S. reporting purposes, and as such, the net
economy. It is not the 500 largest asset values for shareholder transactions
companies, but rather the most widely held and the returns based on those net asset
500 companies chosen with respect to values may differ from the net asset
market size, liquidity, and their values and returns reported in the
industry. Financial Highlights. Additionally, the
returns and net asset values shown
The Fund has elected to use the LIPPER throughout this report are at the Fund
VARIABLE UNDERLYING FUNDS (VUF) GENERAL
U.S. GOVERNMENT FUNDS INDEX as its peer
group instead of the Lipper Intermediate
U.S. Government Funds Index. In 2006,
Lipper
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/93, FUND DATA FROM 5/5/93
AIM V.I. GOVERNMENT
SECURITIES LEHMAN BROTHERS U.S. LEHMAN BROTHERS U.S. LIPPER VUF GENERAL U.S. LIPPER INTERMEDIATE U.S.
DATE FUND-SERIES I SHARES GOVERNMENT INDEX (1) AGGREGATE BOND INDEX(1) GOVERNMENT FUNDS INDEX(1) GOVERNMENT FUNDS INDEX(1)
4/30/93 $10000 $10000 $10000 $10000
5/93 $ 9990 9989 10013 10005 9991
6/93 10150 10211 10194 10223 10154
7/93 10180 10273 10252 10268 10194
8/93 10330 10502 10432 10436 10352
9/93 10363 10542 10460 10470 10394
10/93 10393 10582 10499 10506 10414
11/93 10312 10466 10410 10402 10341
12/93 10355 10507 10466 10496 10383
1/94 10479 10650 10608 10629 10499
2/94 10274 10425 10423 10424 10317
3/94 10064 10191 10166 10125 10113
4/94 9940 10110 10085 10036 10015
5/94 9950 10097 10084 10035 9999
6/94 9923 10074 10062 9985 9980
7/94 10070 10259 10261 10159 10116
8/94 10080 10261 10274 10176 10134
9/94 9969 10117 10123 10028 10017
10/94 9948 10109 10114 10000 10007
11/94 9916 10091 10091 9985 9959
12/94 9970 10152 10161 10069 9998
1/95 10120 10341 10362 10254 10167
2/95 10325 10564 10609 10481 10374
3/95 10367 10630 10674 10545 10440
4/95 10487 10769 10823 10685 10561
5/95 10858 11203 11242 11107 10900
6/95 10935 11289 11324 11189 10963
7/95 10869 11248 11299 11147 10939
8/95 10990 11380 11435 11285 11050
9/95 11077 11489 11546 11381 11141
10/95 11219 11664 11696 11539 11272
11/95 11383 11846 11872 11709 11423
12/95 11520 12014 12038 11869 11554
1/96 11599 12088 12118 11940 11632
2/96 11373 11842 11908 11705 11447
3/96 11293 11743 11825 11616 11368
4/96 11226 11668 11758 11539 11304
5/96 11181 11648 11735 11507 11279
6/96 11317 11798 11892 11652 11407
7/96 11351 11828 11925 11686 11432
8/96 11328 11801 11905 11668 11418
9/96 11498 11997 12112 11868 11596
10/96 11713 12261 12380 12114 11823
11/96 11883 12474 12592 12316 12007
12/96 11784 12347 12475 12207 11904
1/97 11820 12361 12514 12245 11937
2/97 11832 12378 12545 12264 11956
3/97 11736 12247 12406 12142 11843
4/97 11891 12423 12591 12317 12003
5/97 11974 12531 12710 12420 12100
6/97 12094 12671 12861 12555 12229
7/97 12368 13031 13208 12887 12528
8/97 12273 12902 13095 12769 12424
9/97 12428 13096 13289 12956 12595
10/97 12571 13323 13481 13148 12762
11/97 12607 13391 13543 13197 12799
12/97 12744 13531 13680 13334 12918
1/98 12887 13733 13855 13513 13086
2/98 12876 13696 13845 13488 13062
3/98 12923 13735 13893 13528 13103
4/98 12983 13797 13965 13585 13159
5/98 13102 13938 14098 13715 13273
6/98 13210 14097 14217 13840 13383
7/98 13245 14119 14247 13865 13409
8/98 13460 14486 14479 14154 13657
9/98 13734 14876 14818 14511 13982
10/98 13663 14826 14740 14429 13903
11/98 13698 14831 14824 14440 13923
====================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
12/98 13729 14864 14868 14489 13974
1/99 13815 14950 14974 14563 14042
2/99 13544 14595 14713 14278 13779
3/99 13617 14652 14794 14370 13868
4/99 13654 14685 14841 14413 13905
5/99 13507 14556 14711 14268 13776
6/99 13446 14527 14664 14214 13731
7/99 13410 14506 14602 14151 13683
8/99 13410 14505 14595 14134 13669
9/99 13545 14623 14764 14306 13817
10/99 13594 14647 14818 14335 13847
11/99 13594 14626 14817 14340 13848
12/99 13548 14532 14746 14270 13780
1/00 13496 14552 14698 14227 13737
2/00 13649 14759 14875 14385 13888
3/00 13789 15018 15071 14586 14065
4/00 13777 14977 15028 14557 14014
5/00 13789 14986 15021 14564 13999
6/00 14018 15254 15334 14839 14268
7/00 14095 15401 15473 14944 14378
8/00 14262 15629 15697 15167 14582
9/00 14376 15674 15796 15258 14681
10/00 14465 15824 15901 15381 14785
11/00 14682 16135 16160 15660 15027
12/00 14920 16456 16460 15949 15319
1/01 15067 16622 16729 16137 15527
2/01 15188 16811 16875 16285 15682
3/01 15215 16870 16960 16359 15754
4/01 15148 16698 16890 16266 15662
5/01 15201 16753 16991 16353 15743
6/01 15241 16830 17056 16400 15792
7/01 15535 17234 17437 16736 16139
8/01 15656 17448 17637 16879 16309
9/01 15936 17752 17842 17140 16549
10/01 16257 18210 18215 17487 16893
11/01 16042 17801 17964 17191 16614
12/01 15875 17646 17850 17078 16480
1/02 15985 17761 17995 17206 16592
2/02 16137 17925 18169 17374 16764
3/02 15916 17535 17867 17101 16459
4/02 16205 17953 18213 17472 16778
5/02 16302 18060 18368 17598 16928
6/02 16426 18313 18527 17810 17106
7/02 16674 18715 18750 18113 17374
8/02 16923 19086 19067 18406 17649
9/02 17266 19533 19376 18723 17963
10/02 17170 19376 19288 18599 17882
11/02 17060 19209 19282 18511 17768
12/02 17399 19675 19681 18894 18127
1/03 17344 19626 19698 18894 18094
2/03 17526 19942 19970 19170 18332
3/03 17428 19885 19955 19098 18294
4/03 17511 19977 20119 19169 18375
5/03 17735 20496 20495 19549 18690
6/03 17679 20389 20454 19473 18636
7/03 17173 19546 19766 18765 18050
8/03 17159 19655 19897 18892 18114
9/03 17538 20227 20424 19376 18540
10/03 17384 19939 20234 19213 18364
11/03 17454 19962 20282 19257 18379
12/03 17585 20138 20489 19402 18523
1/04 17685 20305 20653 19544 18636
2/04 17800 20548 20877 19751 18805
3/04 17871 20729 21033 19897 18931
4/04 17583 20106 20486 19438 18498
5/04 17511 20031 20404 19405 18424
6/04 17611 20112 20519 19484 18494
7/04 17711 20300 20723 19623 18643
8/04 17927 20695 21118 19913 18929
9/04 17927 20737 21175 19925 18944
10/04 18013 20902 21353 20052 19058
11/04 17956 20654 21183 19947 18920
12/04 18033 20839 21377 20094 19050
1/05 18064 20969 21512 20157 19116
2/05 18004 20821 21385 20070 19013
3/05 17973 20752 21275 20035 18953
4/05 18108 21085 21563 20261 19181
5/05 18197 21329 21796 20397 19337
6/05 18243 21449 21915 20466 19416
7/05 18197 21190 21715 20282 19253
====================================================================================================================================
===================================================================================================================================
[MOUNTAIN CHART]
8/05 18286 21503 21994 20525 19476
9/05 18226 21249 21767 20413 19390
10/05 18180 21099 21595 20288 19190
11/05 18226 21195 21690 20338 19253
12/05 18331 21391 21897 20492 19402
1/06 18362 21355 21898 20520 19412
2/06 18394 21388 21971 20553 19448
3/06 18302 21196 21755 20342 19309
4/06 18302 21137 21716 20298 19288
5/06 18302 21141 21692 20317 19284
6/06 18316 21200 21738 20347 19315
7/06 18501 21453 22032 20609 19531
8/06 18640 21756 22370 20896 19777
9/06 18748 21950 22566 21031 19926
10/06 18857 22065 22715 21105 20032
11/06 18964 22289 22979 21310 20229
12/06 18982 22135 22846 21150 20121
1/07 19029 22107 22836 21121 20113
2/07 19221 22448 23188 21439 20390
3/07 19285 22454 23189 21464 20420
4/07 19381 22565 23314 21566 20516
5/07 19220 22388 23137 21354 20337
6/07 19205 22379 23069 21276 20292
7/07 19381 22698 23261 21506 20523
8/07 19542 23041 23546 21692 20793
9/07 19607 23186 23725 21882 20943
10/07 19817 23356 23938 22083 21097
11/07 20090 23998 24369 22612 21615
12/07 20193 24051 24437 22608 21601
===================================================================================================================================
AIM V.I. Government Securities Fund
SCHEDULE OF INVESTMENTS
December 31, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
U.S. MORTGAGE-BACKED SECURITIES-51.27%(A)
COLLATERALIZED MORTGAGE OBLIGATIONS-4.54%
Fannie Mae REMICS,
6.50%, 06/25/20 $ 457,185 $ 461,112
- ---------------------------------------------------------------------------
5.00%, 01/25/23 to 07/25/23 3,631,362 3,624,658
- ---------------------------------------------------------------------------
6.00%, 08/25/30 to 10/25/30 7,601,193 7,675,625
- ---------------------------------------------------------------------------
Fannie Mae Whole Loans
5.50%, 07/25/34 4,271,138 4,308,883
- ---------------------------------------------------------------------------
Freddie Mac REMICS,
5.50%, 01/15/11 to 07/15/24 12,862,929 12,930,028
- ---------------------------------------------------------------------------
4.50%, 03/15/14 to 11/15/16 300,399 300,609
- ---------------------------------------------------------------------------
7.50%, 01/15/16 3,704,936 3,840,073
- ---------------------------------------------------------------------------
6.00%, 01/15/18 to 08/15/30 15,081,079 15,238,813
- ---------------------------------------------------------------------------
3.50%, 12/15/21 5,278,685 5,261,195
- ---------------------------------------------------------------------------
4.00%, 12/15/21 106,295 106,067
- ---------------------------------------------------------------------------
Government National Mortgage Association
(GNMA) REMICS, 4.25%, 01/20/27 163,649 163,034
===========================================================================
53,910,097
===========================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-10.94%
Pass Through Ctfs.,
8.00%, 05/01/08 to 09/01/36 21,617,198 23,295,902
- ---------------------------------------------------------------------------
6.00%, 11/01/08 to 02/01/34 19,582,783 20,036,663
- ---------------------------------------------------------------------------
6.50%, 12/01/08 to 12/01/35 41,101,075(b) 42,502,466
- ---------------------------------------------------------------------------
7.00%, 11/01/10 to 12/01/37 30,619,892 32,210,689
- ---------------------------------------------------------------------------
7.50%, 03/01/16 to 08/01/36 7,904,253 8,343,805
- ---------------------------------------------------------------------------
10.50%, 08/01/19 9,283 10,393
- ---------------------------------------------------------------------------
8.50%, 09/01/20 to 08/01/31 1,714,252 1,845,313
- ---------------------------------------------------------------------------
10.00%, 03/01/21 149,329 170,884
- ---------------------------------------------------------------------------
9.00%, 06/01/21 to 06/01/22 1,122,727 1,209,526
- ---------------------------------------------------------------------------
7.05%, 05/20/27 423,116 442,983
===========================================================================
130,068,624
===========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-28.14%
Pass Through Ctfs.,
6.00%, 05/01/09 to 03/01/37 76,248,539(b) 78,068,175
- ---------------------------------------------------------------------------
7.50%, 11/01/09 to 07/01/37 28,577,582 30,310,678
- ---------------------------------------------------------------------------
6.50%, 10/01/10 to 02/01/37 78,459,580(b) 81,206,748
- ---------------------------------------------------------------------------
7.00%, 12/01/10 to 09/01/37 79,206,388 83,005,882
- ---------------------------------------------------------------------------
8.00%, 06/01/12 to 11/01/37 31,607,862 33,603,056
- ---------------------------------------------------------------------------
8.50%, 06/01/12 to 08/01/37 11,806,474 12,668,631
- ---------------------------------------------------------------------------
10.00%, 09/01/13 to 03/01/16 114,849 124,864
- ---------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<Caption>
FEDERAL NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)
5.00%, 11/01/17 to 12/01/33 $2,217,237 $ 2,216,414
- ---------------------------------------------------------------------------
5.50%, 03/01/21 to 10/01/22 11,035,547 11,181,529
- ---------------------------------------------------------------------------
6.75%, 07/01/24 1,807,444 1,893,637
- ---------------------------------------------------------------------------
6.95%, 10/01/25 to 09/01/26 237,905 250,929
===========================================================================
334,530,543
===========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-7.65%
Pass Through Ctfs.,
7.50%, 09/15/08 to 05/15/37 16,705,319 17,727,613
- ---------------------------------------------------------------------------
9.00%, 09/15/08 to 12/20/16 178,141 191,224
- ---------------------------------------------------------------------------
6.50%, 09/20/08 to 08/15/35 36,536,300(b) 38,060,196
- ---------------------------------------------------------------------------
9.38%, 06/15/09 to 12/15/09 356,586 368,440
- ---------------------------------------------------------------------------
8.00%, 07/15/12 to 01/15/37 8,841,596 9,510,141
- ---------------------------------------------------------------------------
6.75%, 08/15/13 159,887 165,872
- ---------------------------------------------------------------------------
11.00%, 10/15/15 2,621 3,031
- ---------------------------------------------------------------------------
9.50%, 09/15/16 3,719 4,047
- ---------------------------------------------------------------------------
7.00%, 04/15/17 to 03/15/37 12,377,419 13,085,544
- ---------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 4,808 5,593
- ---------------------------------------------------------------------------
8.50%, 12/15/17 to 01/15/37 2,958,757 3,185,038
- ---------------------------------------------------------------------------
10.00%, 06/15/19 64,693 74,757
- ---------------------------------------------------------------------------
6.00%, 06/20/20 to 08/15/33 5,198,987 5,342,892
- ---------------------------------------------------------------------------
6.95%, 08/20/25 to 08/20/27 1,650,941 1,745,911
- ---------------------------------------------------------------------------
6.25%, 06/15/27 248,666 255,819
- ---------------------------------------------------------------------------
6.38%, 10/20/27 to 09/20/28 1,106,669 1,143,204
===========================================================================
90,869,322
===========================================================================
Total U.S. Mortgage-Backed Securities
(Cost $606,990,530) 609,378,586
===========================================================================
U.S. GOVERNMENT AGENCY SECURITIES-14.02%(A)
FEDERAL AGRICULTURAL MORTGAGE CORP.-0.96%
Medium-Term Notes, 5.60%, 01/10/17 11,000,000 11,448,030
===========================================================================
FEDERAL FARM CREDIT BANK (FFCB)-1.57%
Bonds,
5.75%, 01/18/11 2,000,000 2,117,720
- ---------------------------------------------------------------------------
5.59%, 10/04/21 10,075,000 10,332,215
- ---------------------------------------------------------------------------
5.75%, 01/18/22 2,775,000 2,851,840
- ---------------------------------------------------------------------------
Medium-Term Notes, 5.75%, 12/07/28 3,100,000 3,395,771
===========================================================================
18,697,546
===========================================================================
</Table>
AIM V.I. Government Securities Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (FHLB)-3.81%
Unsec. Bonds,
5.60%, 06/09/20 $2,150,000 $ 2,152,107
- ---------------------------------------------------------------------------
6.15%, 12/08/26 43,000,000 43,074,820
===========================================================================
45,226,927
===========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-6.18%
Unsec. Bonds, 6.50%, 11/25/25 4,762,000 4,772,095
- ---------------------------------------------------------------------------
Unsec. Global Bonds, 6.63%, 11/15/30 700,000(d) 863,947
- ---------------------------------------------------------------------------
Unsec. Notes,
6.13%, 03/21/16 22,695,000 22,809,156
- ---------------------------------------------------------------------------
6.50%, 07/26/16 30,000,000 30,074,700
- ---------------------------------------------------------------------------
6.25%, 03/29/22 13,830,000 13,909,523
- ---------------------------------------------------------------------------
Unsec. Sub. Disc. Deb., 7.37%, 10/09/19(c) 1,800,000 1,023,102
===========================================================================
73,452,523
===========================================================================
PRIVATE EXPORT FUNDING CORP.-0.58%
Series G, Sec. Gtd. Notes, 6.67%, 09/15/09 6,601,000 6,919,630
===========================================================================
TENNESSEE VALLEY AUTHORITY-0.92%
Series A, Bonds, 6.79%, 05/23/12 5,000,000 5,581,150
- ---------------------------------------------------------------------------
Series G, Global Bonds, 5.38%, 11/13/08 5,347,000 5,405,710
===========================================================================
10,986,860
===========================================================================
Total U.S. Government Agency Securities
(Cost $164,377,778) 166,731,516
===========================================================================
U.S. TREASURY SECURITIES-0.67%(A)
U.S. TREASURY BONDS-0.44%
7.50%, 11/15/24 2,815,000(d) 3,810,356
- ---------------------------------------------------------------------------
7.63%, 02/15/25 550,000 753,841
- ---------------------------------------------------------------------------
6.88%, 08/15/25 500,000 642,580
===========================================================================
5,206,777
===========================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<Caption>
U.S. TREASURY STRIPS-0.23%
6.79%, 11/15/18(c) $4,405,000(d) $ 2,738,676
===========================================================================
Total U.S. Treasury Securities (Cost
$7,076,035) 7,945,453
===========================================================================
FOREIGN SOVEREIGN BONDS-0.34%
SOVEREIGN DEBT-0.34%(A)
Israel Government AID Bond (Israel), Gtd.
Global Bonds, 5.13%, 11/01/24 (Cost
$3,834,116) 3,800,000 4,075,918
===========================================================================
Total Investments (excluding Repurchase
Agreements)-66.30% (Cost $782,278,459) 788,131,473
___________________________________________________________________________
===========================================================================
<Caption>
REPURCHASE
AMOUNT
REPURCHASE AGREEMENTS-3.87%
Barclays Capital Inc., Joint Agreement dated
12/31/07 maturing value $700,175,000
(collateralized by U.S. Government
obligations valued at $714,000,000;
4.50%-6.57%, 05/01/08-12/01/37) 4.50%,
01/02/08 (Cost $45,994,047)(e)(f) 46,005,546 45,994,047
===========================================================================
TOTAL INVESTMENTS-70.17% (Cost $828,272,506) 834,125,520
===========================================================================
OTHER ASSETS LESS LIABILITIES-29.83% 354,629,359
===========================================================================
NET ASSETS-100.00% $1,188,754,879
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
REMICS - Real Estate Mortgage Investment Conduits
Sec. - Secured
STRIPS - Separately Traded Registered Interest and Principal Security
Sub. - Subordinated
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 December 31,
2007 was $788,131,473, which represented 66.30% of the Fund's Net Assets.
See Note 1A.
(b) All or a portion of the principal balance was segregated as collateral for
forward commitments.
(c) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(d) 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.
(e) Principal amount equals value at period end. See Note 1L.
(f) Security is considered a cash equivalent for the purpose of the Statement of
Cash Flows. See Note 1J.
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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $828,272,506) $ 834,125,520
- -------------------------------------------------------------
Receivables for:
Investments sold 788,671,775
- -------------------------------------------------------------
Forward commitments -- Sales 125,070,170
- -------------------------------------------------------------
Variation margin 1,967,688
- -------------------------------------------------------------
Fund shares sold 1,301,801
- -------------------------------------------------------------
Interest 7,296,709
- -------------------------------------------------------------
Principal paydowns 25,443
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 55,044
- -------------------------------------------------------------
Other assets 381
=============================================================
Total assets 1,758,514,531
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 443,510,487
- -------------------------------------------------------------
Fund shares reacquired 123,942
- -------------------------------------------------------------
Amount due custodian 4,716
- -------------------------------------------------------------
Trustee deferred compensation and
retirement plans 108,173
- -------------------------------------------------------------
Forward commitments, at value 125,224,670
- -------------------------------------------------------------
Accrued administrative services fees 720,278
- -------------------------------------------------------------
Accrued distribution fees -- Series II 10,941
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,011
- -------------------------------------------------------------
Accrued transfer agent fees 1,403
- -------------------------------------------------------------
Accrued operating expenses 54,031
=============================================================
Total liabilities 569,759,652
=============================================================
Net assets applicable to shares outstanding $1,188,754,879
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,180,856,931
- -------------------------------------------------------------
Undistributed net investment income 56,693,446
- -------------------------------------------------------------
Undistributed net realized gain (loss) (54,672,869)
- -------------------------------------------------------------
Unrealized appreciation 5,877,371
=============================================================
$1,188,754,879
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $1,169,984,718
_____________________________________________________________
=============================================================
Series II $ 18,770,161
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 97,037,090
_____________________________________________________________
=============================================================
Series II 1,564,893
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 12.06
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 11.99
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Interest $59,821,532
- ------------------------------------------------------------
Dividends from affiliated money market funds 28,871
============================================================
Total investment income 59,850,403
============================================================
EXPENSES:
Advisory fees 4,882,489
- ------------------------------------------------------------
Administrative services fees 2,856,587
- ------------------------------------------------------------
Custodian fees 90,789
- ------------------------------------------------------------
Distribution fees -- Series II 40,578
- ------------------------------------------------------------
Transfer agent fees 16,418
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 45,925
- ------------------------------------------------------------
Other 151,058
============================================================
Total expenses 8,083,844
============================================================
Less: Fees waived and expense offset
arrangement(s) (328,277)
============================================================
Net expenses 7,755,567
============================================================
Net investment income 52,094,836
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (690,341)
- ------------------------------------------------------------
Futures contracts 4,976,761
============================================================
4,286,420
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 12,308,609
- ------------------------------------------------------------
Futures contracts (828,196)
============================================================
11,480,413
============================================================
Net realized and unrealized gain 15,766,833
============================================================
Net increase in net assets resulting from
operations $67,861,669
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 52,094,836 $ 40,090,918
- --------------------------------------------------------------------------------------------
Net realized gain (loss) 4,286,420 (10,189,741)
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation 11,480,413 412,143
============================================================================================
Net increase in net assets resulting from operations 67,861,669 30,313,320
============================================================================================
Distributions to shareholders from net investment income:
Series I (45,822,129) (35,873,306)
- --------------------------------------------------------------------------------------------
Series II (650,568) (608,462)
============================================================================================
Decrease in net assets resulting from distributions (46,472,697) (36,481,768)
============================================================================================
Share transactions-net:
Series I 241,536,480 100,669,509
- --------------------------------------------------------------------------------------------
Series II 2,208,083 (2,567,156)
============================================================================================
Net increase in net assets resulting from share
transactions 243,744,563 98,102,353
============================================================================================
Net increase in net assets 265,133,535 91,933,905
============================================================================================
NET ASSETS:
Beginning of year 923,621,344 831,687,439
============================================================================================
End of year (including undistributed net investment income
of $56,693,446 and $46,351,185, respectively) $1,188,754,879 $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 year ended December 31, 2007
<Table>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 67,861,669
=============================================================================
ADJUSTMENTS TO RECONCILE NET INCREASE (DECREASE) IN NET
ASSETS TO NET CASH PROVIDED BY (USED IN) OPERATIONS:
Purchases of investment securities (880,609,599)
- -----------------------------------------------------------------------------
Proceeds from disposition of investment securities and
principal payments 321,941,836
- -----------------------------------------------------------------------------
Amortization of premium and accretion of discount on
investment securities 733,203
- -----------------------------------------------------------------------------
Realized gain (loss) on investment securities 690,341
- -----------------------------------------------------------------------------
Change in unrealized appreciation on investment securities (12,463,109)
- -----------------------------------------------------------------------------
Increase in variation margin receivable (1,856,063)
- -----------------------------------------------------------------------------
Decrease in receivables and other assets 140,686
- -----------------------------------------------------------------------------
Increase in accrued expenses and other payables 178,089
=============================================================================
Net cash provided by (used in) operating activities (503,382,947)
=============================================================================
CASH PROVIDED BY FINANCING ACTIVITIES:
Net cash activity from dollar rolls 259,006,443
- -----------------------------------------------------------------------------
Proceeds from shares of beneficial interest sold 283,555,645
- -----------------------------------------------------------------------------
Disbursements from shares of beneficial interest
reacquired (86,923,174)
- -----------------------------------------------------------------------------
Decrease in amount due to custodian (2,612,666)
=============================================================================
Net cash provided by financing activities 453,026,248
=============================================================================
Net increase (decrease) in cash and cash equivalents (50,356,699)
=============================================================================
Cash and cash equivalents at beginning of period 96,350,746
=============================================================================
Cash and cash equivalents at end of period $ 45,994,047
=============================================================================
NON-CASH FINANCING ACTIVITIES:
Value of capital shares issued in reinvestment of
dividends paid to shareholders $ 46,472,697
_____________________________________________________________________________
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
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.
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 the issuer's 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. Paydown gain 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.
AIM V.I. Government Securities Fund
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 FUNDS -- The Funds 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 AND FORWARD COMMITMENT TRANSACTIONS -- The Fund may engage in
dollar roll and forward commitment transactions with respect to
mortgage-backed securities issued by GNMA, FNMA and FHLMC. These
transactions are often conducted on a to be announced ("TBA") basis. In a
TBA mortgage-backed transaction, the seller does not specify the particular
securities to be delivered. Rather, a Fund agrees to accept any security
that meets specified terms, such as an agreed upon issuer, coupon rate and
terms of the underlying mortgages. TBA mortgage-backed transactions
generally settle once a month on a specific date.
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 coupon 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-
AIM V.I. Government Securities Fund
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.
Forward commitment transactions involve commitments by the Fund to
acquire or sell TBA mortgage-backed securities from a financial
institution, such as a bank or broker-dealer at a specified future date and
amount. The TBA mortgage-backed security is marked to market until
settlement and the unrealized appreciation or depreciation is recorded in
the Statement of Operations.
At the time the Fund enters into the dollar roll or forward commitment
transaction, mortgage-backed securities or other liquid assets held by the
Fund having a dollar value equal to the purchase price or in an amount
sufficient to honor the forward commitment will be segregated.
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.
Forward commitment transactions involve the risk that a counter-party to
the transaction may fail to complete the transaction. If this occurs, the
Fund may lose the opportunity to purchase or sell the security at the
agreed upon price. Settlement dates of forward commitment transactions may
be a month or more after entering into these transactions and as a result
the market values of the securities may vary from the purchase or sale
prices. Therefore, forward commitment transactions may increase the Fund's
overall interest rate exposure.
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 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.
AIM V.I. Government Securities Fund
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 Ltd. ("Invesco")
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 year ended December 31, 2007, AIM waived advisory fees of $322,082.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$253,161 for accounting and fund administrative services and reimbursed
$2,603,426 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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Government &
Agency
Portfolio-Institutional
Class $96,350,746 $ -- $(96,350,746) $ -- $28,871
_________________________________________________________________________________________________
=================================================================================================
</Table>
AIM V.I. Government Securities Fund
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $6,195.
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 year ended December 31, 2007, the Fund paid legal fees of $6,519
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 is a party to 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 year ended December 31, 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 December 31, 2007, $5,571,000 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 12/31/07 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 182 Mar.-08/Long $ 38,265,500 $ 130,403
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 867 Mar.-08/Long 95,613,844 442,206
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 1,115 Mar.-08/Long 126,430,547 1,033,319
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bonds 1,580 Mar.-08/Long 183,872,500 (1,427,071)
==========================================================================================================================
$444,182,391 $ 178,857
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
AIM V.I. Government Securities Fund
NOTE 8--OPEN FORWARD COMMITMENT -- SALES
<Table>
<Caption>
PRINCIPAL VALUE
CONTRACT AMOUNT 12/31/07
- ------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. (FHLMC)
Pass Through Ctfs., TBA
6.5%, 01/01/38 $13,000,000 $ 13,363,587
- ------------------------------------------------------------------------------------------
Federal National Mortgage Association (FNMA)
Pass Through Ctfs., TBA
6.0%, 01/01/28 62,000,000 63,443,438
- ------------------------------------------------------------------------------------------
6.5%, 01/01/38 25,000,000 25,699,207
- ------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA)
Pass Through Ctfs., TBA
6.5%, 01/01/38 22,000,000 22,718,438
==========================================================================================
$125,224,670
__________________________________________________________________________________________
==========================================================================================
</Table>
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
Distributions paid from Ordinary income $46,472,697 $36,481,768
________________________________________________________________________________________
========================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ------------------------------------------------------------------------------
Undistributed ordinary income $ 56,793,085
- ------------------------------------------------------------------------------
Net unrealized appreciation -- investments 5,698,483
- ------------------------------------------------------------------------------
Temporary book/tax differences (99,639)
- ------------------------------------------------------------------------------
Capital loss carryforward (54,493,981)
- ------------------------------------------------------------------------------
Shares of beneficial interest 1,180,856,931
==============================================================================
Total net assets $1,188,754,879
______________________________________________________________________________
==============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the realization for tax purposes of gains on certain futures contracts. The
tax-basis net unrealized appreciation on investments amount includes
appreciation (depreciation) on forward commitments of $(154,500).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 has a capital loss carryforward as of December 31, 2007 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
- -----------------------------------------------------------------------------
December 31, 2015 4,095,457
=============================================================================
Total capital loss carryforward $54,493,981
_____________________________________________________________________________
=============================================================================
</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. Government Securities 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 year ended December 31, 2007 was $997,580,710 and
$972,282,675, respectively. During the same period, purchases and sales of U.S.
Treasury obligations were $0 and $50,000,000.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 7,152,580
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,299,597)
===============================================================================
Net unrealized appreciation of investment securities $ 5,852,983
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $828,272,537.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of paydowns on
mortgage-backed securities and dollar rolls, on December 31, 2007, undistributed
net investment income was increased by $4,720,122, undistributed net realized
gain (loss) was decreased by $4,720,122. This reclassification had no effect on
the net assets of the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007(A) DECEMBER 31,2006
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 23,152,709 $278,908,747 14,050,842 $ 167,801,734
- --------------------------------------------------------------------------------------------------------------------------
Series II 442,120 5,311,096 165,527 1,967,287
==========================================================================================================================
Issued as reinvestment of dividends:
Series I 3,834,488 45,822,129 3,040,111 35,873,306
- --------------------------------------------------------------------------------------------------------------------------
Series II 54,716 650,568 51,828 608,462
==========================================================================================================================
Reacquired:
Series I (6,854,490) (83,194,396) (8,636,109) (103,005,531)
- --------------------------------------------------------------------------------------------------------------------------
Series II (313,409) (3,753,581) (432,546) (5,142,905)
==========================================================================================================================
20,316,134 $243,744,563 8,239,653 $ 98,102,353
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the outstanding
shares of the Fund and in the aggregate they own 92% 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--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on proposals that including, among others, the following proposal(s):
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Government Securities 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
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.80 $ 11.87 $ 12.07 $ 12.23 $ 12.40
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.59 0.55 0.45 0.40 0.36
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.16 (0.13) (0.25) (0.09) (0.23)
===========================================================================================================================
Total from investment operations 0.75 0.42 0.20 0.31 0.13
===========================================================================================================================
Less distributions:
Dividends from net investment income (0.49) (0.49) (0.40) (0.47) (0.30)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.00)
===========================================================================================================================
Total distributions (0.49) (0.49) (0.40) (0.47) (0.30)
===========================================================================================================================
Net asset value, end of period $ 12.06 $ 11.80 $ 11.87 $ 12.07 $ 12.23
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 6.43% 3.55% 1.66% 2.56% 1.07%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,169,985 $907,403 $812,824 $652,226 $526,482
___________________________________________________________________________________________________________________________
===========================================================================================================================
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%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.76%(c) 0.77% 0.88% 0.87% 0.76%
===========================================================================================================================
Ratio of net investment income to average net assets 4.93%(c) 4.62% 3.68% 3.20% 2.93%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 106% 89% 174% 95% 265%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</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 based on average daily net assets of $1,040,988,772.
<Table>
<Caption>
SERIES II
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.74 $ 11.81 $ 12.01 $ 12.17 $ 12.35
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.56 0.52 0.41 0.36 0.33
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.15 (0.13) (0.24) (0.08) (0.22)
======================================================================================================================
Total from investment operations 0.71 0.39 0.17 0.28 0.11
======================================================================================================================
Less distributions:
Dividends from net investment income (0.46) (0.46) (0.37) (0.44) (0.29)
- ----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.00)
======================================================================================================================
Total distributions (0.46) (0.46) (0.37) (0.44) (0.29)
======================================================================================================================
Net asset value, end of period $ 11.99 $ 11.74 $ 11.81 $ 12.01 $ 12.17
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 6.11% 3.28% 1.41% 2.27% 0.93%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,770 $16,218 $18,863 $17,728 $22,325
______________________________________________________________________________________________________________________
======================================================================================================================
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%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.01%(c) 1.02% 1.13% 1.12% 1.01%
======================================================================================================================
Ratio of net investment income to average net assets 4.68%(c) 4.37% 3.43% 2.95% 2.68%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 106% 89% 174% 95% 265%
______________________________________________________________________________________________________________________
======================================================================================================================
</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 based on average daily net assets of $16,231,094.
AIM V.I. Government Securities 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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Government Securities Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, changes
in net assets, cash flows and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Government Securities Fund
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion. The financial highlights for each of the periods ended on or before
December 31, 2004 were audited by another independent registered public
accounting firm whose report dated February 4, 2005 expressed an unqualified
opinion on those financial highlights.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Government Securities Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent the
effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,050.90 $3.77 $1,021.53 $3.72 0.73%
Series II 1,000.00 1,049.40 5.06 1,020.27 4.99 0.98
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Government Securities Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received Deduction* 0%
U.S. Treasury Obligations* 0.61%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Government Securities Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Government Securities Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
FIXED INCOME
Taxable Noninvestment Grade
AIM V.I. High Yield Fund
Annual Report to Shareholders - December 31,2007
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, [COVER GLOBE IMAGE]
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 Proxy
Policy. The information is also available AIM V.I. HIGH YIELD FUND's investment objective is
on the SEC Web site, sec.gov. to achieve a high level of current income.
Information regarding how the Fund voted
proxies related to its portfolio UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
securities during the 12 months ended June IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
30,2007,is available at our Web site. Go
to AIMinvestments.com, access the About Us UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
tab, click on Required Notices and then ARE FROM A I M MANAGEMENT GROUP INC.
click on Proxy Voting Activity.
Next, select the Fund from the drop-down =============================================================
menu. The information is also available on THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY
the SEC Web site, sec.gov. EFFECTIVE FUND PROSPECTUS AND VARIABLE PRODUCT PROSPECTUS,
WHICH CONTAIN MORE COMPLETE INFORMATION, INCLUDING SALES
CHARGES AND EXPENSES. INVESTORS SHOULD READ EACH CAREFULLY
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
-- REGISTERED TRADEMARK -- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. High Yield Fund
Management's discussion of Fund performance meetings and internally generated credit
analysis. Finally, we evaluate securities
======================================================================================= across the market to find securities that
PERFORMANCE SUMMARY are attractively valued.
For the year ended December 31,2007,AIM V.I. High Yield Fund, exclud-ing variable We consider selling a bond when:
product issuer charges, underperformed its broad market and style-specific indexes. The
Fund underperformed its broad market index, as high yield bonds underperformed the o It becomes fully valued.
investment grade-oriented Lehman Brothers U.S. Aggregate Bond Index, driven by a
flight-to-safety market environment. The Fund also underperformed its style specific o Overall market and economic trends
benchmark, the Lehman Brothers U.S. Corporate High Yield Index, primarily due to our indicate that sector emphasis should be
security selection in industry sectors affected by the housing- and mortgage-related changed.
problems.
o Fundamentals, such as credit quality
Your Fund's long-term performance appears later in this report. ratings, deteriorate for an individual
issuer or a sector.
FUND VS. INDEXES
o An unanticipated change occurs involving
Total returns,12/31/06-12/31/07,excluding variable product issuer charges. If variable an individual issuer or a sector.
product issuer charges were included, returns would be lower.
Market conditions and your Fund
Series I Shares 1.24%
Series II Shares 1.01 The U.S. economy expanded throughout 2007.
Lehman Brothers U.S. Aggregate Bond Index (triangle) (Broad Market Index) 6.97 The annualized rate of growth in gross
Lehman Brothers U.S. Corporate High Yield Index (triangle) (Style-Specific Index) 1.87 domestic product accelerated from 0.6% to
Lipper VUF High Current Yield Bond Funds Category Average (triangle) (Peer Group) 2.55 3.8% to 4.9%1 in the first, second and
Lipper High Current Yield Bond Funds Index (triangle) (Former Peer Group Index) 2.13 third quarters of 2007, respectively.
Initial estimates suggested the economy
SOURCE: (triangle) LIPPER INC. expanded at an annualized rate of 0.6%1 in
======================================================================================= the fourth quarter.
How we invest top-down and bottom-up research. Our top Inflation, as measured by the core
down approach takes into account overall Consumer Price Index, which excludes
Your Fund invests primarily in lower rated economic and market trends. Our bottom-up volatile food and energy prices, increased
credit quality corporate bonds. Our efforts evaluate individual bond issuers at an annual rate of 2.4%2 in December, up
investment discipline focuses on providing as well as industry sectors. from a 2.1%2 pace in the third quarter.
attractive current income for shareholders
and consistent performance within a In conducting our analysis, our team Since the summer, global financial
framework designed to control volatility. uses input from various sources including markets experienced considerable
Additionally, we seek growth of company financial statements, rating volatility. Investors witnessed a
shareholders' principal without exposure agencies, news services, Wall Street fixed widespread and disorderly risk repricing
to undue risk. income and equity analysts, economists, after a prolonged period of exceptionally
company management benign financial conditions. U.S.
Our security selection process utilizes sub-prime lending issues first gained
both widespread public attention in early 2007
and by summer were a major concern of the
markets.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 FIXED INCOME ISSUERS*
By credit quality 1. Oil & Gas Exploration & 1 Ford Motor Credit Co. LLC 2.2%
BBB 0.2% Production 5.3% 2. HCA, Inc. 1.9
BB 19.2 2. Broadcasting & Cable TV 5.2 3. General Motors Acceptance
B 50.3 3. Integrated Telecommunication Corp. LLC 1.7
CCC 21.0 Services 4.7 4. Novelis Inc. 1.2
CC 0.2 4. Consumer Finance 4.2 5. Qwest Communications
C 0.2 5. Independent Power Producers & International Inc. 1.2
D 0.4 Energy Traders 4.0 6. NCL Corp. 1.2
NR 1.3 7. Cooper Tire & Rubber Co. 1.1
Equity 1.4 Total Net Assets $51.89 million 8. United Rentals North America,
Cash Equivalent 5.8 Inc. 1.1
Total Number of Holdings* 237 9. Caraustar Industries, Inc. 1.1
The Fund's holdings are subject to change, 10. Digicel Group Ltd. 1.1
and there is no assurance that the Fund
will continue to hold any particular
security.
* Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. High Yield Fund
The spillover from the weak housing quality environment in the credit The views and opinions expressed in
market and subprime loan issues, combined markets, B-rated issues outperformed the management's discussion of Fund
with credit risk repricing and heightened other speculative-grade sectors this year. performance are those of A I M Advisors,
investor risk aversion, dramatically Inc. These views and opinions are subject
diminished liquidity and reduced credit In the lodging sector, contributing to to change at any time based on factors
availability. Consequently, the U.S. Fund performance was Norwegian Cruise Line such as market and economic conditions.
Federal Reserve Board (the Fed) began (NCL), the main subsidiary of Star These views and opinions may not be relied
adding liquidity to the system by cutting Cruises. In August, private equity firm upon as investment advice or
the discount interest rate by one-half of Apollo Management announced it was buying recommendations, or as an offer for a
a percentage point on August 17 and by a 50%-stake in NCL for $1 billion. This particular security. The information is
lowering its federal funds target rate by event caused significant appreciation in not a complete analysis of every aspect of
one half of a percentage point on the market value of NCL's bonds. any market, country, industry, security or
September 18.(3) While the September rate the Fund. Statements of fact are from
cut was larger than expected, two Another contributor to performance this sources considered reliable, but A I M
subsequent 25 basis point (0.25%) cuts to year was GOODMAN GLOBAL HOLDING, a Advisors, Inc. makes no representation or
the federal funds rate on October 31 and Houston-based manufacturer of heating, warranty as to their completeness or
December 11 were fully anticipated by ventilation and air conditioning products. accuracy. Although historical performance
markets.(3) As the company's acquisition by a private is no guarantee of future results, these
equity firm was announced in October, insights may help you understand our
Treasury yields fell and the U.S. followed by the expectation of a tender investment management philosophy.
Treasury yield curve steepened by the end offer of the bonds, the market value of
of the year as investors sold riskier Goodman's outstanding debt increased by Peter Ehret
assets and turned to the relative safety the end of the year. [EHRET Chartered Financial Analyst,
of government securities. This flight to PHOTO] senior portfolio manager, is
safety resulted in a significant demand A position in DANA, an auto parts and co-lead manager of AIM V.I. High
for money market funds. systems company, was also beneficial to Yield Fund. Mr. Ehret joined AIM in 2001.
performance relative the style specific He graduated cum laude with a B.S. in
Despite concerns about the implications benchmark. We sold the holding. economics from the University of
of the credit crunch on the broader Minnesota. He also earned an M.S. in real
economy, for the year ended December 31, While the portfolio remained estate appraisal and investment analysis
2007, the Lehman Brothers U.S. Aggregate well-diversified across industries and from the University of Wisconsin-Madison.
Bond index, which represents the issues, some of the Fund's holdings
performance of investment-grade fixed detracted from performance. One of them Carolyn Gibbs
income investments, returned 6.97%.4 It was LINENS 'N THINGS, a large home [GIBBS Chartered Financial Analyst,
outperformed the S&P 500 Index, which products chain that sells bedding, towels, PHOTO] senior portfolio manager, is
represents the performance of the U.S. housewares and other home accessories. co-lead manager of AIM V.I. High
stock market and which returned 5.49% for This year was difficult for Linens 'N Yield Fund. Ms. Gibbs has been in the
the year.(4) Things as housing market pressures took a investment business since 1983. She
toll on home goods sales. We sold the graduated magna cum laude from Texas
Treasury securities were the best holding. Christian University, where she earned a
performing sector of the bond market, as B.A. in English. She also earned an M.B.A.
the flight-to-safety sentiment continued A Fund holding in the home construction in finance from The Wharton School at the
to dominate the markets throughout the industry, TECHNICAL OLYMPIC USA, (TOUSA) University of Pennsylvania.
second part of the year.(5) Investment also detracted from returns. TOUSA is a
grade bonds outperformed high yield fixed designer, builder and seller of Darren Hughes
income securities for the first time since single-family homes, town homes and [HUGHES Chartered Financial Analyst,
2003.(5) condominiums. During the year, the company PHOTO] senior portfolio manager,is
struggled due to the downturn in the manager of AIM V.I. High Yield
During 2007, we maintained our focus on housing market. Fund. He joined AIM in 1992. Mr. Hughes
the B-rated segment of the high yield earned a B.B.A. in finance and economics
market; that is the middle-quality tier Finally, Freescale Semiconductor, which from Baylor University. Assisted by
and the broadest part of the market. We makes chips used in cell phones and cars, Taxable High Yield Team
were less focused on the BB-rated also detracted from returns. The Austin,
category, which is the highest quality Texas-based company is the primary ==========================================
segment of the high yield market. In supplier of mobile phone chips to FOR A DISCUSSION OF THE RISKS OF INVESTING
addition, we held a relatively neutral Motorola, its former parent company. IN YOUR FUND,INDEXES USED IN THIS REPORT
position in the lowest quality tier (rated Freescale's sales were hurt recently by AND YOUR FUND'S LONG-TERM PERFORMANCE,
CCC and below), as we saw fewer Motorola's continued cell phone sales PLEASE TURN THE PAGE.
opportunities in this high yield credit problems. ==========================================
sector. Our credit quality positioning had
no significant impact on relative Sources: (1) Bureau of Economic
performance, as, despite a flight-to- Analysis; (2) Bureau of Labor Statistics;
(3) U.S. Federal Reserve; (4)Lipper Inc.;
(5) Lehman Brothers Inc.
AIM V.I. High Yield Fund
Your Fund's long-term performance THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. HIGH YIELD FUND, A SERIES
PAST PERFORMANCE AND CANNOT GUARANTEE PORTFOLIO OF AIM VARIABLE INSURANCE
========================================== COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
AVERAGE ANNUAL TOTAL RETURNS PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
As of 12/31/07 FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
SERIES I SHARES MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
Inception (5/1/98) 2.02% PERFORMANCE FIGURES REFLECT FUND INTENDED TO REFLECT ACTUAL VARIABLE
5 Years 10.40 EXPENSES, REIN-VESTED DISTRIBUTIONS AND PRODUCT VALUES. THEY DO NOT REFLECT SALES
1 Year 1.24 CHANGES IN NET ASSET VALUE. INVESTMENT CHARGES, EXPENSES AND FEES ASSESSED IN
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE CONNECTION WITH A VARIABLE PRODUCT. SALES
SERIES II SHARES SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN CHARGES, EXPENSES AND FEES, WHICH ARE
Inception 1.79% YOU SELL SHARES. DETERMINED BY THE VARIABLE PRODUCT
5 Years 10.18 ISSUERS, WILL VARY AND WILL LOWER THE
1 Year 1.01 THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
========================================== RATIO SET FORTH IN THE MOST RECENT FUND
PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARES' INCEPTION DATE IS MARCH FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
26,2002. RETURNS SINCE THAT DATE ARE 0.97% AND 1.22%, RESPECTIVELY.1 THE TOTAL PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
HISTORICAL. ALL OTHER RETURNS ARE THE ANNUAL FUND OPERATING EXPENSE RATIO SET AUTOMATED INFORMATION LINE, 866-702-4402.
BLENDED RETURNS OF THE HISTORICAL FORTH IN THE MOST RECENT FUND PROSPECTUS AS MENTIONED ABOVE, FOR THE MOST RECENT
PERFORMANCE OF SERIES II SHARES SINCE AS OF THE DATE OF THIS REPORT FOR SERIES I MONTH-END PERFORMANCE INCLUDING VARIABLE
THEIR INCEPTION AND THE RESTATED AND SERIES II SHARES WAS 1.19% AND PRODUCT CHARGES, PLEASE CONTACT YOUR
HISTORICAL PERFORMANCE OF SERIES I SHARES 1.44%,RESPECTIVELY. THE EXPENSE RATIOS VARIABLE PRODUCT ISSUER OR FINANCIAL
(FOR PERIODS PRIOR TO INCEPTION OF SERIES PRESENTED ABOVE MAY VARY FROM THE EXPENSE ADVISOR.
II SHARES) ADJUSTED TO REFLECT THE RULE RATIOS PRESENTED IN OTHER SECTIONS OF THIS
12B-1 FEES APPLICABLE TO SERIES II SHARES. REPORT THAT ARE BASED ON EXPENSES INCURRED (1) Total annual operating expenses less
THE INCEPTION DATE OF SERIES I SHARES IS DURING THE PERIOD COVERED BY THIS REPORT. any contractual fee waivers/or expense
MAY 1,1998. reimbursements by the advisor in
effect through at least April 30,
THE PERFORMANCE OF THE FUND'S SERIES I 2009. See current prospectus for more
AND SERIES II SHARE CLASSES WILL DIFFER information.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
generally unsecured and may be Active trading may also increase
Principal risks of investing in the Fund subordinated to other creditors' claims. short-term gains and losses, which may
Credit ratings on junk bonds do not also result in taxable gain distributions
The prices of securities held by the Fund necessarily reflect their actual market to the Fund's shareholders.
may decline in response to market risks. risk.
There is no guarantee that the
Interest rate risk refers to the risk Reinvestment risk is the risk that a investment techniques and risk analyses
that bond prices generally fall as bond's cash flows will be reinvested at an used by the Fund's portfolio managers will
interest rates rise; conversely, bond interest rate below that on the original produce the desired results.
prices generally rise as interest rates bond.
fall. About indexes used in this report
Foreign securities have additional
Credit risk is the risk of loss on an risks, including exchange rate changes, The LEHMAN BROTHERS U.S. Aggregate Bond
investment due to the deterioration of an political and economic upheaval, the Index covers U.S. investment-grade
issuer's financial health. Such a relative lack of information, relatively fixed-rate bonds with components for
deterioration of financial health may low market liquidity, and the potential government and corporate securities,
result in a reduction of the credit rating lack of strict financial and accounting mortgage pass-throughs, and asset-backed
of the issuer's securities and may lead to controls and standards. securities.
the issuer's inability to honor its
contractual obligations, including making Investing in developing countries can The Lehman Brothers U.S. Corporate High
timely payment of interest and principal. add additional risk, such as high rates of Yield Index covers the universe of fixed
inflation or sharply devalued currencies rate, non-investment grade debt.
The Fund may invest in lower quality against the U.S. dollar. Transaction costs Pay-in-kind bonds, Eurobonds, and debt
debt securities, commonly known as "junk are often higher, and there may be delays issues from countries designated as
bonds." Compared to higher quality debt in settlement procedures. emerging markets are excluded, but
securities, junk bonds involve greater Canadian and global bonds
risk of default or price changes due to Portfolio turnover is greater than most
changes in credit quality of the issuer funds, which may affect the Fund's
because they are performance due to higher brokerage
commissions.
Continued
AIM V.I. High Yield Fund
Past performance cannot guarantee types of charts in illustrating changes in ment. In this chart, each segment
comparable future results. value during the early years shown in the represents a doubling, or 100% change, in
chart. The vertical axis, the one that the value of the investment. In other
This chart, which is a logarithmic indicates the dollar value of an words, the space between $5,000 and
chart, presents the fluctuations in the investment, is constructed with each $10,000 is the same size as the space
value of the Fund and its indexes. We segment representing a percent change in between $10,000 and $20,000.
believe that a logarithmic chart is more the value of the invest-
effective than other
====================================================================================================================================
Continued from previous page The S&P 500--REGISTERED TRADEMARK-- financial reporting purposes, and as such,
Index is a market capitalization-weighted the net asset values for shareholder
(SEC registered) of issuers in index covering all major areas of the U.S. transactions and the returns based on
non-emerging countries are included. economy. It is not the 500 largest those net asset values may differ from the
companies, but rather the most widely held net asset values and returns reported in
The Fund has elected to use the Lipper 500 companies chosen with respect to the Financial Highlights. Additionally,
Variable Underlying Funds (VUF) High market size, liquidity, and their the returns and net asset values shown
Current Yield Bond Funds Category Average industry. throughout this report are at the Fund
as its peer group instead of the Lipper level only and do not include variable
High Current Yield Bond Funds Index. In The Fund is not managed to track the product issuer charges. If such charges
2006, Lipper began publishing VUF indexes, performance of any particular index, were included, the total returns would be
allowing the Fund to be compared with the including the indexes defined here, and lower.
Lipper VUF High Current Yield Bond Funds consequently, the performance of the Fund
Category Average. The unmanaged Lipper VUF may deviate significantly from the Industry classifications used in this
High Current Yield Bond Funds Category performance of the indexes. report are generally according to the
Average represents the average of all the Global Industry Classification Standard,
variable insurance underlying High Yield A direct investment cannot be made in which was developed by and is the
Current Bond Funds tracked by Lipper Inc. an index. Unless otherwise indicated, exclusive property and a service mark of
These funds have no credit rating index results include reinvested Morgan Stanley Capital International Inc.
restriction, but tend to invest in dividends, and they do not reflect sales and Standard & Poor's.
fixed-income securities with lower credit charges. Performance of an index of funds
ratings, reflects fund expenses; performance of a The Chartered Financial
market index does not. Analyst--REGISTERED TRADEMARK--
The LIPPER HIGH CURRENT YIELD BOND (CFA--REGISTERED TRADEMARK--) des-
FUNDS INDEX is an equally weighted Other information ignation is a globally recognized standard
representation of the largest funds in the for measuring the competence and integrity
Lipper High Current Yield Bond Funds The returns shown in the management's of investment professionals.
category. These funds have no credit discussion of Fund performance are based
rating restriction, but tend to invest in on net asset values calculated for
fixed-income securities with lower credit shareholder transactions. Generally
ratings. accepted accounting principles require
adjustments to be made to the net assets
of the Fund at period end for
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/98,FUND DATA FROM 5/1/98
LIPPER VUF HIGH
LEHMAN BROTHERS U.S. CURRENT YIELD BOND LIPPER HIGH CURRENT
AIM V.I. HIGH YIELD CORPORATE HIGH YIELD LEHMAN BROTHERS U.S. FUNDS CATEGORY YIELD BOND FUNDS
DATE FUND-SERIES I SHARES INDEX(1) AGGREGATE BOND INDEX(1) AVERAGE(1) INDEX(1)
4/30/98 $10000 $10000 $10000 $10000
5/98 $10080 10035 10095 9993 9989
6/98 10050 10071 10180 10016 10006
7/98 10090 10128 10202 10100 10075
8/98 9410 9569 10368 9387 9307
9/98 9129 9613 10611 9334 9251
10/98 8790 9416 10555 9140 9041
11/98 9279 9806 10615 9646 9572
12/98 9239 9817 10647 9621 9542
1/99 9374 9963 10723 9769 9715
2/99 9479 9904 10535 9728 9676
3/99 9584 9999 10594 9852 9847
4/99 9929 10192 10627 10074 10101
5/99 9772 10054 10534 9894 9909
6/99 9803 10033 10501 9894 9911
7/99 9939 10073 10456 9892 9914
8/99 9835 9962 10451 9786 9813
9/99 9720 9890 10572 9735 9737
10/99 9667 9825 10611 9693 9709
11/99 9918 9939 10610 9847 9880
12/99 10211 10052 10559 9972 9999
1/00 10336 10008 10525 9925 9950
2/00 10506 10028 10652 9991 10020
3/00 10211 9817 10792 9798 9847
4/00 9928 9833 10761 9789 9804
5/00 9646 9732 10756 9632 9629
6/00 9883 9930 10980 9840 9807
7/00 9826 10006 11080 9873 9825
8/00 9769 10074 11240 9934 9876
9/00 9622 9986 11311 9778 9731
10/00 8750 9666 11386 9455 9398
11/00 8139 9284 11572 8964 8874
12/00 8270 9463 11787 9170 9028
1/01 8998 10172 11979 9754 9627
2/01 8986 10307 12084 9800 9657
3/01 8479 10065 12145 9515 9337
4/01 8232 9939 12094 9402 9214
5/01 8310 10118 12167 9497 9314
6/01 7933 9834 12213 9249 9040
7/01 7907 9979 12486 9325 9093
8/01 7919 10097 12629 9395 9133
9/01 7334 9418 12776 8794 8488
10/01 7581 9651 13044 9019 8682
11/01 7919 10003 12864 9287 8958
12/01 7858 9962 12782 9247 8934
1/02 7858 10032 12886 9297 8955
2/02 7621 9892 13010 9178 8797
3/02 7784 10130 12794 9343 8971
4/02 7829 10292 13042 9455 9065
5/02 7740 10235 13153 9379 8974
6/02 7311 9480 13267 8934 8469
7/02 7045 9066 13427 8656 8191
8/02 7119 9325 13653 8800 8332
9/02 7045 9202 13874 8687 8216
10/02 6956 9122 13811 8649 8164
11/02 7297 9687 13808 9104 8635
12/02 7400 9822 14093 9179 8719
1/03 7548 10149 14105 9362 8912
2/03 7622 10274 14300 9477 9031
3/03 7829 10570 14289 9687 9256
4/03 8229 11197 14407 10129 9711
5/03 8347 11313 14676 10238 9826
6/03 8584 11638 14646 10486 10091
7/03 8525 11510 14154 10379 10013
8/03 8629 11643 14248 10518 10148
9/03 8851 11961 14625 10765 10394
10/03 9073 12202 14489 10974 10627
11/03 9221 12387 14523 11110 10751
====================================================================================================================================
SOURCE: (1)LIPPER INC.
====================================================================================================================================
[MOUNTAIN CHART]
12/03 9475 12668 14671 11371 11017
1/04 9682 12910 14789 11541 11194
2/04 9635 12877 14949 11515 11172
3/04 9650 12965 15061 11569 11214
4/04 9682 12876 14669 11521 11189
5/04 9476 12658 14611 11344 11016
6/04 9634 12840 14693 11503 11170
7/04 9713 13014 14839 11636 11259
8/04 9903 13270 15122 11830 11443
9/04 10062 13462 15163 11993 11602
10/04 10252 13706 15290 12211 11808
11/04 10394 13871 15168 12349 11976
12/04 10540 14078 15308 12519 12156
1/05 10557 14059 15404 12503 12126
2/05 10786 14266 15313 12678 12312
3/05 10475 13851 15234 12333 11985
4/05 10312 13716 15440 12196 11845
5/05 10508 13960 15608 12392 12035
6/05 10687 14234 15693 12583 12228
7/05 10867 14483 15550 12772 12418
8/05 10900 14510 15749 12835 12477
9/05 10785 14365 15587 12742 12396
10/05 10671 14265 15464 12646 12294
11/05 10736 14340 15532 12756 12406
12/05 10826 14463 15680 12870 12521
1/06 10952 14694 15680 13023 12682
2/06 11078 14792 15733 13128 12788
3/06 11132 14880 15578 13178 12841
4/06 11167 14972 15550 13260 12915
5/06 11167 14970 15533 13228 12886
6/06 11096 14917 15566 13172 12815
7/06 11186 15063 15777 13276 12912
8/06 11347 15308 16018 13456 13088
9/06 11473 15525 16159 13614 13233
10/06 11635 15736 16266 13796 13424
11/06 11814 16000 16455 13997 13656
12/06 11989 16176 16359 14140 13794
1/07 12146 16357 16352 14276 13941
2/07 12283 16585 16604 14465 14122
3/07 12322 16603 16605 14511 14167
4/07 12498 16819 16695 14697 14363
5/07 12596 16944 16568 14803 14485
6/07 12381 16640 16519 14563 14250
7/07 11930 16051 16657 14116 13788
8/07 12009 16270 16861 14290 13921
9/07 12322 16696 16989 14624 14256
10/07 12421 16796 17141 14734 14379
11/07 12088 16431 17450 14452 14074
12/07 12136 16479 17499 14502 14087
====================================================================================================================================
AIM V.I. High Yield Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
BONDS & NOTES-94.04%
ADVERTISING-0.25%
Lamar Media Corp., Sr. Sub. Notes, 6.63%,
08/15/15 (Acquired 10/01/07; Cost
$123,328)(b)(c) $ 130,000 $ 127,400
========================================================================
AEROSPACE & DEFENSE-2.41%
Bombardier Inc., Notes, 6.30%, 05/01/14
(Acquired 11/16/07; Cost $175,500)(b)(c) 180,000 177,300
- ------------------------------------------------------------------------
DRS Technologies, Inc., Sr. Unsec. Gtd.
Notes, 6.63%, 02/01/16(c) 65,000 163,350
- ------------------------------------------------------------------------
Esterline Technologies Corp., Sr. Unsec. Gtd.
Notes, 6.63%, 03/01/17(c) 120,000 119,700
- ------------------------------------------------------------------------
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)(b)(c) 90,000 90,450
- ------------------------------------------------------------------------
Sr. Sub. Notes, 9.75%, 04/01/17 (Acquired
03/16/07-11/19/07; Cost $187,238)(b)(c)(d) 180,000 180,000
- ------------------------------------------------------------------------
Hexcel Corp., Sr. Unsec. Sub. Global Notes,
6.75%, 02/01/15(c) 367,000 361,495
- ------------------------------------------------------------------------
L-3 Communications Corp., Series B, Sr.
Unsec. Gtd. Sub. Global Notes, 6.38%,
10/15/15(c) 160,000 158,400
========================================================================
1,250,695
========================================================================
AIRLINES-1.25%
Continental Airlines Inc.,
Unsec. Unsub. Notes,
8.75%, 12/01/11(c) 185,000 177,137
- ------------------------------------------------------------------------
-Series 2000-1, Class C, Pass Through
Ctfs., 8.50%, 05/01/11(c) 73,173 73,173
- ------------------------------------------------------------------------
Delta Air Lines Inc.,
-Series 2002-1, Class C, Pass Through
Ctfs., 7.78%, 01/02/12(c) 134,274 131,756
- ------------------------------------------------------------------------
-Series 2007-1, Class C, Pass Through Ctfs.
Bonds, 8.95%, 08/10/14 (Acquired 10/04/07;
Cost $130,000)(b)(c) 130,000 128,213
- ------------------------------------------------------------------------
United AirLines, Inc.-Class B, Gtd. Pass
Through Ctfs. Global Notes, 7.34%, 07/02/19
(Acquired 06/19/07-10/31/07; Cost
142,025)(b)(c) 145,000 136,844
========================================================================
647,123
========================================================================
ALTERNATIVE CARRIERS-0.46%
Level 3 Financing Inc., Sr. Unsec. Gtd.
Unsub. Global Notes, 9.25%, 11/01/14(c) 265,000 241,150
========================================================================
ALUMINUM-1.67%
Century Aluminum Co., Sr. Unsec. Gtd. Global
Notes, 7.50%, 08/15/14(c) 228,000 226,290
- ------------------------------------------------------------------------
Novelis Inc. (Canada), Sr. Unsec. Gtd. Global
Notes, 7.25%, 02/15/15(c) 674,000 638,615
========================================================================
864,905
========================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
APPAREL RETAIL-0.88%
Collective Brands Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 8.25%, 08/01/13(c) $ 485,000 $ 457,112
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-2.16%
American Achievement Corp., Sr. Unsec. Gtd.
Sub. Global Notes, 8.25%, 04/01/12(c) 205,000 201,925
- ------------------------------------------------------------------------
Broder Brothers Co.-Series B, Sr. Unsec. Gtd.
Global Notes, 11.25%, 10/15/10(c) 426,000 331,215
- ------------------------------------------------------------------------
Levi Strauss & Co., Sr. Unsec. Unsub. Global
Notes, 8.88%, 04/01/16(c)(d) 395,000 382,162
- ------------------------------------------------------------------------
Perry Ellis International, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Global Notes, 8.88%,
09/15/13(c) 212,000 205,640
========================================================================
1,120,942
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.17%
Nuveen Investments Inc., Sr. Notes, 10.50%,
11/15/15 (Acquired 10/31/07; Cost
$90,000)(b)(c) 90,000 90,113
========================================================================
AUTO PARTS & EQUIPMENT-2.21%
Cooper-Standard Automotive Inc., Sr. Unsec.
Gtd. Global Notes, 7.00%, 12/15/12(c) 240,000 211,200
- ------------------------------------------------------------------------
Lear Corp.-Series B, Sr. Unsec. Gtd. Global
Notes, 8.50%, 12/01/13(c) 185,000 172,050
- ------------------------------------------------------------------------
Tenneco Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 8.63%, 11/15/14(c) 160,000 157,200
- ------------------------------------------------------------------------
TRW Automotive Inc., Sr. Unsec. Gtd. Notes,
7.25%, 03/15/17 (Acquired
03/14/07-07/18/07; Cost $228,414)(b)(c) 245,000 222,031
- ------------------------------------------------------------------------
Visteon Corp.,
Sr. Unsec. Global Notes, 8.25%,
08/01/10(c)(d) 280,000 250,600
- ------------------------------------------------------------------------
Sr. Unsec. Notes, 7.00%, 03/10/14(c) 180,000 135,450
========================================================================
1,148,531
========================================================================
AUTOMOBILE MANUFACTURERS-2.00%
Ford Motor Co., Unsec. Global Notes, 7.45%,
07/16/31(c)(d) 640,000 476,800
- ------------------------------------------------------------------------
General Motors Corp.,
Sr. Unsec. Unsub. Global Deb., 8.38%,
07/15/33(c)(d) 325,000 263,656
- ------------------------------------------------------------------------
Sr. Unsec. Unsub. Global Notes, 7.20%,
01/15/11(c)(d) 325,000 297,375
========================================================================
1,037,831
========================================================================
BROADCASTING & CABLE TV-4.56%
CCH I Holdings LLC, Sr. Unsec. Gtd. Unsub.
Global Notes, 11.13%, 01/15/14(c) 185,000 113,775
- ------------------------------------------------------------------------
CCH I Holdings LLC/CCH I Holdings Capital
Corp., Sr. Sec. Gtd. Global Notes, 11.00%,
10/01/15(c) 175,000 143,281
- ------------------------------------------------------------------------
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
BROADCASTING & CABLE TV-(CONTINUED)
Clear Channel Communications Inc., Sr. Notes,
5.50%, 09/15/14(c) $ 275,000 $ 209,399
- ------------------------------------------------------------------------
CSC Holdings, Inc.-Series B, Sr. Unsec.
Notes, 7.63%, 04/01/11(c) 272,000 271,660
- ------------------------------------------------------------------------
Echostar DBS Corp., Sr. Unsec. Gtd. Global
Notes, 6.63%, 10/01/14(c) 260,000 260,975
- ------------------------------------------------------------------------
Hughes Network Systems LLC/HNS Finance Corp.,
Sr. Unsec. Gtd. Global Notes, 9.50%,
04/15/14(c) 250,000 255,000
- ------------------------------------------------------------------------
Mediacom Broadband LLC/Corp., Sr. Unsec.
Global Notes, 8.50%, 10/15/15(c) 165,000 145,406
- ------------------------------------------------------------------------
Radio One, Inc.-Series B, Sr. Unsec. Gtd.
Sub. Global Notes, 8.88%, 07/01/11(c) 325,000 306,313
- ------------------------------------------------------------------------
Rainbow National Services LLC, Sr. Notes,
8.75%, 09/01/12 (Acquired
08/13/04-09/22/06; Cost $556,527)(b)(c) 538,000 554,140
- ------------------------------------------------------------------------
Virgin Media Finance PLC (United Kingdom),
Sr. Unsec. Gtd. Global Notes, 8.75%,
04/15/14(c) 105,000 104,475
========================================================================
2,364,424
========================================================================
BUILDING PRODUCTS-2.06%
Associated Materials Inc., Sr. Unsec. Disc.
Global Notes, 11.25%, 03/01/14(c)(d)(e) 705,000 458,250
- ------------------------------------------------------------------------
Building Materials Corp. of America, Sr. Sec.
Gtd. Global Notes, 7.75%, 08/01/14(c) 260,000 200,200
- ------------------------------------------------------------------------
Goodman Global Holdings Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 7.88%, 12/15/12(c) 395,000 408,825
========================================================================
1,067,275
========================================================================
CASINOS & GAMING-1.94%
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)(b)(c) 190,000 189,050
- ------------------------------------------------------------------------
Isle of Capri Casinos, Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 7.00%, 03/01/14(c) 230,000 190,900
- ------------------------------------------------------------------------
MGM Mirage,
Sr. Gtd. Notes, 7.50%, 06/01/16(c) 190,000 187,388
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes, 6.63%,
07/15/15(c) 273,000 256,961
- ------------------------------------------------------------------------
Tropicana Entertainment LLC, Sr. Sub. Global
Notes, 9.63%, 12/15/14(c)(d) 190,000 121,600
- ------------------------------------------------------------------------
Wynn Las Vegas Capital LLC/Corp., Sr. Sec.
First Mortgage Notes, 6.63%, 12/01/14
(Acquired 11/27/07; Cost $57,825)(b)(c) 60,000 59,037
========================================================================
1,004,936
========================================================================
COAL & CONSUMABLE FUELS-0.31%
Massey Energy Co., Sr. Unsec. Gtd. Global
Notes, 6.63%, 11/15/10(c) 90,000 88,200
- ------------------------------------------------------------------------
Peabody Energy Corp., Sr. Unsec. Gtd. Global,
7.38%, 11/01/16(c) 70,000 72,275
========================================================================
160,475
========================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
COMMERCIAL PRINTING-0.57%
Quebecor World Capital Corp. (Canada), Sr.
Notes, 8.75%, 03/15/16 (Acquired
12/06/06-04/05/07; Cost $279,475)(b)(c) $ 290,000 $ 214,237
- ------------------------------------------------------------------------
Quebecor World Inc. (Canada), Sr. Notes,
9.75%, 01/15/15 (Acquired 06/29/07; Cost
$107,100)(b)(c) 105,000 81,113
========================================================================
295,350
========================================================================
COMMODITY CHEMICALS-0.64%
Koppers Holdings Inc., Sr. Unsec. Sub. Disc.
Global Notes, 9.88%, 11/15/14(c)(e) 390,000 333,450
========================================================================
COMMUNICATIONS EQUIPMENT-0.23%
MasTec, Inc., Sr. Unsec. Gtd. Global Notes,
7.63%, 02/01/17(c) 65,000 61,750
- ------------------------------------------------------------------------
Superior Essex Communications LLC/Essex Group
Inc., Sr. Global Notes, 9.00%, 04/15/12(c) 60,000 57,900
========================================================================
119,650
========================================================================
CONSTRUCTION & ENGINEERING-0.60%
Great Lakes Dredge & Dock Corp., Sr. Unsec.
Gtd. Sub. Global Notes, 7.75%, 12/15/13(c) 331,000 311,968
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.82%
Esco Corp., Sr. Unsec. Gtd. Notes, 8.63%,
12/15/13 (Acquired 12/12/06; Cost
$55,000)(b)(c) 55,000 55,275
- ------------------------------------------------------------------------
Titan International, Inc., Sr. Unsec. Gtd.
Global Notes, 8.00%, 01/15/12(c) 380,000 368,600
========================================================================
423,875
========================================================================
CONSTRUCTION MATERIALS-0.75%
Texas Industries, Inc., Sr. Unsec. Global
Notes, 7.25%, 07/15/13(c) 65,000 65,000
- ------------------------------------------------------------------------
U.S. Concrete, Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 8.38%, 04/01/14(c) 365,000 323,481
========================================================================
388,481
========================================================================
CONSUMER ELECTRONICS-0.36%
NXP BV/NXP Funding LLC (Netherlands), Sr.
Sec. Gtd. Global Notes, 7.88%, 10/15/14(c) 195,000 185,738
========================================================================
CONSUMER FINANCE-4.16%
Ford Motor Credit Co. LLC,
Sr. Notes, 9.88%, 08/10/11(c) 120,000 114,895
- ------------------------------------------------------------------------
Sr. Unsec. Notes,
8.63%, 11/01/10(c) 490,000 461,080
- ------------------------------------------------------------------------
8.00%, 12/15/16(c) 125,000 107,335
- ------------------------------------------------------------------------
Unsub. Global Notes, 7.00%, 10/01/13(c) 520,000 440,367
- ------------------------------------------------------------------------
General Motors Acceptance Corp. LLC,
Global Bonds, 8.00%, 11/01/31(c)(d) 575,000 478,688
- ------------------------------------------------------------------------
Global Notes, 6.75%, 12/01/14(c) 480,000 388,637
- ------------------------------------------------------------------------
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
CONSUMER FINANCE-(CONTINUED)
KAR Holdings Inc., Sr. Unsec. Gtd. Unsub.
Notes, 8.75%, 05/01/14 (Acquired
04/13/07-07/13/07; Cost $176,400)(b)(c) $ 180,000 $ 166,050
========================================================================
2,157,052
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.24%
Iron Mountain Inc., Sr. Unsec. Gtd. Sub.
Notes, 7.75%, 01/15/15(c) 125,000 126,406
========================================================================
DISTILLERS & VINTNERS-0.73%
Constellation Brands, Inc., Sr. Gtd. Notes,
7.25%, 05/15/17 (Acquired
05/09/07-11/15/07; Cost $401,700)(b)(c) 410,000 380,787
========================================================================
DIVERSIFIED CHEMICALS-0.22%
Innophos Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 8.88%, 08/15/14(c) 115,000 115,288
========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.16%
Aramark Corp., Sr. Unsec. Gtd. Global Note,
8.50%, 02/01/15(c) 125,000 127,031
- ------------------------------------------------------------------------
GEO Group, Inc. (The), Sr. Unsec. Global
Notes, 8.25%, 07/15/13(c) 408,000 413,100
- ------------------------------------------------------------------------
Mobile Services Group Inc., Sr. Unsec. Gtd.
Global Notes, 9.75%, 08/01/14(c) 60,000 55,500
- ------------------------------------------------------------------------
Travelport LLC,
Sr. Unsec. Gtd. Global Notes, 9.88%,
09/01/14(c) 380,000 389,975
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes,
11.88%, 09/01/16(c) 125,000 133,906
========================================================================
1,119,512
========================================================================
DIVERSIFIED METALS & MINING-1.73%
Aleris International Inc., Sr. Unsec. Gtd.
PIK Global Note, 9.00%, 12/15/14(c) 525,000 435,750
- ------------------------------------------------------------------------
FMG Finance Pty. Ltd. (Austria), Sr. Sec.
Note, 10.63%, 09/01/16 (Acquired
09/10/07-09/12/07; Cost $209,250)(b)(c) 180,000 207,450
- ------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold Inc., Sr.
Unsec. Notes, 8.25%, 04/01/15(c) 240,000 255,600
========================================================================
898,800
========================================================================
ELECTRIC UTILITIES-2.24%
Edison Mission Energy,
Sr. Unsec. Global Notes, 7.00%,
05/15/17(c)(d) 320,000 315,200
- ------------------------------------------------------------------------
Sr. Unsec. Notes, 7.75%, 06/15/16(c) 155,000 161,588
- ------------------------------------------------------------------------
Elwood Energy LLC, Sr. Sec. Global Notes,
8.16%, 07/05/26(c) 77,486 77,486
- ------------------------------------------------------------------------
LSP Energy L.P./LSP Batesville Funding Corp.-
Series C, Sr. Sec. Bonds, 7.16%,
01/15/14(c) 156,414 156,511
- ------------------------------------------------------------------------
Mirant North America, LLC, Sr. Unsec. Gtd.
Global Notes, 7.38%, 12/31/13(c) 185,000 186,850
- ------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
ELECTRIC UTILITIES-(CONTINUED)
Tenaska Alabama Partners L.P., Sr. Sec.
Notes, 7.00%, 06/30/21 (Acquired
12/12/06-05/21/07; Cost $266,439)(b)(c) $ 263,423 $ 262,764
========================================================================
1,160,399
========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.36%
Baldor Electric Co., Sr. Unsec. Gtd. Notes,
8.63%, 02/15/17(c) 180,000 186,300
========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.52%
Sanmina-SCI Corp., Sr. Unsec. Gtd. Sub.
Global Notes, 6.75%, 03/01/13(c)(d) 310,000 271,250
========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.24%
Allied Waste North America, Inc.-Series B,
Sr. Sec. Gtd. Global Notes, 7.13%,
11/15/16(c)(d) 125,000 125,625
========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.29%
Mosaic Co. (The), Sr. Notes, 7.63%, 12/01/14
(Acquired 11/16/06-08/24/07; Cost
$140,400)(b)(c) 140,000 149,450
========================================================================
FOREST PRODUCTS-0.28%
Millar Western Forest Products Ltd. (Canada),
Sr. Unsec. Global Notes, 7.75%, 11/15/13(c) 195,000 147,225
========================================================================
GENERAL MERCHANDISE STORES-0.70%
Pantry, Inc. (The), Sr. Gtd. Sub. Global
Notes, 7.75%, 02/15/14(c) 395,000 364,387
========================================================================
HEALTH CARE EQUIPMENT-0.16%
Viant Holdings Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.13%, 07/15/17 (Acquired 06/25/07;
Cost $87,870)(b)(c)(f) 87,000 81,345
========================================================================
HEALTH CARE FACILITIES-2.94%
Community Health Systems Inc., Sr. Unsec.
Gtd. Global Notes, 8.88%, 07/15/15(c) 350,000 358,750
- ------------------------------------------------------------------------
HCA, Inc.,
Sr. Sec. Gtd. Global Notes,
9.13%, 11/15/14(c) 140,000 145,950
- ------------------------------------------------------------------------
9.25%, 11/15/16(c) 600,000 634,500
- ------------------------------------------------------------------------
Sr. Unsec. Global Notes, 6.38%, 01/15/15(c) 55,000 46,887
- ------------------------------------------------------------------------
Sr. Unsec. Bonds, 7.50%, 11/06/33(c) 165,000 130,350
- ------------------------------------------------------------------------
Tenet Healthcare Corp., Sr. Unsec. Notes,
6.38%, 12/01/11(c) 229,000 210,680
========================================================================
1,527,117
========================================================================
HEALTH CARE SERVICES-1.19%
Omnicare Inc.,
Sr. Unsec. Gtd. Sub. Notes,
6.75%, 12/15/13(c) 110,000 103,950
- ------------------------------------------------------------------------
6.88%, 12/15/15(c) 110,000 102,850
- ------------------------------------------------------------------------
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
HEALTH CARE SERVICES-(CONTINUED)
Rural/Metro Corp., Sr. Gtd. Sub. Global
Notes, 9.88%, 03/15/15(c) $ 56,000 $ 53,340
- ------------------------------------------------------------------------
Universal Hospital Services Inc., Sr. Sec.
PIK Global Notes, 8.50%, 06/01/15(c) 65,000 66,300
- ------------------------------------------------------------------------
US Oncology Inc., Sr. Unsec. Gtd. Global
Notes, 9.00%, 08/15/12(c) 295,000 292,050
========================================================================
618,490
========================================================================
HEALTH CARE SUPPLIES-0.13%
Bausch & Lomb Inc., Sr. Unsec. Notes, 9.88%,
11/01/15 (Acquired 10/16/07; Cost
$64,838)(b)(c) 65,000 66,463
========================================================================
HOMEBUILDING-0.19%
TOUSA, Inc., Sr. Unsec. Gtd. Global Notes,
9.00%, 07/01/10(c) 163,000 70,905
- ------------------------------------------------------------------------
9.00%, 07/01/10(c) 60,000 26,250
========================================================================
97,155
========================================================================
HOMEFURNISHING RETAIL-0.46%
Rent-A-Center Inc.-Series B, Sr. Unsec. Gtd.
Sub. Global Notes, 7.50%, 05/01/10(c) 255,000 240,338
========================================================================
HOTELS, RESORTS & CRUISE LINES-1.20%
NCL Corp., Sr. Unsec. Unsub. Global Notes,
10.63%, 07/15/14(c) 626,000 622,087
========================================================================
HOUSEWARES & SPECIALTIES-0.57%
Yankee Acquisition Corp.-Series B, Sr. Gtd.
Sub. Global Notes, 8.50%, 02/15/15(c)(d) 320,000 296,400
========================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-3.97%
AES Corp. (The),
Sr. Notes, 8.00%, 10/15/17 (Acquired
10/09/07-10/10/07; Cost $161,463)(b)(c) 160,000 164,000
- ------------------------------------------------------------------------
Sr. Sec. Second Priority Notes, 8.75%,
05/15/13 (Acquired 08/17/07-11/27/07; Cost
$240,719)(b)(c) 231,100 242,077
- ------------------------------------------------------------------------
AES Red Oak LLC-Series A, Sr. Sec. Bonds,
8.54%, 11/30/19(c) 251,809 273,212
- ------------------------------------------------------------------------
Calpine Canada Energy Finance ULC (Canada),
Sr. Unsec. Gtd. Notes, 8.50%, 05/01/08
(Acquired 08/08/07; Cost $182,400)(b)(c)(g) 160,000 184,800
- ------------------------------------------------------------------------
Dynegy Holdings Inc., Sr. Unsec. Global
Notes, 7.75%, 06/01/19(c) 185,000 172,050
- ------------------------------------------------------------------------
Energy Future Holdings Corp.,-Series P,
Sr. Unsec. Global Notes,
5.55%, 11/15/14(c) 5,350 4,320
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 10.88%, 11/01/17
(Acquired 10/24/07-11/02/07; Cost
210,450)(b)(c) 210,000 211,838
- ------------------------------------------------------------------------
Mirant Americas Generation LLC, Sr. Unsec.
Notes, 8.50%, 10/01/21(c) 185,000 171,125
- ------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-(CONTINUED)
NRG Energy, Inc., Sr. Unsec. Gtd. Notes,
7.38%, 02/01/16(c) $ 145,000 $ 142,281
- ------------------------------------------------------------------------
7.38%, 01/15/17(c) 255,000 250,219
- ------------------------------------------------------------------------
Texas Competitive Electric Holdings Co. LLC,
Sr. Unsec. Gtd. Notes,
10.25%, 11/01/15 (Acquired 11/29/07; Cost
$90,250)(b)(c) 95,000 94,406
- ------------------------------------------------------------------------
10.25%, 11/01/15 (Acquired 10/24/07; Cost
$150,000)(b)(c) 150,000 149,063
========================================================================
2,059,391
========================================================================
INDUSTRIAL CONGLOMERATES-0.77%
Indalex Holding Corp.-Series B, Sr. Sec. Gtd.
Global Notes, 11.50%, 02/01/14(c) 130,000 120,900
- ------------------------------------------------------------------------
TransDigm Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 7.75%, 07/15/14(c) 275,000 280,500
========================================================================
401,400
========================================================================
INDUSTRIAL MACHINERY-0.93%
Columbus McKinnon Corp., Sr. Sub. Global
Notes, 8.88%, 11/01/13(c) 158,000 164,320
- ------------------------------------------------------------------------
SPX Corp., Sr. Notes, 7.63%, 12/15/14
(Acquired 12/10/07; Cost $90,000)(b)(c) 90,000 92,475
- ------------------------------------------------------------------------
Stewart & Stevenson LLC, Sr. Unsec. Gtd.
Global Notes, 10.00%, 07/15/14(c) 225,000 227,250
========================================================================
484,045
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-4.72%
Citizens Communications Co.,
Sr. Unsec. Global Bonds, 9.00%, 08/15/31(c) 240,000 242,400
- ------------------------------------------------------------------------
Sr. Unsec. Global Notes, 7.88%, 01/15/27(c) 325,000 309,969
- ------------------------------------------------------------------------
Hawaiian Telcom Communications Inc.-Series B,
Sr. Unsec. Gtd. Global Notes, 9.75%,
05/01/13(c)(d) 190,000 189,763
- ------------------------------------------------------------------------
Intelsat Intermediate Holding Co. Ltd.
(Bermuda), Sr. Unsec. Gtd. Disc. Global
Notes, 9.25%, 02/01/15(c)(e) 690,000 569,250
- ------------------------------------------------------------------------
Qwest Communications International Inc., Sr.
Unsec. Gtd. Global Notes, 7.25%,
02/15/11(c) 625,000 623,437
- ------------------------------------------------------------------------
Windstream Corp., Sr. Unsec. Gtd. Unsub.
Global Notes,
8.13%, 08/01/13(c) 310,000 324,725
- ------------------------------------------------------------------------
8.63%, 08/01/16(c) 180,000 189,900
========================================================================
2,449,444
========================================================================
INVESTMENT BANKING & BROKERAGE-0.70%
E*Trade Financial Corp.,
Sr. Unsec. Global Notes, 8.00%,
06/15/11(c)(d) 195,000 170,138
- ------------------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 12/01/15(c) 250,000 191,250
========================================================================
361,388
========================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
METAL & GLASS CONTAINERS-0.14%
Owens-Brockway Glass Container Inc., Sr.
Unsec. Gtd. Global Notes, 8.25%,
05/15/13(c) $ 71,000 $ 73,840
========================================================================
MORTGAGE REIT'S-0.97%
Thornburg Mortgage Inc., Sr. Unsec. Global
Notes, 8.00%, 05/15/13(c)(d) 590,000 504,450
========================================================================
MOVIES & ENTERTAINMENT-1.44%
AMC Entertainment Inc., Sr. Unsec. Sub.
Global Notes, 8.00%, 03/01/14(c) 180,000 170,100
- ------------------------------------------------------------------------
Cinemark Inc., Sr. Unsec. Disc. Global Notes,
9.75%, 03/15/14(c)(e) 345,000 322,575
- ------------------------------------------------------------------------
Marquee Holdings Inc., Sr. Unsec. Global
Notes, 12.00%, 08/15/14(c) 315,000 253,575
========================================================================
746,250
========================================================================
MULTI-LINE INSURANCE-0.48%
Crum & Forster Holdings Corp., Sr. Unsec.
Global Notes, 7.75%, 05/01/17(c) 255,000 251,175
========================================================================
MULTI-SECTOR HOLDINGS-0.30%
Leucadia National Corp., Sr. Unsec. Notes,
8.13%, 09/15/15(c) 80,000 81,015
- ------------------------------------------------------------------------
Stena A.B., Sr. Unsec. Global Notes, 7.50%,
11/01/13(c) 75,000 74,081
========================================================================
155,096
========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.13%
Allis-Chalmers Energy Inc., Sr. Unsec. Gtd.
Global Notes, 8.50%, 03/01/17(c) 255,000 245,437
- ------------------------------------------------------------------------
Basic Energy Services Inc., Sr. Unsec. Gtd.
Global Notes, 7.13%, 04/15/16(c) 200,000 188,500
- ------------------------------------------------------------------------
Calfrac Holdings L.P., Sr. Notes, 7.75%,
02/15/15 (Acquired 02/07/07; Cost
$245,000)(b)(c) 245,000 234,588
- ------------------------------------------------------------------------
CHC Helicopter Corp. (Canada), Sr. Unsec.
Gtd. Sub. Global Notes, 7.38%, 05/01/14(c) 195,000 185,738
- ------------------------------------------------------------------------
Compagnie Generale de Geophysique-Veritas
(France), Sr. Unsec. Gtd. Global Notes,
7.75%, 05/15/17(c) 245,000 248,981
========================================================================
1,103,244
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-5.33%
Chaparral Energy Inc.,
Sr. Notes, 8.88%, 02/01/17 (Acquired
02/06/07-12/10/07; Cost $376,100)(b)(c) 385,000 348,425
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes, 8.50%,
12/01/15(c) 130,000 117,488
- ------------------------------------------------------------------------
Cimarex Energy Co., Sr. Unsec. Gtd. Notes,
7.13%, 05/01/17(c) 315,000 313,031
- ------------------------------------------------------------------------
Clayton Williams Energy, Inc., Sr. Unsec.
Gtd. Global Notes, 7.75%, 08/01/13(c) 100,000 88,125
- ------------------------------------------------------------------------
Delta Petroleum Corp., Sr. Unsec. Gtd. Global
Notes, 7.00%, 04/01/15(c) 445,000 380,475
- ------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
OIL & GAS EXPLORATION & PRODUCTION-(CONTINUED)
Encore Acquisition Co., Sr. Unsec. Gtd. Sub.
Global Notes, 6.00%, 07/15/15(c) $ 245,000 $ 221,725
- ------------------------------------------------------------------------
Forest Oil Corp., Sr. Notes, 7.25%, 06/15/19
(Acquired 06/01/07; Cost $130,000)(b)(c) 130,000 131,625
- ------------------------------------------------------------------------
Mariner Energy Inc., Sr. Unsec. Gtd. Notes,
8.00%, 05/15/17(c) 65,000 62,238
- ------------------------------------------------------------------------
OPTI Canada Inc. (Canada), Sr. Sec. Gtd.
Notes, 8.25%, 12/15/14 (Acquired 02/14/07;
Cost $266,156)(b)(c) 255,000 253,087
- ------------------------------------------------------------------------
Quicksilver Resources Inc., Sr. Unsec. Gtd.
Sub. Notes, 7.13%, 04/01/16(c) 160,000 157,600
- ------------------------------------------------------------------------
Sabine Pass LNG, L.P., Sr. Sec. Global Notes,
7.25%, 11/30/13(c) 425,000 416,500
- ------------------------------------------------------------------------
Whiting Petroleum Corp., Sr. Unsec. Gtd. Sub.
Global Notes, 7.00%, 02/01/14(c) 280,000 276,500
========================================================================
2,766,819
========================================================================
OIL & GAS REFINING & MARKETING-0.35%
Petroplus Finance Ltd. (Switzerland), Sr.
Gtd. Notes, 6.75%, 05/01/14 (Acquired
09/06/07-10/31/07; Cost $184,200)(b)(c) 195,000 182,569
========================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.60%
Copano Energy LLC, Sr. Unsec. Gtd. Global
Notes, 8.13%, 03/01/16(c) 410,000 416,150
- ------------------------------------------------------------------------
El Paso Corp., Sr. Unsec. Sub. Global Notes,
6.88%, 06/15/14(c) 180,000 182,250
- ------------------------------------------------------------------------
MarkWest Energy Partners L.P./MarkWest Energy
Finance Corp.-Series B, Sr. Unsec. Gtd.
Global Notes, 8.50%, 07/15/16(c) 75,000 76,031
- ------------------------------------------------------------------------
Sabine Pass LNG, L.P., Sr. Sec. Global Notes,
7.50%, 11/30/16(c) 100,000 96,000
- ------------------------------------------------------------------------
Williams Partners L.P./Williams Partners
Finance Corp., Sr. Unsec. Global Notes,
7.25%, 02/01/17(c) 60,000 61,920
========================================================================
832,351
========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.82%
NSG Holdings LLC/NSG Holdings Inc., Sr. Sec.
Notes, 7.75%, 12/15/25 (Acquired 03/06/07;
Cost $60,000)(b)(c) 60,000 58,950
- ------------------------------------------------------------------------
Residential Capital Corp., Sr. Unsec. Gtd.
Unsub. Notes, 7.50%, 02/22/11(c) 360,000 227,700
- ------------------------------------------------------------------------
Residential Capital LLC, Sr. Unsec. Gtd.
Unsub. Floating Rate Notes, 5.65%,
06/09/08(c)(h) 160,000 138,000
========================================================================
424,650
========================================================================
PACKAGED FOODS & MEATS-0.13%
Dole Foods Co. Inc., Sr. Unsec. Gtd. Global
Notes, 7.25%, 06/15/10(c) 72,000 66,600
========================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
PAPER PACKAGING-1.53%
Caraustar Industries, Inc., Unsec. Unsub.
Notes, 7.38%, 06/01/09(c) $ 665,000 $ 581,875
- ------------------------------------------------------------------------
Jefferson Smurfit Corp., Sr. Unsec. Gtd.
Unsub. Global Notes, 7.50%, 06/01/13(c) 219,000 210,787
========================================================================
792,662
========================================================================
PAPER PRODUCTS-2.96%
Abitibi-Consolidated Finance L.P., Unsec.
Gtd. Notes, 7.88%, 08/01/09(c) 155,000 148,800
- ------------------------------------------------------------------------
Cellu Tissue Holdings, Inc., Sec. Gtd. Global
Notes, 9.75%, 03/15/10(c) 182,000 176,540
- ------------------------------------------------------------------------
Domtar Corp., Sr. Unsec. Gtd. Notes, 5.38%,
12/01/13(c) 50,000 45,688
- ------------------------------------------------------------------------
Exopack Holding Corp., Sr. Unsec. Gtd. Global
Notes, 11.25%, 02/01/14(c) 145,000 142,825
- ------------------------------------------------------------------------
Georgia-Pacific Corp., Sr. Gtd. Notes,
7.00%, 01/15/15 (Acquired
12/13/06-01/10/07; Cost $125,013)(b)(c) 125,000 122,187
- ------------------------------------------------------------------------
7.13%, 01/15/17 (Acquired
12/13/06-02/21/07; Cost $141,000)(b)(c) 140,000 136,150
- ------------------------------------------------------------------------
Mercer International Inc., Sr. Unsec. Global
Notes, 9.25%, 02/15/13(c) 577,000 533,725
- ------------------------------------------------------------------------
Neenah Paper, Inc., Sr. Unsec. Gtd. Global
Notes, 7.38%, 11/15/14(c) 179,000 168,260
- ------------------------------------------------------------------------
NewPage Corp., Sr. Sec Notes, 10.00%,
05/01/12 (Acquired 12/07/07; Cost
$60,000)(b)(c) 60,000 60,750
========================================================================
1,534,925
========================================================================
PERSONAL PRODUCTS-0.96%
DEL Laboratories Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 8.00%, 02/01/12(c) 230,000 235,175
- ------------------------------------------------------------------------
NBTY, Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 7.13%, 10/01/15(c) 269,000 261,939
========================================================================
497,114
========================================================================
PHARMACEUTICALS-1.40%
Elan Finance PLC/Elan Finance Corp.
(Ireland), Sr. Unsec. Gtd. Global Notes,
7.75%, 11/15/11(c) 166,000 157,492
- ------------------------------------------------------------------------
8.88%, 12/01/13(c) 280,000 278,600
- ------------------------------------------------------------------------
Valeant Pharmaceuticals International, Sr.
Unsec. Global Notes, 7.00%, 12/15/11(c) 300,000 289,875
========================================================================
725,967
========================================================================
PUBLISHING-2.93%
Dex Media Inc., Sr. Unsec. Disc. Global
Notes, 9.00%, 11/15/13(c)(e) 504,000 462,420
- ------------------------------------------------------------------------
Donnelley, R.H. Corp., Sr. Notes, 8.88%,
10/15/17 (Acquired 09/19/07; Cost
$130,000)(b)(c) 130,000 121,550
- ------------------------------------------------------------------------
Idearc Inc., Sr. Unsec. Gtd. Global Notes,
8.00%, 11/15/16 (Acquired
11/01/06-08/07/07; Cost $241,500)(b)(c) 245,000 225,400
- ------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
PUBLISHING-(CONTINUED)
MediMedia USA Inc., Sr. Sub. Notes, 11.38%,
11/15/14 (Acquired 11/01/06; Cost
$30,000)(b)(c) $ 30,000 $ 30,975
- ------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen Finance Co., Sr.
Unsec. Gtd. Sub. Disc. Global Notes,
12.50%, 08/01/16(c)(e) 390,000 277,875
- ------------------------------------------------------------------------
Reader's Digest Association Inc. (The), Sr.
Unsec. Sub. Notes, 9.00%, 02/15/17
(Acquired 10/04/07; Cost $239,200)(b)(c) 260,000 224,250
- ------------------------------------------------------------------------
Valassis Communications, Inc., Sr. Unsec.
Gtd. Global Notes, 8.25%, 03/01/15(c) 195,000 176,475
========================================================================
1,518,945
========================================================================
RAILROADS-0.12%
Kansas City Southern de Mexico, S.A. de C.V.
(Mexico), Sr. Unsec. Unsub. Notes, 7.38%,
06/01/14 (Acquired 05/14/07; Cost
65,000)(b)(c) 65,000 63,294
========================================================================
SEMICONDUCTOR EQUIPMENT-0.38%
Amkor Technology Inc., Sr. Unsec. Global
Notes, 7.13%, 03/15/11(c) 205,000 196,031
========================================================================
SEMICONDUCTORS-3.40%
Avago Technologies Finance Pte/ Avago
Technologies U.S./ Avago Technologies
Wireless (Singapore), Sr. Unsec. Gtd.
Global Notes, 10.13%, 12/01/13(c) 285,000 303,881
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes, 11.88%,
12/01/15(c) 120,000 131,250
- ------------------------------------------------------------------------
Freescale Semiconductor Inc.,
Sr. Unsec. Gtd. Global Notes,
8.88%, 12/15/14(c) 185,000 165,575
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes,
10.13%, 12/15/16(c)(d) 485,000 401,338
- ------------------------------------------------------------------------
MagnaChip Semiconductor S.A./MagnaChip
Semiconductor Finance Co. (South Korea),
Sr. Sec. Gtd. Global Notes, 6.88%,
12/15/11(c)(d) 360,000 306,900
- ------------------------------------------------------------------------
Spansion Inc., Sr. Sec. Floating Rate Notes,
8.25%, 06/01/13 (Acquired 10/11/07; Cost
$308,800)(b)(c)(h) 320,000 288,000
- ------------------------------------------------------------------------
Viasystems Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 10.50%, 01/15/11(c) 165,000 166,650
========================================================================
1,763,594
========================================================================
SPECIALTY CHEMICALS-1.37%
Johnsondiversey Holdings Inc., Sr. Unsec.
Global Notes, 10.67%, 05/15/13(c) 190,000 192,850
- ------------------------------------------------------------------------
NewMarket Corp., Sr. Gtd. Global Notes,
7.13%, 12/15/16(c) 150,000 149,250
- ------------------------------------------------------------------------
Polypore Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 8.75%, 05/15/12(c) 380,000 370,500
========================================================================
712,600
========================================================================
SPECIALTY STORES-0.95%
Michaels Stores, Inc., Sr. Unsec. Gtd. Global
Notes, 10.00%, 11/01/14(c) 520,000 495,300
========================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
STEEL-0.62%
Metals USA, Inc.,
Sr. Sec. Gtd. Global Notes, 11.13%,
12/01/15(c) $ 155,000 $ 162,169
- ------------------------------------------------------------------------
Steel Dynamics Inc., Sr. Notes,
7.38%, 11/01/12 (Acquired 10/04/07; Cost
$65,000)(b)(c) 65,000 65,812
- ------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Notes, 6.75%,
04/01/15 (Acquired 03/28/07; Cost
95,000)(b)(c) 95,000 92,625
========================================================================
320,606
========================================================================
TIRES & RUBBER-1.92%
Cooper Tire & Rubber Co., Unsec. Notes,
8.00%, 12/15/19(c) 380,000 358,150
- ------------------------------------------------------------------------
7.63%, 03/15/27(c) 260,000 232,700
- ------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The), Sr. Unsec.
Global Notes, 9.00%, 07/01/15(c) 380,000 403,750
========================================================================
994,600
========================================================================
TRADING COMPANIES & DISTRIBUTORS-1.78%
United Rentals North America, Inc., Sr.
Unsec. Gtd. Global Notes, 6.50%,
02/15/12(c) 638,100 582,266
- ------------------------------------------------------------------------
Wesco Distribution Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 7.50%, 10/15/17(c) 360,000 341,100
========================================================================
923,366
========================================================================
TRUCKING-0.23%
Hertz Corp. (The), Sr. Unsec. Gtd. Global
Notes, 8.88%, 01/01/14(c) 120,000 122,100
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.70%
Centennial Cellular Operating Co./Centennial
Communications Corp., Sr. Unsec. Gtd.
Global Notes, 10.13%, 06/15/13(c) 213,000 223,118
- ------------------------------------------------------------------------
Digicel Group Ltd. (Bermuda), Sr. Notes,
8.88%, 01/15/15 (Acquired
05/31/07-08/24/07; Cost $584,505)(b)(c) 615,000 574,256
- ------------------------------------------------------------------------
iPCS Inc., Sr. Sec. Gtd. Global Floating Rate
First Lien Notes, 7.04%, 05/01/13(c)(h) 90,000 85,050
- ------------------------------------------------------------------------
882,424
========================================================================
Total Bonds & Notes (Cost $50,988,690) 48,799,540
========================================================================
<Caption>
SHARES
COMMON STOCKS & OTHER EQUITY INTERESTS-0.92%
BROADCASTING & CABLE TV-0.68%
Adelphia Communications Corp., Sr. Notes,
10.88%, 10/01/10(i) -- 33,210
- ------------------------------------------------------------------------
Adelphia Recovery Trust-Series ACC-1(i) 318,750 21,503
- ------------------------------------------------------------------------
</Table>
<Table>
- ------------------------------------------------------------------------
<Caption>
SHARES VALUE
BROADCASTING & CABLE TV-(CONTINUED)
Adelphia Recovery Trust-Series ARAHOVA(i) 109,170 $ 54,039
- ------------------------------------------------------------------------
Time Warner Cable, Inc.-Class A(d)(j)() 6,181 170,596
- ------------------------------------------------------------------------
Virgin Media Inc. 4,129 70,771
- ------------------------------------------------------------------------
XM Satellite Radio Holdings Inc.-Wts.,
expiring 03/15/10(k) 182 364
========================================================================
350,483
========================================================================
CONSTRUCTION MATERIALS-0.00%
Dayton Superior Corp.-Wts., expiring 06/15/09
(Acquired 08/07/00; Cost $0)(b)(f)(k)(l) 175 0
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.00%
XO Holdings Inc.(j) 33 68
- ------------------------------------------------------------------------
XO Holdings Inc.-Class A-Wts., expiring
01/16/10(k) 1,533 307
- ------------------------------------------------------------------------
XO Holdings Inc.-Class B-Wts., expiring
01/16/10(k) 1,148 149
- ------------------------------------------------------------------------
XO Holdings Inc.-Class C-Wts., expiring
01/16/10(k) 1,148 58
========================================================================
582
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.24%
iPCS, Inc. 3,489 125,569
========================================================================
Total Common Stocks & Other Equity
Interests (Cost $500,308) 476,634
========================================================================
PREFERRED STOCKS-0.43%
THRIFTS & MORTGAGE FINANCE-0.43%
Fannie Mae 8.25% Pfd. 6,225 160,294
- ------------------------------------------------------------------------
Freddie Mac 8.38% Pfd.(j) 2,500 65,375
========================================================================
Total Preferred Stocks (Cost $218,125) 225,669
========================================================================
<Caption>
PRINCIPAL
AMOUNT
ASSET-BACKED SECURITIES-0.28%
ELECTRIC UTILITIES-0.28%
Reliant Energy Mid-Atlantic Power Holdings,
LLC- Series B, Sr. Unsec. Pass Through
Ctfs., 9.24%, 07/02/17 (Cost $132,979) $ 132,444 146,350
========================================================================
SENIOR SECURED FLOATING RATE INTEREST
LOANS-0.18%
AIRLINES-0.18%
Evergreen International Aviation Inc.,
First Lien Term Loan, 8.82%, 10/31/11(c)(h) 94,985 91,186
- ------------------------------------------------------------------------
10.75%, 10/31/11(c)(h) 2,288 2,196
========================================================================
Total Senior Secured Floating Rate
Interest Loans (Cost $96,501) 93,382
========================================================================
</Table>
AIM V.I. High Yield Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
MONEY MARKET FUNDS-2.12%
Liquid Assets Portfolio-Institutional
Class(m) 549,765 $ 549,765
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(m) 549,765 549,765
========================================================================
Total Money Market Funds (Cost
$1,099,530) 1,099,530
========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-97.98% (Cost
$53,036,133) 50,841,105
========================================================================
</Table>
<Table>
- ------------------------------------------------------------------------
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN MONEY MARKET
FUNDS-7.32%
Liquid Assets Portfolio-Institutional Class
(Cost $3,796,191)(m)(n) 3,796,191 $ 3,796,191
========================================================================
TOTAL INVESTMENTS-105.29% (Cost $56,832,324) 54,637,296
========================================================================
OTHER ASSETS LESS LIABILITIES-(5.29)% (2,746,522)
========================================================================
NET ASSETS-100.00% $51,890,774
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
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:
(a) 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.
(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 December 31, 2007 was $7,972,664,
which represented 15.36% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(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 December 31,
2007 was $48,892,922, which represented 94.22% of the Fund's Net Assets. See
Note 1A.
(d) All or a portion of this security was out on loan at December 31, 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 December 31, 2007 was
$81,345, which represented 0.16% of the Fund's Net Assets.
(g) Defaulted security. Currently, the issuer is in default with respect to
interest payments. The value of this security at December 31, 2007
represented 0.36% of the Fund's Net Assets.
(h) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2007.
(i) Non-income producing security. Acquired as part of the Adelphia
Communications bankruptcy reorganization.
(j) Non-income producing security.
(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 December
31, 2007 represented less than 0.01% 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.
(n) 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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $51,936,603)* $ 49,741,575
- ----------------------------------------------------------------
Investments in affiliated money market funds (Cost
$4,895,721) 4,895,721
================================================================
Total investments (Cost $56,832,324) 54,637,296
================================================================
Cash 99,789
- ----------------------------------------------------------------
Receivables for:
Fund shares sold 295,039
- ----------------------------------------------------------------
Dividends and Interest 1,061,370
- ----------------------------------------------------------------
Investment for trustee deferred compensation and
retirement plans 41,516
- ----------------------------------------------------------------
Other assets 593
================================================================
Total assets 56,135,603
________________________________________________________________
================================================================
LIABILITIES:
Payables for:
Investments purchased 255,571
- ----------------------------------------------------------------
Fund shares reacquired 13,899
- ----------------------------------------------------------------
Trustee deferred compensation and retirement
plans 45,944
- ----------------------------------------------------------------
Collateral upon return of securities loaned 3,796,191
- ----------------------------------------------------------------
Unrealized depreciation on swap agreements 46,097
- ----------------------------------------------------------------
Premiums received on swap agreements 11,853
- ----------------------------------------------------------------
Accrued administrative services fees 32,354
- ----------------------------------------------------------------
Accrued distribution fees -- Series II 423
- ----------------------------------------------------------------
Accrued trustees' and officer's fees and benefits 608
- ----------------------------------------------------------------
Accrued transfer agent fees 1,086
- ----------------------------------------------------------------
Accrued operating expenses 40,803
================================================================
Total liabilities 4,244,829
================================================================
Net assets applicable to shares outstanding $ 51,890,774
________________________________________________________________
================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 60,369,677
- ----------------------------------------------------------------
Undistributed net investment income 4,329,317
- ----------------------------------------------------------------
Undistributed net realized gain (loss) (10,567,095)
- ----------------------------------------------------------------
Unrealized appreciation (depreciation) (2,241,125)
================================================================
$ 51,890,774
________________________________________________________________
================================================================
NET ASSETS:
Series I $ 51,224,846
________________________________________________________________
================================================================
Series II $ 665,928
________________________________________________________________
================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 8,924,643
________________________________________________________________
================================================================
Series II 116,404
________________________________________________________________
================================================================
Series I:
Net asset value per share $ 5.74
________________________________________________________________
================================================================
Series II:
Net asset value per share $ 5.72
________________________________________________________________
================================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $3,719,716 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Interest $ 4,644,784
- ----------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of $110,000) 211,197
- ----------------------------------------------------------------
Dividends 34,552
================================================================
Total investment income 4,890,533
================================================================
EXPENSES:
Advisory fees 364,789
- ----------------------------------------------------------------
Administrative services fees 187,978
- ----------------------------------------------------------------
Custodian fees 21,012
- ----------------------------------------------------------------
Distribution fees-Series II 1,852
- ----------------------------------------------------------------
Transfer agent fees 12,524
- ----------------------------------------------------------------
Trustees' and officer's fees and benefits 18,390
- ----------------------------------------------------------------
Professional services fees 48,908
- ----------------------------------------------------------------
Other 18,080
================================================================
Total expenses 673,533
================================================================
Less: Fees waived and expense offset arrangement(s) (118,824)
================================================================
Net expenses 554,709
================================================================
Net investment income 4,335,824
================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains from
securities sold to affiliates of $291) 719,598
- ----------------------------------------------------------------
Swap agreements 53,438
================================================================
773,036
================================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (3,993,051)
- ----------------------------------------------------------------
Swap agreements (46,097)
================================================================
(4,039,148)
================================================================
Net realized and unrealized gain (loss) (3,266,112)
================================================================
Net increase in net assets resulting from
operations $ 1,069,712
________________________________________________________________
================================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,335,824 $ 3,893,306
- ----------------------------------------------------------------------------------------
Net realized gain 773,036 1,321,873
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (4,039,148) 486,551
========================================================================================
Net increase in net assets resulting from operations 1,069,712 5,701,730
========================================================================================
Distributions to shareholders from net investment income:
Series I (3,849,927) (4,779,802)
- ----------------------------------------------------------------------------------------
Series II (46,750) (74,015)
========================================================================================
Decrease in net assets resulting from distributions (3,896,677) (4,853,817)
========================================================================================
Share transactions-net:
Series I (4,318,662) 2,787,332
- ----------------------------------------------------------------------------------------
Series II (218,532) (666,577)
========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (4,537,194) 2,120,755
========================================================================================
Net increase (decrease) in net assets (7,364,159) 2,968,668
========================================================================================
NET ASSETS:
Beginning of year 59,254,933 56,286,265
========================================================================================
End of year (including undistributed net investment income
of $4,329,317 and $3,856,303, respectively) $51,890,774 $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
December 31, 2007
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 the issuer's 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. High Yield Fund
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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.
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
AIM V.I. High Yield Fund
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. 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 an upfront payment and/or 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 an upfront payment and/or a fixed
payment over the life of the agreement. 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. Payments received or paid at the beginning of the agreement
are reflected as such on the Statement of Assets and Liabilities and may be
referred to as upfront payments. The Fund amortizes upfront payments and/or
accrues for the fixed payment stream on swap agreements on a daily basis
with the net amount, 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.
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 $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 Ltd. ("Invesco")
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 (excluding investments made in affiliated money market
AIM V.I. High Yield Fund
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 year ended December 31, 2007, AIM waived advisory fees of $110,948.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $137,978
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 year ended December 31, 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 A I M
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 year ended December 31, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $1,494,785 $19,782,320 $(20,727,340) $ 549,765 $ 50,673
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 1,494,785 19,782,320 (20,727,340) 549,765 50,524
=================================================================================================
Subtotal $2,989,570 $39,564,640 $(41,454,680) $1,099,530 $101,197
_________________________________________________________________________________________________
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $2,240,339 $19,900,019 $(18,344,167) $3,796,191 $ 80,436
- -------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 2,240,340 5,550,189 (7,790,529) -- 29,564
=================================================================================================
Subtotal $4,480,679 $25,450,208 $(26,134,696) $3,796,191 $110,000
=================================================================================================
Total
Investments
in
Affiliates $7,470,249 $65,014,848 $(67,589,376) $4,895,721 $211,197
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $504,583, which resulted in net realized gains of
$291, and securities purchases of $229,171.
AIM V.I. High Yield 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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $7,876.
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 year ended December 31, 2007, the Fund paid legal fees of $3,693
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 SEC, 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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $3,719,716 were
on loan to brokers. The loans were secured by cash collateral of $3,796,191
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $110,000 for securities lending transactions, which
are net of compensation to counterparties.
AIM V.I. High Yield Fund
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
- --------------------------------------------------------------------------------------------------------------------------
NOTIONAL UNREALIZED
BUY/SELL (PAY)/RECEIVE EXPIRATION AMOUNT APPRECIATION
COUNTERPARTY REFERENCE ENTITY PROTECTION FIXED RATE DATE (000) (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. Allied Waste North America, Inc. Sell 3.25% 09/20/12 $120 $ (1,799)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. Dole Foods Co. Inc. Sell 6.15% 09/20/12 120 (10,053)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. MBIA Inc. Sell 6.25% 12/20/08 310 (10,390)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. Pulte Homes Inc. Sell 4.20% 12/20/08 210 (982)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. Pulte Homes Inc. Sell 4.40% 12/20/08 180 (510)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. Residential Capital, LLC Sell 5.00%(a) 03/20/08 510 (22,918)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. Tenet Healthcare Sell 3.75% 12/20/08 360 685
==========================================================================================================================
$(45,967)
==========================================================================================================================
Lehman
Brothers,
Inc. Windstream Corp. Buy (2.17)% 09/20/13 180 $ (2,077)
- --------------------------------------------------------------------------------------------------------------------------
Lehman
Brothers,
Inc. United Parcel Buy (0.26)% 12/20/17 180 1,947
==========================================================================================================================
$ (130)
==========================================================================================================================
Total
Credit
Default
Swap
Agreements $(46,097)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) Unamortized premium at period-end of $11,853.
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from ordinary income $3,896,677 $4,853,817
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 4,320,042
- ----------------------------------------------------------------------------
Undistributed appreciation (depreciation) -- investments (2,315,021)
- ----------------------------------------------------------------------------
Temporary book/tax differences (36,822)
- ----------------------------------------------------------------------------
Capital loss carryforward (10,225,025)
- ----------------------------------------------------------------------------
Post-October capital loss deferral (222,077)
- ----------------------------------------------------------------------------
Shares of beneficial interest 60,369,677
============================================================================
Total net assets $ 51,890,774
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and the realization for tax purposes of unrealized gains (losses) on
swap agreements.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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, 2007 to utilizing $5,421,323 of capital loss carryforward in the fiscal year
ended December 31, 2008.
AIM V.I. High Yield Fund
The Fund utilized $994,536 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2010 $10,225,025
_____________________________________________________________________________
=============================================================================
</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 year ended December 31, 2007 was $62,944,194 and
$65,304,141, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 473,586
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,788,607)
===============================================================================
Net unrealized appreciation (depreciation) of investment
securities $(2,315,021)
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $56,952,317.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of swap agreements, on
December 31, 2007, undistributed net investment income was increased by $33,867
and undistributed net realized gain (loss) was decreased by $33,867. This
reclassification had no effect on the net assets of the Fund.
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007(A) DECEMBER 31, 2006
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Series I 4,258,577 $26,501,855 3,750,321 $23,392,683
- --------------------------------------------------------------------------------------------------------------------
Series II 6,878 42,592 1,887 11,586
====================================================================================================================
Issued as reinvestment of dividends:
Series I 669,553 3,849,927 786,151 4,779,801
- --------------------------------------------------------------------------------------------------------------------
Series II 8,159 46,750 12,214 74,015
====================================================================================================================
Reacquired:
Series I (5,538,034) (34,670,444) (4,078,880) (25,385,152)
- --------------------------------------------------------------------------------------------------------------------
Series II (49,587) (307,874) (122,412) (752,178)
====================================================================================================================
(644,454) $(4,537,194) 349,281 $ 2,120,755
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) There are entities that are 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to
AIM V.I. High Yield Fund
utilize the additional resources and talent of these affiliated sub-advisers in
managing the Fund. Because AIM would pay all of the sub-advisory fees of the
sub-advisers, the new sub-advisory agreements would not affect the fees the Fund
pays pursuant to the advisory agreement. If approved by shareholders, the New
Sub-advisory Arrangements are expected to become effective on or about May 1,
2008.
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.12 $ 6.03 $ 6.45 $ 5.97 $ 5.00
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.46 0.45 0.43 0.42 0.49
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.38) 0.19 (0.26) 0.23 0.91
=======================================================================================================================
Net increase from payments by affiliates -- -- -- 0.02 --
=======================================================================================================================
Total from investment operations 0.08 0.64 0.17 0.67 1.40
=======================================================================================================================
Less dividends from net investment income (0.46) (0.55) (0.59) (0.19) (0.43)
=======================================================================================================================
Net asset value, end of period $ 5.74 $ 6.12 $ 6.03 $ 6.45 $ 5.97
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 1.24% 10.74% 2.72% 11.25%(c) 28.04%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,225 $58,336 $54,731 $96,602 $37,267
_______________________________________________________________________________________________________________________
=======================================================================================================================
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%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.15%(d) 1.18% 1.16% 1.04% 1.20%
=======================================================================================================================
Ratio of net investment income to average net assets 7.42%(d) 7.22% 6.58% 6.79% 8.54%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 113% 135% 69% 131% 101%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</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) 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 based on average daily net assets of $57,625,515.
<Table>
<Caption>
SERIES II
-----------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.09 $6.00 $ 6.43 $ 5.95 $ 4.99
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.44 0.43 0.41 0.41 0.49
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.38) 0.19 (0.26) 0.24 0.90
===================================================================================================================
Net increase from payments by affiliates -- -- -- 0.01 --
===================================================================================================================
Total from investment operations 0.06 0.62 0.15 0.66 1.39
===================================================================================================================
Less dividends from net investment income (0.43) (0.53) (0.58) (0.18) (0.43)
===================================================================================================================
Net asset value, end of period $ 5.72 $6.09 $ 6.00 $ 6.43 $ 5.95
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) 1.01% 10.41% 2.43% 11.14%(c) 27.89%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 666 $919 $1,556 $ 1,072 $1,251
___________________________________________________________________________________________________________________
===================================================================================================================
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%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.40%(d) 1.43% 1.41% 1.29% 1.45%
===================================================================================================================
Ratio of net investment income to average net assets 7.17%(d) 6.97% 6.37% 6.59% 8.29%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 113% 135% 69% 131% 101%
___________________________________________________________________________________________________________________
===================================================================================================================
</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) 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 based on average daily net assets of $740,672.
AIM V.I. High Yield Fund
NOTE 16--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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. High Yield Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. High Yield Fund, (one of
the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. High Yield Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent the
effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
ENDING EXPENSES
BEGINNING ACCOUNT EXPENSES ENDING PAID ANNUALIZED
ACCOUNT VALUE VALUE PAID DURING ACCOUNT VALUE DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $ 980.40 $ 4.84 $1,020.32 $4.94 0.97%
Series II 1,000.00 979.50 6.09 1,019.06 6.21 1.22
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. High Yield Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
<Table>
FEDERAL AND STATE INCOME TAX
Corporate Dividends Received
Deduction* 0%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. High Yield Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. High Yield Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund N/A
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
INTERNATIONAL/GLOBAL EQUITY
International/Global Growth
AIM V.I. International
Growth Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. INTERNATIONAL GROWTH FUND's investment
procedures that the Fund uses to objective is long-term growth of capital.
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 Proxy Policy. The information is
also available on the SEC Web site,
sec.gov.
Information regarding how the Fund UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
voted proxies related to its IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
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. UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
Next, select the Fund from the ARE FROM A I M MANAGEMENT GROUP INC.
drop-down menu. The information is
also available on the SEC Web site,
sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. International Growth Fund
Management's discussion of Fund performance We believe disciplined sell decisions are key
to successful investing. We consider selling a
================================================================================ stock for one of the following reasons:
PERFORMANCE SUMMARY
o A company's fundamentals deteriorate, or it
Steady market gains over the first half of the year ended December 31, 2007, posts disappointing earnings.
were aided by improving corporate earnings and record levels of merger and
acquisition activity. A more uneven climb by markets followed over the second o A stock's price seems overvalued.
half of the review period.
o A more attractive opportunity becomes
Within this environment, we are pleased to once again have provided available.
shareholders with double-digit Fund performance, excluding variable issuer
charges. As the table illustrates, your Fund outperformed its broad benchmark Market conditions and your Fund
index but underperformed its style-specific benchmark index, excluding
applicable variable product issuer charges. Our exposure to emerging market International markets continued their ongoing
stocks provided a competitive advantage versus both EAFE indexes. In contrast, five-year rally(1) with particular strength in
relative results versus our style-specific index can be attributed to an Europe, as positive economic data and a strong
underweight exposure to the strong materials sector of the market. currency drove returns higher in the region.
While most major international markets finished
Your Fund's long-term performance appears later in this report. the period in positive territory,(1) Japan stood
out as it lagged significantly. Recent economic
FUND VS. INDEXES data pointed to a lack of confidence among
Japanese consumers and investors, and leading
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If indicators suggested a recession is not out of
variable product issuer charges were included, returns would be lower. the question. The recent strength in the yen
also created headwinds for export-driven
Series I Shares 14.72% businesses, including many of Japan's largest
Series II Shares 14.45 companies. Emerging markets enjoyed strong
MSCI EAFE Index(triangle) (Broad Market Index) 11.17 investor optimism as many local markets,
MSCI EAFE Growth Index(triangle) (Style-Specific Index) 16.45 particularly China and India, as well as
Lipper VUF International Growth Funds Index(triangle) (Peer Group Index) 14.63 commodity-related companies within the asset
Lipper International Multi-Cap Growth Index Funds Index(triangle) class, outperformed during the period.(1) While
(Former Peer Group Index) 17.09 emerging markets are not included within the
SOURCE: (triangle)LIPPER INC. MSCI EAFE INDEX, they are representative of the
heightened investor appetite for risk during the
================================================================================ past few years.
How we invest growth but whose prices do not fully The cornerstone of our strategy continued to
reflect these attributes. be our security selection process. On an
When selecting stocks for your Fund, we absolute basis, nine of the Fund's 10 invested
employ a disciplined investment While research responsibilities sectors delivered positive returns during the
strategy that emphasizes fundamental within the portfolio management team period. Our stock selection within the
research, supported by both are focused by geographic region, we industrials, health care and financials sectors
quantitative analysis and portfolio select investments for the Fund by made the largest contribution to the Fund's
construction techniques. Our EQV using a bottom-up investment approach,
(Earnings, Quality, Valuation) strategy which means that we construct the Fund
focuses primarily on identifying primarily on a stock-by-stock basis.
quality companies that have We focus on the strengths of
experienced, or exhibit the potential individual companies rather than
for, accelerating or above-average sectors, countries or market-cap
earnings trends.
======================================= ====================================== ================================================
PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Germany 14.5% 1. Roche Holding A.G. 2.0%
Industrials 18.3% 2. Japan 10.6 2. Syngenta A.G. 2.0
Financials 17.1 3. United Kingdom 9.7 3. Siemens A.G. 2.0
Consumer Discretionary 16.0 4. Switzerland 8.7 4. Teva Pharmaceutical Industries Ltd.-ADR 2.0
Consumer Staples 10.7 5. France 6.3 5. Porsche Automobil Holding S.E.-Pfd. 1.9
Information Technology 8.5 6. Bayer A.G. 1.7
Health Care 7.1 7. InBev N.V. 1.7
Energy 6.2 Total Net Assets $1.54 billion 8. Daimler A.G. 1.6
Materials 5.8 9. WPP Group PLC 1.6
Telecommunication Services 1.7 Total Number of Holdings* 90 10. Henkel KGaA-Pfd. 1.6
Utilities 1.1
Money Market Funds The Fund's holdings are subject to
Plus Other Assets Less change, and there is no assurance that
Liabilities 7.5 the Fund will continue to hold any
particular security.
*Excluding money market fund holdings.
======================================= ====================================== ================================================
AIM V.I. International Growth Fund
relative results. An overweight position prospects relative to non-Japan Asia. Clas G. Olsson
in the strong energy sector helped as Conversely, the Fund's relative returns [OLSSON Senior portfolio manager and
well. South Korean shipbuilder HYUNDAI were hurt by select holdings in France and PHOTO] head of AIM's International
HEAVY INDUSTRIES, Chinese insurance the portfolio's underweight position in Investment Management Unit,
provider PING AN INSURANCE and Indian Australia, which benefited significantly is lead manager of AIM V.I. International
trucking company BHARAT HEAVY ELECTRICALS from robust commodity-related stocks, as Growth Fund with respect to the Fund's
were all triple-digit performers for the well as currency strength. investments in Europe and Canada. Mr.
period. Fund managers took profits and Olsson joined AIM in 1994. Mr. Olsson
sold Ping An over the period. The Fund also benefited from its became a commissioned naval officer at the
large-/mid-cap flexibility, which enabled Royal Swedish Naval Academy in 1988. He
In contrast, the Fund's underweight us to invest in several attractive, also earned a B.B.A. from The University
position in the materials sector hurt under-followed mid-cap names. Foreign of Texas at Austin.
relative performance as material stocks exchange was another contributor to Fund
within the style-specific index were some performance. Our exposure to the Barrett K. Sides
of the best performing stocks during the appreciating euro, compared with the U.S. [SIDES Senior portfolio manager, is
period. Although we benefited from the dollar, added value to the Fund's overall PHOTO] lead manager of AIM V.I.
performance of our Swiss based fertilizer returns as well. As we do not typically International Growth Fund
stock SYNGENTA, we missed out on hedge currencies--we buy stocks in their with respect to the Fund's investments in
strong-performing metals and mining index local currency and then translate that the Asia Pacific region and Latin America.
heavyweights such as Rio Tinto and BASF. value back into dollars for the He joined AIM in 1990. Mr. Sides graduated
Significant price appreciation kept us Fund--foreign currency appreciation with a B.S. in economics from Bucknell
cautious on this sector. Similarly, boosted Fund performance. University. He also earned an M.B.A. in
communications equipment manufacturer international business from the University
Nokia and software gaming giant Nintendo, The performance of international stocks of St. Thomas.
neither of which was held in the Fund, over the last several years underscores
performed well, benefiting the the investment opportunities beyond U.S. Shuxin Cao
style-specific index and detracting from borders. Although the Fund has experienced [CAO Chartered Financial Analyst,
our relative results. A combination of strong double-digit returns over the past PHOTO] senior portfolio manager, is
lower quality earnings and high valuations 12 months, it would be imprudent for us to manager of AIM V.I.
kept us out of these names. suggest that such a level of performance International Growth Fund. He joined AIM
is sustainable over the long term. in 1997. Mr. Cao graduated from Tianjin
From a geographical perspective, all However, the Fund has provided an Foreign Language Institute with a B.A. in
international regions, led by Asia, opportunity to gain exposure to a broadly English. He also earned an M.B.A. from
contributed positively to both absolute diversified portfolio of high-quality Texas A&M University and is a certified
and relative fund performance. Holdings in growth companies that, as a whole, are public accountant.
emerging markets such as Brazil, India, selling at relatively close to a market
Korea and China--countries not represented multiple--in contrast to the large premium Matthew W. Dennis
in the EAFE GROWTH INDEX--gave the Fund a valuation investors often expect to pay [DENNIS Chartered Financial Analyst,
competitive edge as well. Over the for high-quality growth stocks. PHOTO] portfolio manager, is manager
12-month period, emerging markets of AIM V.I. International
accounted for a larger proportion of We welcome new investors who have Growth Fund. He joined AIM in 2000. Mr.
relative Fund outperformance. Despite very joined the Fund during the reporting Dennis graduated with a B.A. in economics
strong emerging markets returns, however, period and thank all of our shareholders from The University of Texas at Austin.
the Fund's exposure to these markets for your continued investment in AIM V.I. He also earned an M.S. in finance from
remained close to 18%. This reflects the International Growth Fund. Texas A&M University.
Fund's valuation discipline, which led to
the sale of several emerging-market stocks Source: (1)Lipper Inc. Jason T. Holzer
because we perceived their valuations had [HOLZER Chartered Financial Analyst,
become stretched. We selected our The views and opinions expressed in PHOTO] senior portfolio manager, is
emerging-market holdings using the same management's discussion of Fund manager of AIM V.I.
rigorous EQV investment discipline that we performance are those of A I M Advisors, International Growth Fund. He joined AIM
used for selecting developed-market Inc. These views and opinions are subject in 1996. He earned a B.A. in quantitative
stocks. We believe that many to change at any time based on factors economics and an M.S. in engineering
emerging-market companies are higher such as market and economic conditions. economic systems from Stanford
quality investments than many stocks in These views and opinions may not be relied University.
developed markets and that emerging-market upon as investment advice or
exposure should not necessarily be viewed recommendations, or as an offer for a Assisted by the Asia Pacific/Latin
as low quality or high risk. particular security. The information is America and Europe/Canada Team
not a complete analysis of every aspect of
A significant underweight exposure in any market, country, industry, security or ==========================================
Japan favored relative Fund results as the Fund. Statements of fact are from FOR A DISCUSSION OF THE RISKS OF
well. We continued to believe that the sources considered reliable, but A I M INVESTING IN YOUR FUND, INDEXES USED IN
Japanese market was fairly valued and Advisors, Inc. makes no representation or THIS REPORT AND YOUR FUND'S LONG-TERM
offered limited growth warranty as to their completeness or PERFORMANCE, PLEASE TURN THE PAGE.
accuracy. Although historical performance ==========================================
is no guarantee of future results, these
insights may help you understand our
investment management philosophy.
AIM V.I. International Growth Fund
Your Fund's long-term performance
========================================== SHARE CLASSES WILL DIFFER PRIMARILY DUE TO AIM V.I. INTERNATIONAL GROWTH FUND, A
DIFFERENT CLASS EXPENSES. SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
AVERAGE ANNUAL TOTAL RETURNS FUNDS, IS CURRENTLY OFFERED THROUGH
THE PERFORMANCE DATA QUOTED REPRESENT INSURANCE COMPANIES ISSUING VARIABLE
As of 12/31/07 PAST PERFORMANCE AND CANNOT GUARANTEE PRODUCTS. YOU CANNOT PURCHASE SHARES OF
SERIES I SHARES COMPARABLE FUTURE RESULTS; CURRENT THE FUND DIRECTLY. PERFORMANCE FIGURES
Inception (5/5/93) 10.20% PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE GIVEN REPRESENT THE FUND AND ARE NOT
10 Years 8.96 CONTACT YOUR VARIABLE PRODUCT ISSUER OR INTENDED TO REFLECT ACTUAL VARIABLE
5 Years 22.66 FINANCIAL ADVISOR FOR THE MOST RECENT PRODUCT VALUES. THEY DO NOT REFLECT SALES
1 Year 14.72 MONTH-END VARIABLE PRODUCT PERFORMANCE. CHARGES, EXPENSES AND FEES ASSESSED IN
PERFORMANCE FIGURES REFLECT FUND EXPENSES, CONNECTION WITH A VARIABLE PRODUCT. SALES
SERIES II SHARES REINVESTED DISTRIBUTIONS AND CHANGES IN CHARGES, EXPENSES AND FEES, WHICH ARE
10 Years 8.68% NET ASSET VALUE. INVESTMENT RETURN AND DETERMINED BY THE VARIABLE PRODUCT
5 Years 22.34 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU ISSUERS, WILL VARY AND WILL LOWER THE
1 Year 14.45 MAY HAVE A GAIN OR LOSS WHEN YOU SELL TOTAL RETURN.
SHARES.
========================================== THE MOST RECENT MONTH-END PERFORMANCE
THE TOTAL ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
SERIES II SHARES' INCEPTION DATE IS RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
SEPTEMBER 19, 2001. RETURNS SINCE THAT PROSPECTUS AS OF THE DATE OF THIS REPORT AUTOMATED INFORMATION LINE, 866-702-4402.
DATE ARE HISTORICAL. ALL OTHER RETURNS ARE FOR SERIES I AND SERIES II SHARES WAS AS MENTIONED ABOVE, FOR THE MOST RECENT
THE BLENDED RETURNS OF THE HISTORICAL 1.11% AND 1.36%, RESPECTIVELY. THE EXPENSE MONTH-END PERFORMANCE INCLUDING VARIABLE
PERFORMANCE OF SERIES II SHARES SINCE RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, PLEASE CONTACT YOUR
THEIR INCEPTION AND THE RESTATED EXPENSE RATIOS PRESENTED IN OTHER SECTIONS VARIABLE PRODUCT ISSUER OR FINANCIAL
HISTORICAL PERFORMANCE OF SERIES I SHARES OF THIS REPORT THAT ARE BASED ON EXPENSES ADVISOR.
(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
MAY 5, 1993. THE PERFORMANCE OF THE FUND'S
SERIES I AND SERIES II
===================================================================================================================================
Principal risks of investing in the Fund About indexes used in this report an above-average price-to-cash flow ratio,
price-to-book ratio and three-year
Investing in developing countries can add The MSCI EAFE--REGISTERED TRADEMARK-- sales-per-share growth value compared to
additional risk, such as high rates of INDEX is a free float-adjusted market the S&P/Citigroup World ex-U.S. BMI.
inflation or sharply devalued currencies capitalization index that is designed to
against the U.S. dollar. Transaction costs measure developed market equity THE LIPPER INTERNATIONAL MULTI-CAP
are often higher, and there may be delays performance, excluding the U.S. and GROWTH FUNDS INDEX is an equally weighted
in settlement procedures. Canada. representation of the largest funds in the
Lipper International Multi-Cap Growth
Prices of equity securities change in The MSCI EAFE--REGISTERED TRADEMARK-- Funds category. These funds typically have
response to many factors including the GROWTH INDEX is an unmanaged index an above-average price-to-cash flow ratio,
historical and prospective earnings of the considered representative of growth stocks price-to-book ratio, and three-year
issuer, the value of its assets, general of Europe, Australasia and the Far East. sales-per-share growth value, compared to
economic conditions, interest rates, the S&P/Citigroup World ex-U.S. BM.
investor perceptions and market liquidity. The Fund has elected to use the LIPPER
VARIABLE UNDERLYING FUNDS (VUF) The Fund is not managed to track the
Foreign securities have additional INTERNATIONAL GROWTH FUNDS INDEX as its performance of any particular index,
risks, including exchange rate changes, peer group instead of the Lipper including the indexes defined here, and
political and economic upheaval, the International Multi-Cap Growth Funds consequently, the performance of the Fund
relative lack of information, relatively Index. In 2006, Lipper began publishing may deviate significantly from the
low market liquidity, and the potential VUF indexes, allowing the Fund to be performance of the indexes.
lack of strict financial and accounting compared with the Lipper VUF International
controls and standards. Growth Index. The unmanaged Lipper VUF A direct investment cannot be made in
International Growth Funds Index is an an index. Unless otherwise indicated,
There is no guarantee that the equally weighted representation of the index results include reinvested
investment techniques and risk analyses largest variable insurance underlying dividends, and they do not reflect sales
used by the Fund's portfolio managers will funds in the Lipper International Growth charges. Performance of an index of funds
produce the desired results. Funds category. These funds invest at reflects fund expenses; performance of a
least 75% of their equity assets in market index does not.
companies strictly outside of the U.S. and
typically have
Continued
AIM V.I. International Growth Fund
Past performance cannot guarantee structed with each segment representing a
comparable future results. percent change in the value of the
investment. In this chart, each segment
This chart, which is a logarithmic represents a doubling, or 100% change, in
chart, presents the fluctuations in the the value of the investment. In other
value of the Fund and its indexes. We words, the space between $5,000 and
believe that a logarithmic chart is more $10,000 is the same size as the space
effective than other types of charts in between $10,000 and $20,000, and so on.
illustrating changes in value during the
early years shown in the chart. The
vertical axis, the one that indicates the
dollar value of an investment, is
con-
Continued from previous page
Other information Industry Classification Standard, which
was developed by and is the exclusive
The returns shown in the management's property and a service mark of Morgan
discussion of Fund performance are based Stanley Capital International Inc. and
on net asset values calculated for Standard & Poor's.
shareholder transactions. Generally
accepted accounting principles require The Chartered Financial
adjustments to be made to the net assets Analyst--REGISTERED TRADEMARK--
of the Fund at period end for financial (CFA--REGISTERED TRADEMARK--) designation
reporting purposes, and as such, the net is a globally recognized standard for
asset values for shareholder transactions measuring the competence and integrity
and the returns based on those net asset of investment professionals.
values may differ from the net asset
values and returns reported in the
Financial Highlights. Additionally, the
returns and net asset values shown
throughout this report are at the Fund
level only and do not include variable
product issuer charges. If such charges
were included, the total returns would be
lower.
Industry classifications used in this
report are generally according to the
Global
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 4/30/93, FUND DATA FROM 5/5/93
AIM V.I. INTERNATIONAL
GROWTH FUND-SERIES I MSCI EAFE GROWTH
DATE SHARES MSCI EAFE INDEX(1) INDEX(1)
4/30/93 $10000 $10000
5/93 $10190 10211 10294
6/93 9880 10052 10201
7/93 9931 10404 10499
8/93 10611 10965 11035
9/93 10661 10719 10766
10/93 11241 11049 11106
11/93 10910 10083 10016
12/93 11890 10811 10607
1/94 12490 11725 11405
2/94 12121 11693 11319
3/94 11561 11189 10761
4/94 11931 11664 11206
5/94 11801 11597 11075
6/94 11620 11761 11180
7/94 12041 11874 11278
8/94 12340 12155 11534
9/94 12070 11772 11149
10/94 12430 12164 11461
11/94 11750 11580 10946
12/94 11698 11652 11087
1/95 11057 11204 10661
2/95 11328 11172 10657
3/95 11739 11869 11328
4/95 12100 12315 11829
5/95 12411 12169 11693
6/95 12671 11955 11451
7/95 13383 12700 12181
8/95 13093 12215 11668
9/95 13334 12454 11935
10/95 13274 12119 11613
11/95 13314 12456 11932
12/95 13716 12958 12348
1/96 14067 13011 12357
2/96 14358 13055 12399
3/96 14630 13332 12697
4/96 15102 13720 13004
5/96 15182 13468 12733
6/96 15504 13543 12777
7/96 14741 13148 12364
8/96 15102 13176 12376
9/96 15534 13526 12715
10/96 15485 13388 12610
11/96 16228 13921 13013
12/96 16468 13742 12776
1/97 16438 13261 12243
2/97 16629 13478 12433
3/97 16508 13526 12506
4/97 16478 13598 12632
5/97 17475 14483 13374
6/97 18391 15282 14152
7/97 19135 15529 14490
8/97 17484 14369 13372
9/97 19035 15174 14256
10/97 17394 14008 12907
11/97 17444 13865 12879
12/97 17610 13986 13045
1/98 17784 14626 13635
2/98 18967 15564 14539
3/98 20139 16043 14736
4/98 20447 16170 14883
5/98 20848 16092 14779
6/98 20921 16214 14983
7/98 21281 16378 15051
8/98 18434 14349 13434
9/98 18032 13909 13056
10/98 18834 15359 14380
11/98 19637 16146 15076
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
12/98 20340 16783 15942
1/99 20651 16733 16025
2/99 19738 16334 15505
3/99 20050 17016 15714
4/99 20734 17706 15875
5/99 20018 16794 15185
6/99 21241 17448 15773
7/99 21728 17967 16077
8/99 21749 18033 16167
9/99 22226 18214 16423
10/99 23844 18896 17303
11/99 26891 19553 18571
12/99 31535 21308 20638
1/00 29337 19954 19477
2/00 32341 20491 20557
3/00 31274 21286 20942
4/00 28731 20165 19558
5/00 26964 19673 18347
6/00 28105 20442 19001
7/00 27428 19585 17811
8/00 28481 19755 18000
9/00 26146 18793 16808
10/00 24326 18349 16031
11/00 22226 17661 15292
12/00 23202 18289 15578
1/01 23513 18280 15534
2/01 20873 16909 13957
3/01 19351 15782 12991
4/01 20469 16879 13881
5/01 20101 16283 13322
6/01 19858 15617 12675
7/01 19397 15333 12367
8/01 18693 14944 11803
9/01 16940 13431 10686
10/01 17263 13775 11111
11/01 17436 14283 11682
12/01 17743 14367 11749
1/02 17040 13604 11116
2/02 17267 13699 11266
3/02 17992 14507 11746
4/02 18015 14536 11756
5/02 18206 14720 11779
6/02 17849 14134 11475
7/02 16041 12739 10252
8/02 16006 12710 10173
9/02 14316 11345 9287
10/02 14863 11955 9812
11/02 15100 12497 10101
12/02 14961 12077 9867
1/03 14411 11573 9378
2/03 14244 11307 9176
3/03 14016 11085 9079
4/03 14902 12172 9866
5/03 15800 12909 10375
6/03 16135 13221 10556
7/03 16208 13541 10694
8/03 16519 13868 10890
9/03 16902 14296 11258
10/03 17981 15187 11906
11/03 18340 15524 12184
12/03 19310 16737 13023
1/04 19924 16974 13277
2/04 20478 17366 13528
3/04 20429 17464 13539
4/04 20021 17068 13203
5/04 20201 17126 13169
6/04 20514 17501 13345
7/04 19876 16933 12803
8/04 20045 17008 12817
9/04 20803 17452 13133
10/04 21633 18048 13573
11/04 22956 19280 14508
12/04 23944 20126 15122
1/05 23556 19757 14774
2/05 24597 20611 15365
3/05 24075 20093 14989
4/05 23396 19620 14699
5/05 23591 19630 14743
6/05 24147 19890 14862
7/05 25152 20500 15315
===================================================================================================================================
===================================================================================================================================
[MOUNTAIN CHART]
8/05 25987 21018 15754
9/05 26616 21954 16417
10/05 25817 21313 15968
11/05 26773 21834 16269
12/05 28232 22850 17130
1/06 30327 24253 18186
2/06 30108 24200 17979
3/06 30996 24997 18674
4/06 32410 26191 19524
5/06 30802 25174 18698
6/06 30753 25172 18722
7/06 31070 25421 18809
8/06 32083 26120 19263
9/06 32253 26161 19155
10/06 33546 27178 19807
11/06 34921 27990 20384
12/06 36203 28869 20955
1/07 36522 29065 21124
2/07 36029 29299 21286
3/07 37491 30046 21992
4/07 39385 31380 22938
5/07 40527 31931 23397
6/07 40883 31970 23457
7/07 40356 31499 23267
8/07 40235 31007 23038
9/07 42400 32666 24473
10/07 44541 33949 25456
11/07 42229 32833 24933
12/07 41539 32094 24403
===================================================================================================================================
AIM V.I. International Growth Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-87.52%
AUSTRALIA-1.68%
BHP Billiton Ltd. (Diversified Metals &
Mining)(b) 605,852 $ 21,194,100
- --------------------------------------------------------------------------
Brambles Ltd. (Diversified Commercial &
Professional Services)(b) 468,661 4,711,687
==========================================================================
25,905,787
==========================================================================
BELGIUM-2.43%
InBev N.V. (Brewers)(b) 308,808 25,429,015
- --------------------------------------------------------------------------
KBC Groep N.V. (Diversified Banks)(b) 85,745 11,953,528
==========================================================================
37,382,543
==========================================================================
BRAZIL-0.67%
All America Latina Logistica (Railroads)(c) 805,800 10,327,616
==========================================================================
CANADA-3.25%
Canadian National Railway Co. (Railroads) 205,220 9,634,209
- --------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas
Exploration & Production) 161,653 11,828,308
- --------------------------------------------------------------------------
Manulife Financial Corp. (Life & Health
Insurance) 243,201 9,909,639
- --------------------------------------------------------------------------
Suncor Energy, Inc. (Integrated Oil & Gas) 171,775 18,657,216
==========================================================================
50,029,372
==========================================================================
DENMARK-1.14%
Novo Nordisk A.S.-Class B
(Pharmaceuticals)(b) 268,336 17,483,791
==========================================================================
FRANCE-6.28%
Axa (Multi-Line Insurance)(b) 393,754 15,648,886
- --------------------------------------------------------------------------
BNP Paribas (Diversified Banks)(b) 205,885 22,090,728
- --------------------------------------------------------------------------
Cap Gemini S.A. (IT Consulting & Other
Services)(b) 202,787 12,578,361
- --------------------------------------------------------------------------
Schneider Electric S.A. (Electrical
Components & Equipment)(b) 100,680 13,437,249
- --------------------------------------------------------------------------
Societe Generale (Diversified Banks)(b) 84,970 12,121,053
==========================================================================
Total S.A. (Integrated Oil & Gas)(b) 249,647 20,679,842
==========================================================================
96,556,119
==========================================================================
GERMANY-10.99%
Bayer A.G. (Diversified Chemicals)(b) 285,071 25,943,209
- --------------------------------------------------------------------------
Commerzbank A.G. (Diversified Banks)(b) 351,049 13,262,792
- --------------------------------------------------------------------------
Continental A.G. (Tires & Rubber)(b) 84,768 10,972,263
- --------------------------------------------------------------------------
Daimler A.G. (Automobile Manufacturers)(b) 253,770 24,535,354
- --------------------------------------------------------------------------
Deutsche Boerse A.G. (Specialized Finance)(b) 59,505 11,723,460
- --------------------------------------------------------------------------
MAN A.G. (Industrial Machinery)(b) 101,320 16,641,242
- --------------------------------------------------------------------------
Merck KGaA (Pharmaceuticals)(b) 120,399 15,437,797
- --------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)(b) 48,331 19,172,339
- --------------------------------------------------------------------------
Siemens A.G. (Industrial Conglomerates)(b) 199,926 31,328,275
==========================================================================
169,016,731
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
GREECE-0.75%
OPAP S.A. (Casinos & Gaming)(b) 288,360 $ 11,491,490
==========================================================================
HONG KONG-3.23%
Esprit Holdings Ltd. (Apparel Retail)(b) 1,185,800 17,428,041
- --------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Industrial
Conglomerates)(b) 1,816,000 20,424,834
- --------------------------------------------------------------------------
Li & Fung Ltd. (Distributors)(b) 2,948,000 11,780,714
==========================================================================
49,633,589
==========================================================================
HUNGARY-0.57%
OTP Bank Nyrt. (Diversified Banks)(b) 174,879 8,775,652
==========================================================================
INDIA-3.50%
Bharat Heavy Electricals Ltd. (Heavy
Electrical Equipment)(b) 331,126 21,625,641
- --------------------------------------------------------------------------
Housing Development Finance Corp. Ltd.
(Thrifts & Mortgage Finance)(b) 186,046 13,460,534
- --------------------------------------------------------------------------
Infosys Technologies Ltd. (IT Consulting &
Other Services)(b) 419,838 18,747,699
==========================================================================
53,833,874
==========================================================================
INDONESIA-0.72%
PT Telekomunikasi Indonesia-Series B
(Integrated Telecommunication Services) 10,262,000 11,080,777
==========================================================================
IRELAND-1.69%
Anglo Irish Bank Corp. PLC (Diversified
Banks)(b) 938,438 14,847,547
- --------------------------------------------------------------------------
CRH PLC (Construction Materials)(b)(d) 321,217 11,132,267
==========================================================================
25,979,814
==========================================================================
ISRAEL-1.98%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 655,387 30,462,388
==========================================================================
ITALY-1.98%
Eni S.p.A. (Integrated Oil & Gas)(b) 505,190 18,373,421
- --------------------------------------------------------------------------
Finmeccanica S.p.A. (Aerospace & Defense)(b) 380,379 12,034,356
==========================================================================
30,407,777
==========================================================================
JAPAN-10.54%
Canon Inc. (Office Electronics)(b) 468,700 21,466,935
- --------------------------------------------------------------------------
Denso Corp. (Auto Parts & Equipment)(b) 321,100 13,081,559
- --------------------------------------------------------------------------
FANUC Ltd. (Industrial Machinery) 213,000 20,794,473
- --------------------------------------------------------------------------
IBIDEN Co., Ltd. (Electronic Equipment
Manufacturers)(b) 323,600 22,405,722
- --------------------------------------------------------------------------
Keyence Corp. (Electronic Equipment
Manufacturers)(b) 47,000 11,541,990
- --------------------------------------------------------------------------
Komatsu Ltd. (Construction & Farm Machinery &
Heavy Trucks)(b) 796,600 21,590,673
- --------------------------------------------------------------------------
Mizuho Financial Group, Inc. (Diversified
Banks) (Acquired 10/24/05; Cost
$2,127,848)(b)(e) 354 1,683,461
- --------------------------------------------------------------------------
</Table>
AIM V.I. International Growth Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
JAPAN-(CONTINUED)
Mizuho Financial Group, Inc. (Diversified
Banks)(b) 1,401 $ 6,662,511
- --------------------------------------------------------------------------
ORIX Corp. (Consumer Finance)(b) 52,530 8,805,652
- --------------------------------------------------------------------------
Suzuki Motor Corp. (Automobile
Manufacturers)(b) 521,200 15,713,448
- --------------------------------------------------------------------------
Toyota Motor Corp. (Automobile
Manufacturers)(b) 341,500 18,425,812
==========================================================================
162,172,236
==========================================================================
MEXICO-2.13%
America Movil S.A.B de C.V.-Series L-ADR
(Wireless Telecommunication Services) 244,018 14,980,265
- --------------------------------------------------------------------------
Desarrolladora Homex S.A. de C.V.-ADR
(Homebuilding)(f) 144,713 7,156,058
- --------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 246,410 5,857,166
- --------------------------------------------------------------------------
Urbi, Desarrollos Urbanos, S.A. de C.V.
(Homebuilding)(f) 1,366,900 4,722,259
==========================================================================
32,715,748
==========================================================================
NETHERLANDS-2.38%
Heineken Holding N.V. (Brewers)(b) 262,699 14,773,242
- --------------------------------------------------------------------------
TNT N.V. (Air Freight & Logistics)(b) 525,359 21,821,161
==========================================================================
36,594,403
==========================================================================
NORWAY-0.84%
Petroleum Geo-Services A.S.A. (Oil & Gas
Equipment & Services)(b) 452,150 12,990,733
==========================================================================
SINGAPORE-2.65%
Keppel Corp. Ltd. (Industrial
Conglomerates)(b) 2,377,000 21,278,990
- --------------------------------------------------------------------------
United Overseas Bank Ltd. (Diversified
Banks)(b) 1,402,000 19,406,507
==========================================================================
40,685,497
==========================================================================
SOUTH AFRICA-0.80%
Standard Bank Group Ltd. (Diversified Banks) 852,301 12,328,390
==========================================================================
SOUTH KOREA-2.03%
Hana Financial Group Inc. (Diversified
Banks)(b) 319,660 17,303,147
- --------------------------------------------------------------------------
Hyundai Heavy Industries Co., Ltd.
(Construction & Farm Machinery & Heavy
Trucks)(b) 29,969 13,945,965
==========================================================================
31,249,112
==========================================================================
SPAIN-0.85%
Banco Santander S.A. (Diversified Banks) 602,681 13,008,138
==========================================================================
SWEDEN-2.41%
Assa Abloy A.B.-Class B (Building
Products)(b) 685,504 13,634,067
- --------------------------------------------------------------------------
Atlas Copco A.B.-Class A (Industrial
Machinery)(b)(f) 661,000 9,755,720
- --------------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(b) 573,339 13,638,257
==========================================================================
37,028,044
==========================================================================
SWITZERLAND-8.72%
Adecco S.A. (Human Resource & Employment
Services)(b) 108,043 5,787,212
- --------------------------------------------------------------------------
Compagnie Financiere Richemont S.A.-Class A
(Apparel, Accessories & Luxury Goods)(b)(g) 220,070 14,997,584
- --------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
SWITZERLAND-(CONTINUED)
Credit Suisse Group (Diversified Capital
Markets) 225,114 $ 13,525,907
- --------------------------------------------------------------------------
Nestle S.A. (Packaged Foods & Meats)(b) 51,281 23,471,738
- --------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(b) 182,546 31,409,118
- --------------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(b) 123,848 31,388,717
- --------------------------------------------------------------------------
UBS A.G. (Diversified Capital Markets)(b) 291,413 13,518,123
==========================================================================
134,098,399
==========================================================================
TAIWAN-2.85%
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services)(b) 3,692,141 22,811,563
- --------------------------------------------------------------------------
MediaTek Inc. (Semiconductors)(b) 1,161,785 14,953,451
- --------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-
ADR (Semiconductors)(d) 616,715 6,142,481
==========================================================================
43,907,495
==========================================================================
TURKEY-0.78%
Akbank T.A.S. (Diversified Banks)(b) 1,612,169 11,966,629
==========================================================================
UNITED KINGDOM-9.68%
Aviva PLC (Multi-Line Insurance)(b) 859,761 11,398,265
- --------------------------------------------------------------------------
Capita Group PLC (Human Resource & Employment
Services)(b) 866,371 12,092,182
- --------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(b) 487,614 4,688,428
- --------------------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco)(b) 418,494 22,742,272
- --------------------------------------------------------------------------
Informa PLC (Publishing)(b) 1,373,288 12,538,177
- --------------------------------------------------------------------------
International Power PLC (Independent Power
Producers & Energy Traders)(b) 1,837,145 16,460,880
- --------------------------------------------------------------------------
Reckitt Benckiser Group PLC (Household
Products)(b) 283,824 16,365,723
- --------------------------------------------------------------------------
Shire PLC (Pharmaceuticals)(b) 638,707 14,646,382
- --------------------------------------------------------------------------
Tesco PLC (Food Retail)(b) 1,481,875 13,966,879
- --------------------------------------------------------------------------
WPP Group PLC (Advertising)(b) 1,878,423 24,004,196
==========================================================================
148,903,384
==========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $1,057,349,063) 1,346,015,528
==========================================================================
FOREIGN PREFERRED STOCKS-5.02%
BRAZIL-1.54%
Companhia de Bebidas das Americas-Pfd.-ADR
(Brewers)(d) 154,355 10,963,835
- --------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Pfd.-ADR (Integrated
Oil & Gas) 132,281 12,728,078
==========================================================================
23,691,913
==========================================================================
GERMANY-3.48%
Henkel KGaA-Pfd. (Household Products)(b) 426,074 23,839,588
- --------------------------------------------------------------------------
Porsche Automobil Holding S.E.-Pfd.
(Automobile Manufacturers)(b) 14,755 29,679,298
==========================================================================
53,518,886
==========================================================================
Total Foreign Preferred Stocks (Cost
$49,464,555) 77,210,799
==========================================================================
</Table>
AIM V.I. International Growth Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
MONEY MARKET FUNDS-7.64%
Liquid Assets Portfolio-Institutional
Class(h) 58,718,289 $ 58,718,289
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(h) 58,718,289 58,718,289
==========================================================================
Total Money Market Funds (Cost
$117,436,578) 117,436,578
==========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.18% (Cost
$1,224,250,196) 1,540,662,905
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-0.21%
Liquid Assets Portfolio-Institutional Class
(Cost $3,315,553)(h)(i) 3,315,553 3,315,553
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
TOTAL INVESTMENTS-100.39% (Cost
$1,227,565,749) $1,543,978,458
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.39)% (5,993,609)
- --------------------------------------------------------------------------
NET ASSETS-100.00% $1,537,984,849
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) 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.
(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 December 31, 2007 was $1,199,119,124,
which represented 77.97% of the Fund's Net Assets. See Note 1A.
(c) Each unit represents one common share and four preferred shares.
(d) All or a portion of this security was out on loan at December 31, 2007.
(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 December 31, 2007 represented 0.11% of the
Fund's Net Assets. Unless otherwise indicated, this security is not
considered to be illiquid.
(f) Non-income producing security.
(g) Each unit represents one A bearer share in the company and one bearer share
participation certificate in Richemont S.A.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(i) 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. International Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $1,106,813,618)* $1,423,226,327
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $120,752,131) 120,752,131
- -------------------------------------------------------------
Total investments (Cost $1,227,565,749) 1,543,978,458
- -------------------------------------------------------------
Foreign currencies, at value (Cost
$1,247,607) 1,333,303
- -------------------------------------------------------------
Receivables for:
Fund shares sold 2,124,674
- -------------------------------------------------------------
Dividends 1,648,390
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 55,075
- -------------------------------------------------------------
Other assets 190
=============================================================
Total assets 1,549,140,090
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 3,729,043
- -------------------------------------------------------------
Fund shares reacquired 1,294,820
- -------------------------------------------------------------
Amount due custodian 6,458
- -------------------------------------------------------------
Trustee deferred compensation and
retirement plans 98,372
- -------------------------------------------------------------
Collateral upon return of securities loaned 3,315,553
- -------------------------------------------------------------
Accrued administrative services fees 903,885
- -------------------------------------------------------------
Accrued distribution fees -- Series II 446,623
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 807
- -------------------------------------------------------------
Accrued transfer agent fees 4,716
- -------------------------------------------------------------
Accrued operating expenses 1,354,964
=============================================================
Total liabilities 11,155,241
=============================================================
Net assets applicable to shares outstanding $1,537,984,849
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,194,009,370
- -------------------------------------------------------------
Undistributed net investment income 7,026,310
- -------------------------------------------------------------
Undistributed net realized gain 20,528,440
- -------------------------------------------------------------
Unrealized appreciation 316,420,729
=============================================================
$1,537,984,849
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $ 792,778,938
_____________________________________________________________
=============================================================
Series II $ 745,205,911
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 23,575,658
_____________________________________________________________
=============================================================
Series II 22,421,707
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 33.63
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 33.24
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $3,169,568 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$1,872,414) $ 18,492,594
- -------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$452,596) 4,313,308
=============================================================
Total investment income 22,805,902
=============================================================
EXPENSES:
Advisory fees 7,664,516
- -------------------------------------------------------------
Administrative services fees 2,831,605
- -------------------------------------------------------------
Custodian fees 810,767
- -------------------------------------------------------------
Distribution fees -- Series II 1,024,030
- -------------------------------------------------------------
Transfer agent fees 53,187
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 43,907
- -------------------------------------------------------------
Other 101,942
=============================================================
Total expenses 12,529,954
=============================================================
Less: Fees waived and expense offset
arrangement(s) (70,907)
=============================================================
Net expenses 12,459,047
=============================================================
Net investment income 10,346,855
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (net of tax on the sale
of foreign investments of $36,526 -- Note
II) 42,492,367
- -------------------------------------------------------------
Foreign currencies (104,707)
=============================================================
42,387,660
=============================================================
Change in net unrealized appreciation of:
Investment securities (net of change in
estimated tax on foreign investments held
of $1,124,375 -- Note II) 53,557,736
- -------------------------------------------------------------
Foreign currencies 10,122
=============================================================
53,567,858
=============================================================
Net realized and unrealized gain 95,955,518
=============================================================
Net increase in net assets resulting from
operations $106,302,373
_____________________________________________________________
=============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 10,346,855 $ 5,082,538
- --------------------------------------------------------------------------------------------
Net realized gain 42,387,660 36,770,565
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation 53,567,858 106,359,912
============================================================================================
Net increase in net assets resulting from operations 106,302,373 148,213,015
============================================================================================
Distributions to shareholders from net investment income:
Series I (3,152,708) (5,173,427)
- --------------------------------------------------------------------------------------------
Series II (2,719,089) (1,205,499)
============================================================================================
Decrease in net assets resulting from distributions (5,871,797) (6,378,926)
============================================================================================
Share transactions-net:
Series I 149,884,993 317,895
- --------------------------------------------------------------------------------------------
Series II 560,552,308 85,698,882
============================================================================================
Net increase in net assets resulting from share
transactions 710,437,301 86,016,777
============================================================================================
Net increase in net assets 810,867,877 227,850,866
============================================================================================
NET ASSETS:
Beginning of year 727,116,972 499,266,106
============================================================================================
End of year (including undistributed net investment income
of $7,026,310 and $2,692,485, respectively) $1,537,984,849 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 Ltd. ("Invesco") 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 year ended December 31, 2007, AIM waived advisory fees of $69,947.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$257,727 for accounting and fund administrative services and reimbursed
$2,573,878 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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $22,755,651 $299,297,371 $(263,334,733) $ 58,718,289 $1,930,516
- --------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 22,755,651 299,297,371 (263.334,733) 58,718,289 1,930,196
==================================================================================================
Subtotal $45,511,302 $598,594,742 $(526,669,466) $117,436,578 $3,860,712
__________________________________________________________________________________________________
==================================================================================================
</Table>
AIM V.I. International Growth Fund
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 28,210,678 $ 445,114,612 $ (470,009,737) $ 3,315,553 $ 311,878
- --------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 28,210,678 184,987,456 (213,198,134) -- 140,718
==================================================================================================
Subtotal $ 56,421,356 $ 630,102,068 $ (683,207,871) $ 3,315,553 $ 452,596
==================================================================================================
Total
Investments
in
Affiliates $101,932,658 $1,228,696,810 $(1,209,877,337) $120,752,131 $4,313,308
__________________________________________________________________________________________________
==================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities purchases of $6,992,473.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $960.
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 year ended December 31, 2007, the Fund paid legal fees of $6,021
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 SEC, 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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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
AIM V.I. International Growth Fund
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 December 31, 2007, securities with an aggregate value of $3,169,568 were
on loan to brokers. The loans were secured by cash collateral of $3,315,553
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $452,596 for securities lending transactions, which
are net of compensation to counterparties.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from ordinary income $5,871,797 $6,378,926
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ------------------------------------------------------------------------------
Undistributed ordinary income $ 10,180,926
- ------------------------------------------------------------------------------
Undistributed long-term gain 21,483,315
- ------------------------------------------------------------------------------
Net unrealized appreciation -- investments 312,485,051
- ------------------------------------------------------------------------------
Temporary book/tax differences (89,833)
- ------------------------------------------------------------------------------
Post-October currency loss deferral (83,980)
- ------------------------------------------------------------------------------
Shares of beneficial interest 1,194,009,370
==============================================================================
Total net assets $1,537,984,849
______________________________________________________________________________
==============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the recognition of unrealized gains for tax purposes on passive foreign
investment companies. The tax-basis net unrealized appreciation on investments
amount includes appreciation on foreign currencies of $8,021.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 utilized $20,815,286 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund does not have a capital loss carryforward as of December 31, 2007.
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 year ended December 31, 2007 was $855,239,734 and
$205,985,556, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $330,437,226
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (17,960,196)
==============================================================================
Net unrealized appreciation of investment securities $312,477,030
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,231,501,428.
</Table>
AIM V.I. International Growth Fund
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and foreign capital gain taxes, on December 31, 2007, undistributed
net investment income was decreased by $141,233 and undistributed net realized
gain was increased by $141,233. This reclassification had no effect on the net
assets of the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2007(A) 2006
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 9,094,637 $ 298,953,566 5,527,297 $ 145,984,568
- ------------------------------------------------------------------------------------------------------------------------
Series II 18,926,292 627,011,734 4,213,039 111,448,899
========================================================================================================================
Issued as reinvestment of dividends:
Series I 90,543 3,152,708 172,402 4,966,887
- ------------------------------------------------------------------------------------------------------------------------
Series II 78,997 2,719,089 42,239 1,205,499
========================================================================================================================
Reacquired:
Series I (4,751,273) (152,221,281) (5,743,301) (150,633,560)
- ------------------------------------------------------------------------------------------------------------------------
Series II (2,196,518) (69,178,515) (1,018,904) (26,955,516)
========================================================================================================================
21,242,678 $ 710,437,301 3,192,772 $ 86,016,777
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 44% 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--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s):
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. International Growth 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
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.44 $ 23.17 $ 19.77 $ 16.04 $ 12.49
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.34 0.23 0.23 0.15 0.09
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.98 6.32 3.31 3.70 3.54
=========================================================================================================================
Total from investment operations 4.32 6.55 3.54 3.85 3.63
=========================================================================================================================
Less dividends from net investment income (0.13) (0.28) (0.14) (0.12) (0.08)
=========================================================================================================================
Net asset value, end of period $ 33.63 $ 29.44 $ 23.17 $ 19.77 $ 16.04
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 14.68% 28.28% 17.93% 24.00% 29.06%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $792,779 $563,460 $444,608 $346,605 $290,680
=========================================================================================================================
Ratio of expenses to average net assets 1.06%(c)(d) 1.10% 1.11% 1.14% 1.10%
=========================================================================================================================
Ratio of net investment income to average net assets 1.06%(c) 0.90% 1.11% 0.90% 0.69%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 20% 34% 36% 48% 79%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 based on average daily net assets of $667,461,477.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.07% for the year ended December 31, 2007.
<Table>
<Caption>
SERIES II
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.16 $ 23.00 $ 19.65 $ 15.97 $ 12.45
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.26 0.17 0.18 0.11 0.06
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.94 6.25 3.30 3.66 3.51
======================================================================================================================
Total from investment operations 4.20 6.42 3.48 3.77 3.57
======================================================================================================================
Less dividends from net investment income (0.12) (0.26) (0.13) (0.09) (0.05)
======================================================================================================================
Net asset value, end of period $ 33.24 $ 29.16 $ 23.00 $ 19.65 $ 15.97
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 14.41% 27.92% 17.70% 23.63% 28.68%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $745,206 $163,657 $54,658 $21,497 $10,972
======================================================================================================================
Ratio of expenses to average net assets 1.31%(c)(d) 1.35% 1.36% 1.39% 1.35%
======================================================================================================================
Ratio of net investment income to average net assets 0.81%(c) 0.65% 0.86% 0.65% 0.44%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 20% 34% 36% 48% 79%
______________________________________________________________________________________________________________________
======================================================================================================================
</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 based on average daily net assets of $409,612,185.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.32% for the year ended December 31, 2007.
AIM V.I. International Growth 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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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. International Growth Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds and Shareholders of
AIM V. I. International Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. International Growth Fund
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those financial
highlights.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. International Growth Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,015.70 $5.44 $1,019.81 $5.45 1.07%
Series II 1,000.00 1,014.70 6.70 1,018.55 6.72 1.32
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. International Growth Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received Deduction* 0.00%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
FOREIGN TAX CREDIT
For the fiscal year ended December 31, 2007, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $0.4836 per share (representing a total of $21,616,021). Of the
foreign source income, $0.3851 per share is considered qualified dividend
income. Foreign source income with the required adjustments for qualified
dividends is $0.2641 per share. The amount of taxes paid by the Fund to such
countries for the fiscal year end December 31, 2007 was $0.0260 per share
(representing a total of $1,162,416). The following table provides a breakdown
by country of ordinary income received and foreign taxes paid by the fund during
the fiscal year ended December 31, 2007. The per share amount is based on
shareholders of record on December 10, 2007
<Table>
<Caption>
FOREIGN SOURCE FOREIGN TAX FOREIGN QUALIFIED ADJUSTED FOREIGN
INCOME PAID DIVIDEND SOURCE INCOME
COUNTRY % % % %
- -----------------------------------------------------------------------------------------------------------------
Australia 2.61% 0.00% 2.77% 2.47%
- -----------------------------------------------------------------------------------------------------------------
Austria 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------
Belgium 2.10% 3.32% 1.72% 2.42%
- -----------------------------------------------------------------------------------------------------------------
Brazil 2.10% 1.49% 2.64% 1.66%
- -----------------------------------------------------------------------------------------------------------------
Canada 2.00% 4.85% 2.51% 1.57%
- -----------------------------------------------------------------------------------------------------------------
China 0.32% 0.00% 0.40% 0.25%
- -----------------------------------------------------------------------------------------------------------------
Denmark 0.52% 0.50% 0.26% 0.73%
- -----------------------------------------------------------------------------------------------------------------
France 11.92% 21.11% 10.95% 12.72%
- -----------------------------------------------------------------------------------------------------------------
Germany 7.26% 8.17% 4.23% 9.79%
- -----------------------------------------------------------------------------------------------------------------
Greece 2.37% 0.00% 2.98% 1.87%
- -----------------------------------------------------------------------------------------------------------------
Hong Kong 3.27% 0.00% 4.11% 2.58%
- -----------------------------------------------------------------------------------------------------------------
Hungary 0.48% 0.00% 0.60% 0.38%
- -----------------------------------------------------------------------------------------------------------------
India 1.05% 0.00% 1.32% 0.83%
- -----------------------------------------------------------------------------------------------------------------
Indonesia 1.08% 2.61% 1.35% 0.85%
- -----------------------------------------------------------------------------------------------------------------
Ireland 1.91% 0.00% 2.40% 1.50%
- -----------------------------------------------------------------------------------------------------------------
Israel 0.84% 2.17% 1.05% 0.66%
- -----------------------------------------------------------------------------------------------------------------
Italy 3.57% 6.60% 3.41% 3.71%
- -----------------------------------------------------------------------------------------------------------------
Japan 7.01% 7.32% 8.23% 6.00%
- -----------------------------------------------------------------------------------------------------------------
Mexico 3.06% 0.00% 3.61% 2.61%
- -----------------------------------------------------------------------------------------------------------------
Netherlands 1.20% 1.13% 0.59% 1.72%
- -----------------------------------------------------------------------------------------------------------------
Norway 2.68% 0.00% 1.05% 4.04%
- -----------------------------------------------------------------------------------------------------------------
Russia 0.39% 1.06% 0.50% 0.31%
- -----------------------------------------------------------------------------------------------------------------
Singapore 2.56% 0.00% 3.21% 2.02%
- -----------------------------------------------------------------------------------------------------------------
South Africa 1.32% 0.00% 1.65% 1.04%
- -----------------------------------------------------------------------------------------------------------------
South Korea 1.19% 3.13% 1.49% 0.94%
- -----------------------------------------------------------------------------------------------------------------
Spain 3.13% 7.60% 3.94% 2.47%
- -----------------------------------------------------------------------------------------------------------------
Sweden 8.60% 15.59% 8.07% 9.04%
- -----------------------------------------------------------------------------------------------------------------
Switzerland 8.79% 0.00% 4.08% 12.70%
- -----------------------------------------------------------------------------------------------------------------
Taiwan 4.03% 11.97% 5.06% 3.17%
- -----------------------------------------------------------------------------------------------------------------
Turkey 1.08% 1.38% 1.35% 0.85%
- -----------------------------------------------------------------------------------------------------------------
United Kingdom 11.56% 0.00% 14.47% 9.10%
- -----------------------------------------------------------------------------------------------------------------
United States 0.00% 0.00% 0.00% 0.00%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
AIM V.I. International Growth Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. International Growth Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.,
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Large-Cap Growth
AIM V.I. Large Cap
Growth Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. LARGE CAP GROWTH FUND's investment
determine how to vote proxies objective is long-term growth of capital.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
Us tab, click on Required Notices and IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
then click on Proxy Voting Activity.
Next, select the Fund from the
drop-down menu. The information is UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
also available on the SEC Web site, ARE FROM A I M MANAGEMENT GROUP INC.
sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Large Cap Growth Fund
Management's discussion of Fund performance o Risk assessment--avoid "high risk"
companies as defined below
=======================================================================================
PERFORMANCE SUMMARY Our fundamental analysis seeks to
determine the company's drivers of
For the 12 months ended December 31, 2007, AIM V.I. Large Cap Growth Fund, excluding earnings. To accomplish this goal, we
variable product issuer charges, produced double-digit returns and outperformed the S&P examine financial statements and analyze
500 Index and the Russell 1000 Growth Index. trends, growth rates and the competitive
landscape. We meet with company management
The Fund outperformed its broad market and style-specific indexes largely due to to evaluate proprietary products and the
strong stock selection in the industrials, telecommunication services and materials quality of management. We believe stocks
sectors. An underweight position in financial stocks also contributed to outperformance that pass our quantitative and fundamental
versus the S&P 500 Index. screens are more likely to outperform.
Your Fund's long-term performance appears later in this report. We construct the portfolio using a
bottom-up strategy, focusing on individual
FUND VS. INDEXES stocks. While there are no formal sector
guidelines or constraints, internal
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If controls and proprietary software help us
variable product issuer charges were included, returns would be lower. monitor risk levels and sector
concentration.
Series I Shares 15.64%
Series II Shares 15.30 We believe disciplined sell decisions
S&P 500 Index(triangle) (Broad Market Index) 5.49 are integral to successful investing, so
Russell 1000 Growth Index(triangle) (Style-Specific Index) 11.81 we consider selling stocks based on:
Lipper VUF Large-Cap Growth Funds Index(triangle) (Peer Group Index) 14.44
Lipper Large-Cap Growth Funds Index(triangle) (Former Peer Group Index) 14.97 o Deteriorating business prospects.
SOURCES: (triangle)LIPPER INC. o Extended valuation.
=======================================================================================
o Slowing earnings growth.
How we invest correlated with outperformance in the
large-cap growth universe, including: o Weakened balance sheet.
We believe a growth investment strategy is
an essential component of a diversified o Earnings--focus on companies exhibiting Market conditions and your Fund
portfolio. Our investment process combines strong growth in earnings, revenue and
quantitative and fundamental analysis to cash flows Despite high market volatility late in the
uncover companies exhibiting long-term, year, major U.S. equity markets finished
sustainable earnings and cash flow growth o Quality--focus on companies with the year in positive territory.(1) In the
that is not yet reflected in investor sustainable earnings growth; focus on first part of the year, strong economic
expectations or equity valuations. companies with management teams that growth, favorable corporate earnings and
profitably reinvest shareholder cash flow increased merger and acquisition activity
Our quantitative model ranks companies drove equity markets higher. However,
based on factors we have found to be o Valuation--focus on companies that are concerns about the credit markets,
highly attractively valued given their growth
potential
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Aerospace & Defense 10.2% 1. Hewlett-Packard Co. 4.6%
Information Technology 32.5% 2. Computer Hardware 9.9 2. Cisco Systems, Inc. 3.6
Industrials 17.3 3. Communications Equipment 7.2 3. Lockheed Martin Corp. 3.5
Health Care 16.7 4. Systems Software 5.4 4. Apple Inc. 3.3
Financials 7.3 5. Managed Health Care 4.7 5. Accenture Ltd.-Class A 2.6
Energy 6.2 6. Goldman Sachs Group, Inc. (The) 2.6
Materials 5.1 Total Net Assets $130.33 million 7. ABB Ltd. 2.6
Consumer Discretionary 5.0 8. Microsoft Corp. 2.5
Telecommunication Services 3.8 Total Number of Holdings* 69 9. WellPoint Inc. 2.1
Consumer Staples 3.5 10. McKesson Corp. 2.1
Utilities 1.0
Money Market Funds Plus
Other Assets Less Liabilities 1.6
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Large Cap Growth Fund
continued weakness in housing and rising and an overweight position in metals and The views and opinions expressed in
oil prices weighed heavily on investor mining stocks. In this area, holdings that management's discussion of Fund
sentiment during much of the second half performed well included FREEPORT MCMORAN performance are those of A I M Advisors,
of the year. and RIO TINTO. Chemicals holdings SYNGENTA Inc. These views and opinions are subject
and MOSAIC also made solid contributions to change at any time based on factors
In this environment, large- and mid-cap to performance. such as market and economic conditions.
stocks generally outperformed small-cap These views and opinions may not be relied
stocks.1 Additionally, growth stocks The Fund underperformed the Russell upon as investment advice or
generally outperformed value stocks.(1) 1000 Growth Index in the financials, recommendations, or as an offer for a
With the exception of the financials, information technology (IT) and consumer particular security. The information is
consumer discretionary and staples sectors. Many financials stocks not a complete analysis of every aspect of
telecommunication services sectors, faced selling pressure late in the year any market, country, industry, security or
positive performance was broad among due to concerns about sub-prime issues. In the Fund. Statements of fact are from
Russell 1000 Growth Index sectors with this environment, the Fund's overweight sources considered reliable, but A I M
the best returns found in the materials, position in capital markets and insurance Advisors, Inc. makes no representation or
energy and utilities sectors. stocks hurt performance relative to the warranty as to their completeness or
benchmark index. Examples of holdings that accuracy. Although historical performance
The Fund enjoyed strong absolute and detracted from performance included LEHMAN is no guarantee of future results, these
relative performance during the year, led BROTHERS and MORGAN STANLEY, both of which insights may help you understand our
by significant contributions from holdings we sold due to deteriorating fundamentals. investment management philosophy.
in the industrials, telecommunication
services and materials sectors. An While the Fund underperformed the Geoffrey V. Keeling
underweight position in the consumer Russell 1000 Growth Index in the IT [KEELING Chartered Financial Analyst,
discretionary sector also contributed to sector, several IT holdings made solid PHOTO] senior portfolio manager, is
outperformance, as many consumer stocks contributions to the Fund's absolute co-manager of AIM V.I. Large
struggled late in the year. performance. These included APPLE, NOKIA Cap Growth Fund. He joined AIM in 1995 and
and GOOGLE. Much of the Fund's assumed his present responsibilities in
The industrials sector benefited from a underperformance versus the Russell 1000 1999. Mr. Keeling earned a B.B.A. in
broad-based rally during much of the year, Growth Index was due to stock selection in finance from The University of Texas at
and the Fund outperformed the benchmark the software industry, where holdings such Austin.
Russell 1000 Growth in this sector due to as AMDOCS detracted from performance. Two
strong stock selection. Specific areas of other key detractors in the IT sector Robert L. Shoss
strength for the Fund included electrical included DELL and MOTOROLA. While we sold [SHOSS Senior portfolio manager, is
equipment and engineering and Amdocs and Motorola, we continued to own PHOTO] co-manager of AIM V.I. Large
construction, two industries that Dell at the close of the year. Cap Growth Fund. He joined
continued to benefit from global economic AIM in 1995 and assumed his present
expansion. Two holdings in these Underperformance in the consumer responsibilities in 1999. Mr. Shoss earned
industries that made significant staples sector was due to both stock a B.A. from The University of Texas at
contributions during the year included selection and an underweight position. Austin and an M.B.A. and a J.D. from the
electrical equipment maker ABB LIMITED and University of Houston.
engineering and construction firm Our investment process led us to reduce
MCDERMOTT INTERNATIONAL. Several of the our exposure to the consumer Assisted by the Large/Multi-Cap Growth
Fund's aerospace and defense holdings also discretionary, financials and consumer Team
made key contributions to performance. staples sectors due to concerns about
growth prospects. Proceeds from these
Outperformance in the telecommunication sales were primarily invested in IT,
services sector was driven by both stock energy and industrials stocks.
selection and an overweight position. In
this sector, two of the Fund's foreign We are pleased to have provided
wireless holdings were among the top five positive returns for our investors for the
contributors to performance for the year: year by focusing on attractively priced
CHINA MOBILE and AMERICA MOVIL. These two stocks of large-cap companies with the
companies have been successful in rolling potential for sustainable cash flow and
out wireless service to expanding markets earnings growth. We thank you for your ==========================================
in China and Latin America, respectively. commitment to AIM V.I. Large Cap Growth FOR A DISCUSSION OF THE RISKS OF INVESTING
Fund. IN YOUR FUND, INDEXES USED IN THIS REPORT
Many materials stocks performed well AND YOUR FUND'S LONG-TERM PERFORMANCE,
during the reporting period, driven Source: (1)Lipper Inc. PLEASE TURN THE PAGE.
largely by strong global demand for =========================================
commodities. The Fund benefited from
strong stock selection
AIM V.I. Large Cap Growth Fund
Your Fund's long-term performance
========================================== HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. VALUES. THEY DO NOT REFLECT SALES CHARGES,
AVERAGE ANNUAL TOTAL RETURNS EXPENSES AND FEES ASSESSED IN CONNECTION
THE NET ANNUAL FUND OPERATING EXPENSE WITH A VARIABLE PRODUCT. SALES CHARGES,
As of 12/31/07 RATIO SET FORTH IN THE MOST RECENT FUND EXPENSES AND FEES, WHICH ARE DETERMINED BY
SERIES I SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT THE VARIABLE PRODUCT ISSUERS, WILL VARY
Inception (8/29/03) 11.38% FOR SERIES I AND SERIES II SHARES WAS AND WILL LOWER THE TOTAL RETURN.
1 Year 15.64 1.02% AND 1.27%, RESPECTIVELY.(1) THE
TOTAL ANNUAL FUND OPERATING EXPENSE RATIO THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARES SET FORTH IN THE MOST RECENT FUND DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
Inception (8/29/03) 11.16% PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
1 Year 15.30 FOR SERIES I AND SERIES II SHARES WAS AUTOMATED INFORMATION LINE, 866-702-4402.
1.17% AND 1.42%, RESPECTIVELY. THE EXPENSE
========================================== RATIOS PRESENTED ABOVE MAY VARY FROM THE AS MENTIONED ABOVE, FOR THE MOST RECENT
EXPENSE RATIOS PRESENTED IN OTHER SECTIONS MONTH-END PERFORMANCE INCLUDING VARIABLE
THE PERFORMANCE OF THE FUND'S SERIES I AND OF THIS REPORT THAT ARE BASED ON EXPENSES PRODUCT CHARGES, PLEASE CONTACT YOUR
SERIES II SHARE CLASSES WILL DIFFER INCURRED DURING THE PERIOD COVERED BY THIS VARIABLE PRODUCT ISSUER OR FINANCIAL
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. REPORT. ADVISOR.
AIM V.I. LARGE CAP GROWTH FUND, A HAD THE ADVISOR NOT WAIVED FEES AND/OR
THE PERFORMANCE DATA QUOTED REPRESENT SERIES PORTFOLIO OF AIM VARIABLE INSURANCE REIMBURSED EXPENSES IN THE PAST,
PAST PERFORMANCE AND CANNOT GUARANTEE FUNDS, IS CURRENTLY OFFERED THROUGH PERFORMANCE WOULD HAVE BEEN LOWER.
COMPARABLE FUTURE RESULTS; CURRENT INSURANCE COMPANIES ISSUING VARIABLE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE PRODUCTS. YOU CANNOT PURCHASE SHARES OF (1) Total annual operating expenses less
CONTACT YOUR VARIABLE PRODUCT ISSUER OR THE FUND DIRECTLY. PERFORMANCE FIGURES any contractual fee waivers and/or
FINANCIAL ADVISOR FOR THE MOST RECENT GIVEN REPRESENT THE FUND AND ARE NOT expense reimbursements by the advisor
MONTH-END VARIABLE PRODUCT PERFORMANCE. INTENDED TO REFLECT ACTUAL VARIABLE in effect through at least April 30,
PERFORMANCE FIGURES REFLECT FUND EXPENSES, PRODUCT 2009. See current prospectus for more
REINVESTED DISTRIBUTIONS AND CHANGES IN information.
NET ASSET VALUE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU
MAY
====================================================================================================================================
Principal risks of investing in the Fund The Fund invests in synthetic The Fund has elected to use the Lipper
instruments, the value of which may not Variable Underlying Funds (VUF) Large-Cap
Investing in developing countries can add correlate perfectly with the overall Growth Funds Index as its peer group
additional risk, such as high rates of securities markets. Rising interest rates instead of the Lipper Large-Cap Growth
inflation or sharply devalued currencies and market price fluctuations will affect Funds Index. In 2006, Lipper began
against the U.S. dollar. Transaction costs the performance of the Fund's investments publishing VUF indexes, allowing the Fund
are often higher, and there may be delays in synthetic instruments. to be compared with the Lipper VUF
in settlement procedures. Large-Cap Growth Funds Index. The
About indexes used in this report unmanaged Lipper VUF Large-Cap Growth
Prices of equity securities change in Funds Index is an equally weighted
response to many factors including the The S&P 500--REGISTERED TRADEMARK-- INDEX representation of the largest variable
historical and prospective earnings of the is a market capitalization-weighted index insurance underlying funds in the Lipper
issuer, the value of its assets, general covering all major areas of the U.S. Large-Cap Growth Funds category. These
economic conditions, interest rates, economy. It is not the 500 largest funds typically have an above-average
investor perceptions and market liquidity. companies, but rather the most widely held price-to-earnings ratio, price-to-book
500 companies chosen with respect to ratio, and three-year sales-per-share
Foreign securities have additional market size, liquidity, and their growth value compared to the S&P 500
risks, including exchange rate changes, industry. Index.
political and economic upheaval, the
relative lack of information, relatively The Russell 1000--REGISTERED THE LIPPER LARGE-CAP GROWTH FUNDS INDEX
low market liquidity, and the potential TRADEMARK-- GROWTH INDEX measures the is an equally weighted representation of
lack of strict financial and accounting performance of those Russell 1000 the largest funds in the Lipper Large-Cap
controls and standards. companies with higher price-to-book ratios Growth Funds category. These funds
and higher forecasted growth values. The typically have an above-average
There is no guarantee that the Russell 1000 Growth Index is a price-to-earnings ratio, price-to-book
investment techniques and risk analyses trademark/service mark of the Frank ratio, and three-year sales-per-share
used by the Fund's portfolio managers will Russell Company. RUSSELL--REGISTERED growth value, compared to the S&P 500
produce the desired results. TRADEMARK-- is a trademark of the Frank Index.
Russell Company.
Continued
AIM V.I. Large Cap Growth Fund
Past performance cannot guarantee comparable future results.
====================================================================================================================================
Continued from previous page
The Fund is not managed to track the returns reported in the Financial
performance of any particular index, Highlights. Additionally, the returns and
including the indexes defined here, and net asset values shown throughout this
consequently, the performance of the Fund report are at the Fund level only and do
may deviate significantly from the not include variable product issuer
performance of the indexes. charges. If such charges were included,
the total returns would be lower.
A direct investment cannot be made in
an index. Unless otherwise indicated, Industry classifications used in this
index results include reinvested report are generally according to the
dividends, and they do not reflect sales Global Industry Classification Standard,
charges. Performance of an index of funds which was developed by and is the
reflects fund expenses; performance of a exclusive property and a service mark of
market index does not. Morgan Stanley Capital International Inc.
and Standard & Poor's.
Other information
The Chartered Financial
The returns shown in the management's Analyst--REGISTERED TRADEMARK--
discussion of Fund performance are based (CFA--REGISTERED TRADEMARK--) des-
on net asset values calculated for ignation is a globally recognized standard
shareholder transactions. Generally for measuring the competence and integrity
accepted accounting principles require of investment professionals.
adjustments to be made to the net assets
of the Fund at period end for financial
reporting purposes, and as such, the net
asset values for shareholder transactions
and the returns based on those net asset
values may differ from the net asset
values and
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 8/29/03, INDEX DATA FROM 8/31/03
AIM V.I. LARGE CAP AIM V.I. LARGE CAP
GROWTH GROWTH RUSSELL 1000 LIPPER VUF LARGE-CAP LIPPER LARGE-CAP
FUND-SERIES I FUND-SERIES II GROWTH GROWTH GROWTH
DATE SHARES SHARES S&P 500 INDEX(1) INDEX(1) FUNDS INDEX(1) FUNDS INDEX(1)
8/29/03 $10000 $10000
8/03 10000 10000 $10000 $10000 $10000 $10000
9/03 9840 9840 9894 9893 9786 9787
10/03 10610 10610 10454 10449 10392 10381
11/03 10830 10830 10545 10558 10475 10480
12/03 10917 10911 11098 10923 10848 10775
1/04 11107 11101 11302 11146 11020 10982
2/04 11117 11111 11459 11217 11060 11029
3/04 11177 11171 11286 11009 10964 10906
4/04 10916 10911 11109 10881 10729 10661
5/04 11257 11241 11261 11084 10920 10854
6/04 11457 11442 11480 11222 11115 11010
7/04 10777 10761 11100 10588 10481 10359
8/04 10676 10661 11145 10536 10427 10286
9/04 10987 10971 11265 10636 10665 10527
10/04 10958 10941 11437 10802 10844 10654
11/04 11569 11542 11900 11173 11306 11129
12/04 11909 11881 12305 11611 11765 11578
1/05 11617 11590 12005 11224 11362 11180
2/05 11738 11711 12257 11344 11394 11253
3/05 11547 11520 12041 11137 11263 11048
4/05 11075 11049 11812 10925 11003 10808
5/05 11617 11591 12188 11453 11589 11408
6/05 11777 11752 12205 11411 11658 11430
7/05 12148 12113 12659 11969 12175 12005
8/05 11998 11963 12544 11815 12066 11877
9/05 12329 12294 12645 11869 12211 12019
10/05 12169 12123 12434 11754 12155 11941
11/05 12691 12645 12904 12261 12724 12488
12/05 12777 12731 12909 12222 12765 12456
1/06 13421 13363 13251 12437 13131 12795
2/06 13190 13132 13286 12417 12976 12623
3/06 13412 13353 13452 12601 13086 12745
4/06 13412 13344 13632 12583 13103 12725
5/06 12688 12620 13240 12157 12471 12131
6/06 12698 12641 13258 12109 12426 12091
7/06 12597 12531 13340 11878 12165 11782
8/06 12759 12691 13657 12249 12482 12054
9/06 13041 12973 14008 12585 12808 12314
10/06 13442 13364 14464 13028 13176 12685
11/06 13644 13565 14739 13286 13509 12975
12/06 13808 13726 14946 13331 13568 13043
1/07 14099 14008 15172 13674 13897 13380
2/07 13656 13565 14876 13417 13605 13078
3/07 13877 13786 15042 13490 13730 13176
4/07 14431 14329 15708 14125 14261 13711
5/07 15016 14913 16256 14633 14773 14175
6/07 14825 14711 15986 14415 14605 14042
7/07 14392 14289 15491 14191 14419 13864
8/07 14684 14571 15722 14417 14656 14092
9/07 15509 15385 16310 15021 15515 14952
10/07 16446 16310 16569 15533 16161 15620
11/07 15811 15677 15876 14960 15516 14983
12/07 15964 15825 15766 14906 15527 14996
====================================================================================================================================
SOURCE: (1)LIPPER INC.
AIM V.I. Large Cap Growth Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-82.90%
AEROSPACE & DEFENSE-10.23%
Boeing Co. (The) 21,204 $ 1,854,502
- -----------------------------------------------------------------------
General Dynamics Corp. 20,551 1,828,833
- -----------------------------------------------------------------------
Honeywell International Inc. 31,430 1,935,145
- -----------------------------------------------------------------------
Lockheed Martin Corp. 42,984 4,524,496
- -----------------------------------------------------------------------
Raytheon Co. 36,384 2,208,509
- -----------------------------------------------------------------------
United Technologies Corp. 12,770 977,416
=======================================================================
13,328,901
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.73%
Janus Capital Group Inc. 29,000 952,650
=======================================================================
AUTO PARTS & EQUIPMENT-0.74%
BorgWarner, Inc. 20,000 968,200
=======================================================================
AUTOMOTIVE RETAIL-0.75%
AutoZone, Inc.(b) 8,200 983,262
=======================================================================
BIOTECHNOLOGY-0.60%
Biogen Idec Inc.(b) 13,800 785,496
=======================================================================
COMMUNICATIONS EQUIPMENT-4.48%
Cisco Systems, Inc.(b) 172,441 4,667,978
- -----------------------------------------------------------------------
Juniper Networks, Inc.(b) 35,378 1,174,549
=======================================================================
5,842,527
=======================================================================
COMPUTER HARDWARE-9.92%
Apple Inc.(b) 21,767 4,311,607
- -----------------------------------------------------------------------
Dell Inc.(b) 41,702 1,022,116
- -----------------------------------------------------------------------
Hewlett-Packard Co. 118,326 5,973,097
- -----------------------------------------------------------------------
International Business Machines Corp. 15,069 1,628,959
=======================================================================
12,935,779
=======================================================================
COMPUTER STORAGE & PERIPHERALS-0.70%
EMC Corp.(b) 49,000 907,970
=======================================================================
CONSTRUCTION & ENGINEERING-2.69%
Chicago Bridge & Iron Co. N.V.-New York
Shares 35,264 2,131,356
- -----------------------------------------------------------------------
Fluor Corp. 9,430 1,374,140
=======================================================================
3,505,496
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.69%
DST Systems, Inc.(b) 10,953 904,170
=======================================================================
DIVERSIFIED METALS & MINING-1.12%
Freeport-McMoRan Copper & Gold, Inc. 14,283 1,463,151
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
EDUCATION SERVICES-0.81%
Apollo Group, Inc.-Class A(b) 15,000 $ 1,052,250
=======================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.16%
Mosaic Co. (The)(b) 16,000 1,509,440
=======================================================================
FOOTWEAR-1.69%
NIKE, Inc.-Class B 34,321 2,204,781
=======================================================================
HEALTH CARE DISTRIBUTORS-2.09%
McKesson Corp. 41,592 2,724,692
=======================================================================
HEALTH CARE EQUIPMENT-2.02%
Baxter International Inc. 45,346 2,632,335
=======================================================================
HEALTH CARE SERVICES-3.35%
Express Scripts, Inc.(b) 28,381 2,071,813
- -----------------------------------------------------------------------
Medco Health Solutions, Inc.(b) 22,569 2,288,497
=======================================================================
4,360,310
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.97%
NRG Energy, Inc.(b) 29,247 1,267,565
=======================================================================
INDUSTRIAL CONGLOMERATES-1.87%
McDermott International, Inc.(b) 41,336 2,440,064
=======================================================================
INTEGRATED OIL & GAS-4.16%
Exxon Mobil Corp. 12,412 1,162,880
- -----------------------------------------------------------------------
Marathon Oil Corp. 34,855 2,121,275
- -----------------------------------------------------------------------
Occidental Petroleum Corp. 27,721 2,134,240
=======================================================================
5,418,395
=======================================================================
INTERNET RETAIL-1.02%
Expedia, Inc.(b) 42,000 1,328,040
=======================================================================
INTERNET SOFTWARE & SERVICES-1.93%
eBay Inc.(b) 26,000 862,940
- -----------------------------------------------------------------------
Google Inc.-Class A(b) 2,393 1,654,712
=======================================================================
2,517,652
=======================================================================
INVESTMENT BANKING & BROKERAGE-2.63%
Goldman Sachs Group, Inc. (The) 15,930 3,425,746
=======================================================================
IT CONSULTING & OTHER SERVICES-2.63%
Accenture Ltd.-Class A 95,089 3,426,057
=======================================================================
LIFE & HEALTH INSURANCE-1.67%
Prudential Financial, Inc. 23,360 2,173,414
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-0.77%
Invitrogen Corp.(b) 10,700 999,487
=======================================================================
</Table>
AIM V.I. Large Cap Growth Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
MANAGED HEALTH CARE-4.75%
Coventry Health Care, Inc.(b) 21,833 $ 1,293,605
- -----------------------------------------------------------------------
UnitedHealth Group Inc. 36,082 2,099,973
- -----------------------------------------------------------------------
WellPoint Inc.(b) 31,870 2,795,955
=======================================================================
6,189,533
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-1.23%
National-Oilwell Varco Inc.(b) 21,800 1,601,428
=======================================================================
OIL & GAS REFINING & MARKETING-0.78%
Valero Energy Corp. 14,500 1,015,435
=======================================================================
PHARMACEUTICALS-2.41%
Merck & Co. Inc. 37,477 2,177,788
- -----------------------------------------------------------------------
Schering-Plough Corp. 36,392 969,483
=======================================================================
3,147,271
=======================================================================
PROPERTY & CASUALTY INSURANCE-0.73%
Chubb Corp. (The) 17,340 946,417
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.71%
Applied Materials, Inc. 43,854 778,847
- -----------------------------------------------------------------------
MEMC Electronic Materials, Inc.(b) 16,360 1,447,696
=======================================================================
2,226,543
=======================================================================
SEMICONDUCTORS-2.36%
Intel Corp. 36,850 982,421
- -----------------------------------------------------------------------
NVIDIA Corp.(b) 33,150 1,127,763
- -----------------------------------------------------------------------
Texas Instruments Inc. 28,823 962,688
=======================================================================
3,072,872
=======================================================================
SOFT DRINKS-1.28%
PepsiCo, Inc. 21,975 1,667,903
=======================================================================
SPECIALIZED FINANCE-0.85%
Nasdaq Stock Market Inc(b) 22,500 1,113,525
=======================================================================
SYSTEMS SOFTWARE-5.38%
BMC Software, Inc.(b) 42,864 1,527,673
- -----------------------------------------------------------------------
Microsoft Corp. 90,498 3,221,729
- -----------------------------------------------------------------------
Oracle Corp.(b) 99,997 2,257,932
=======================================================================
7,007,334
=======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $81,371,653) 108,046,091
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-14.77%
BRAZIL-0.75%
Unibanco-Uniao de Bancos Brasileiros S.A.-GDR
(Diversified Banks) 7,019 $ 980,133
=======================================================================
CANADA-0.70%
Research In Motion Ltd. (Communications
Equipment)(b) 8,054 913,324
=======================================================================
FINLAND-1.98%
Nokia Oyj-ADR (Communications Equipment) 67,218 2,580,499
=======================================================================
HONG KONG-1.71%
China Mobile Ltd. (Wireless Telecommunication
Services)(c) 128,500 2,226,886
=======================================================================
ISRAEL-0.75%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 21,000 976,080
=======================================================================
MEXICO-2.05%
America Movil S.A.B. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 43,548 2,673,412
=======================================================================
SWITZERLAND-3.84%
ABB Ltd. (Heavy Electrical Equipment) 115,653 3,328,570
- -----------------------------------------------------------------------
Syngenta A.G. (Fertilizers & Agricultural
Chemicals)(c) 6,611 1,675,528
=======================================================================
5,004,098
=======================================================================
UNITED KINGDOM-2.99%
Diageo PLC (Distillers & Vintners)(c) 89,170 1,905,177
- -----------------------------------------------------------------------
Rio Tinto PLC-ADR (Diversified Metals &
Mining) 4,725 1,984,027
=======================================================================
3,889,204
=======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $11,663,211) 19,243,636
=======================================================================
FOREIGN PREFERRED STOCKS-0.74%
BRAZIL-0.74%
Companhia de Bebidas das Americas-Pfd.-ADR
(Brewers) (Cost $961,143) 13,622 967,571
=======================================================================
MONEY MARKET FUNDS-3.52%
Liquid Assets Portfolio-Institutional
Class(d) 2,294,731 2,294,731
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 2,294,731 2,294,731
=======================================================================
Total Money Market Funds (Cost
$4,589,462) 4,589,462
=======================================================================
TOTAL INVESTMENTS-101.93% (Cost $98,585,469) 132,846,760
=======================================================================
OTHER ASSETS LESS LIABILITIES-(1.93)% (2,516,777)
=======================================================================
NET ASSETS-100.00% $130,329,983
_______________________________________________________________________
=======================================================================
</Table>
AIM V.I. Large Cap Growth Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(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 December 31, 2007 was $5,807,591,
which represented 4.46% 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. Large Cap Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $93,996,007) $128,257,298
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $4,589,462) 4,589,462
- -------------------------------------------------------------
Total investments (Cost $98,585,469) 132,846,760
- -------------------------------------------------------------
Foreign currencies, at value (Cost $300) 292
- -------------------------------------------------------------
Receivables for:
Fund shares sold 99,820
- -------------------------------------------------------------
Dividends 84,737
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 36,046
=============================================================
Total assets 133,067,655
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 2,511,587
- -------------------------------------------------------------
Fund shares reacquired 57,522
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 44,571
- -------------------------------------------------------------
Accrued administrative services fees 77,146
- -------------------------------------------------------------
Accrued distribution fees -- Series II 792
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 562
- -------------------------------------------------------------
Accrued transfer agent fees 675
- -------------------------------------------------------------
Accrued operating expenses 44,817
=============================================================
Total Liabilities 2,737,672
=============================================================
Net assets applicable to shares outstanding $130,329,983
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $105,918,498
- -------------------------------------------------------------
Undistributed net investment income (loss) (43,877)
- -------------------------------------------------------------
Undistributed net realized gain (loss) (9,805,921)
- -------------------------------------------------------------
Unrealized appreciation 34,261,283
=============================================================
$130,329,983
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $129,071,100
_____________________________________________________________
=============================================================
Series II $ 1,258,883
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 8,141,807
_____________________________________________________________
=============================================================
Series II 79,906
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 15.85
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 15.75
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$8,972) $ 1,306,378
- ------------------------------------------------------------
Dividends from affiliated money market funds 75,001
============================================================
Total investment income 1,381,379
============================================================
EXPENSES:
Advisory fees 892,832
- ------------------------------------------------------------
Administrative services fees 346,781
- ------------------------------------------------------------
Custodian fees 13,156
- ------------------------------------------------------------
Distribution fees -- Series II 3,954
- ------------------------------------------------------------
Transfer agent fees 7,801
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 20,171
- ------------------------------------------------------------
Other 60,073
============================================================
Total expenses 1,344,768
============================================================
Less: Fees waived and expense offset
arrangement(s) (93,059)
============================================================
Net expenses 1,251,709
============================================================
Net investment income 129,670
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 4,682,513
- ------------------------------------------------------------
Foreign currencies (8,551)
============================================================
4,673,962
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 13,025,898
- ------------------------------------------------------------
Foreign currencies (164)
============================================================
13,025,734
============================================================
Net realized and unrealized gain 17,699,696
============================================================
Net increase in net assets resulting from
operations $17,829,366
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 129,670 $ 39,447
- ------------------------------------------------------------------------------------------
Net realized gain (loss) 4,673,962 (1,567,432)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation 13,025,734 15,089,538
==========================================================================================
Net increase in net assets resulting from operations 17,829,366 13,561,553
==========================================================================================
Distributions to shareholders from net investment
income -- Series I (38,491) (201,184)
==========================================================================================
Share transactions-net:
Series I (9,305,183) 103,311,208
- ------------------------------------------------------------------------------------------
Series II (929,004) 1,113,671
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (10,234,187) 104,424,879
==========================================================================================
Net increase in net assets 7,556,688 117,785,248
==========================================================================================
NET ASSETS:
Beginning of year 122,773,295 4,988,047
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(43,877) and $(132,060), respectively) $130,329,983 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 annual rate of the Fund's average daily net assets as follows:
<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 Ltd. ("Invesco") 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 year ended December 31, 2007, AIM waived advisory fees of $92,307.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $296,781
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 868,402 $15,015,478 $(13,589,149) $2,294,731 $37,511
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 868,402 15,015,478 (13,589,149) 2,294,731 37,490
=================================================================================================
Total
Investments
in
Affiliates $1,736,804 $30,030,956 $(27,178,298) $4,589,462 $75,001
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities purchases of $989,363.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $752.
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 year ended December 31, 2007, the Fund paid legal fees of $3,887
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 SEC, 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 is a party to 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 year ended December 31, 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--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- ---------------------------------------------------------------------------------
Distributions paid from ordinary income $38,491 $201,184
_________________________________________________________________________________
=================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 8,356
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 33,194,773
- ----------------------------------------------------------------------------
Temporary book/tax differences (38,982)
- ----------------------------------------------------------------------------
Capital loss carryforward (8,739,411)
- ----------------------------------------------------------------------------
Post-October currency loss deferral (13,251)
- ----------------------------------------------------------------------------
Shares of beneficial interest 105,918,498
============================================================================
Total net assets $130,329,983
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies of $(8).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 utilized $4,366,650 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $3,427,095
- -----------------------------------------------------------------------------
December 31, 2010 3,544,700
- -----------------------------------------------------------------------------
December 31, 2013 10,284
- -----------------------------------------------------------------------------
December 31, 2014 1,757,332
=============================================================================
Total capital loss carryforward $8,739,411
_____________________________________________________________________________
=============================================================================
</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 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 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 year ended December 31, 2007 was $71,410,586 and
$81,768,937, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $33,840,279
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (645,498)
===============================================================================
Net unrealized appreciation of investment securities $33,194,781
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $99,651,979.
</Table>
AIM V.I. Large Cap Growth Fund
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and expenses related to the plan of reorganization, on December 31,
2007, undistributed net investment income (loss) was decreased by $2,996,
undistributed net realized gain (loss) was increased by $8,552 and shares of
beneficial interest decreased by $5,556. This reclassification had no effect on
the net assets of the Fund.
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007(a) 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,230,557 $ 18,519,621 2,493,288 $ 31,035,114
- ----------------------------------------------------------------------------------------------------------------------
Series II 404 6,093 2,883 35,815
======================================================================================================================
Issued as reinvestment of dividends:
Series I 2,379 38,491 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 (1,902,716) (27,863,295) (3,205,686) (40,513,941)
- ----------------------------------------------------------------------------------------------------------------------
Series II (63,178) (935,097) (14,623) (196,285)
======================================================================================================================
(732,554) $(10,234,187) 8,561,744 $104,424,879
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are 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 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 on the close of business, June 9, 2006. AIM V.I.
Blue Chip Fund's net assets as of the close of business on June 9, 2006
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 12--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Large Cap Growth 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
---------------------------------------------------------------------------
AUGUST 29, 2003
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
------------------------------------------------- TO 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) 0.02 0.02 (0.01)(a) (0.04)(b) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 2.13 1.00 0.88 1.03 0.95
=================================================================================================================================
Total from investment operations 2.15 1.02 0.87 0.99 0.92
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.01) (0.02) -- -- (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.02) (0.03) --
=================================================================================================================================
Total distributions (0.01) (0.02) (0.02) (0.03) (0.02)
=================================================================================================================================
Net asset value, end of period $ 15.85 $ 13.71 $12.71 $11.86 $10.90
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 15.64% 8.05% 7.30% 9.08% 9.16%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $129,071 $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 1.08%(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) 58% 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 based on average daily net assets of $122,032,329.
(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 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
-----------------------------------------------------------------
AUGUST 29,
2003
(COMMENCEMENT
YEAR ENDED DECEMBER 31, DATE) TO
--------------------------------------------- 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) (0.04) (0.01) (0.03)(a) (0.06)(b) (0.03)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.13 1.00 0.88 1.03 0.94
===============================================================================================================================
Total from investment operations 2.09 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 $15.75 $13.66 $12.67 $11.84 $10.90
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 15.30% 7.81% 7.15% 8.89% 9.11%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,259 $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 1.33%(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) 58% 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 based on average daily net assets of $1,581,650.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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. Large Cap Growth Fund
NOTE 14--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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Large Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Large Cap Growth Fund (one
of the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those financial
highlights.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Large Cap Growth Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------ ------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,077.10 $5.29 $1,020.11 $5.14 1.01%
Series II 1,000.00 1,075.80 6.59 1,018.85 6.41 1.26
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Large Cap Growth Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received Deduction* 100%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Large Cap Growth Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm);
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Large Cap Growth Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
SECTOR EQUITY
Sectors
AIM V.I. Leisure Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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, AIM V.I. LEISURE FUND's investment
upon request, from our Client Services objective is capital growth.
department at 800-410-4246 or on the AIM
Web site, AIMinvestments.com. On the home
page, scroll down and click on 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
tab, click on Required Notices and then IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu. UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
The information is also available on the ARE FROM A I M MANAGEMENT GROUP INC.
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Leisure Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE leisure-related stocks, including those of
cable television companies, satellite
======================================================================================= programming companies, publishers, cruise
PERFORMANCE SUMMARY lines, advertising agencies, hotels,
casinos, electronic game and toy
The year ended December 31, 2007 was a difficult one for consumer discretionary manufacturers, restaurants, retailers and
stocks--and AIM V.I. Leisure Fund--as investors attempted to digest the impact of the entertainment companies.
credit market downturn and prospects for slower global economic growth.
We consider selling or trimming a stock
AIM V.I. Leisure Fund underperformed its broad market and style-specific index, the when:
S&P 500 Index as consumer discretionary was one of the weakest performing sectors
during the year.(triangle) Specifically, our overweight positions in broadcasting and o There is a change in the company's
cable television stocks and hotels, resorts and cruise lines stocks hurt performance fundamental business prospects.
relative to the index.
o A stock's valuation rises so that it is
Your Fund's long-term performance appears later in this report. no longer attractive relative to other
investment opportunities.
FUND VS. INDEXES
Market conditions and your Fund
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If
variable product issuer charges were included, returns would be lower. The year was characterized by extremes.
Subprime loan concerns, record high crude
Series I Shares -0.82% oil prices, a weak housing market and a
Series II Shares -1.13 weak U.S. dollar increased fears of
S&P 500 Index(triangle)(Broad Market Index/Style-Specific Index) 5.49 recession and worries about a potentially
Source: (triangle)Lipper Inc. negative effect on consumer spending.
These factors affected investor sentiment
======================================================================================= which caused market volatility to increase
during the year. Yet, despite concerns
How we invest ding financial goals. We then evaluate over a slowing economy, several major
whether the company has the right market indexes ended the year in positive
We focus on companies that profit from management in place, appropriate territory after setting all-time closing
consumer spending on leisure activities competitive position and adequate highs during the year.(1) Strong global
(products and/or services purchased with resources to realize their vision. growth, steady corporate earnings and
consumers' discretionary dollars) and that continued merger and acquisition activity
are growing their market share, cash flow o Valuation analysis involves using drove equity markets higher for much of
and earnings at rates greater than the financial models for each company in an 2007. Against this backdrop, energy,
broad market. effort to estimate its fair valuation over materials and utilities were among the
the next two to three years based best performing sectors of the S&P 500
We perform both fundamental and primarily on our expectations for free Index.(1) Conversely, financials, consumer
valuation analysis: cash flow growth. discretionary and health care were the
weakest performing sectors.(1)
o Fundamental research includes interviews Just as we look for managements with
with company managements, buyers, long-term visions, we maintain a long-term
customers and competitors. We ask company investment horizon, resulting in
management teams to detail their three- to relatively low portfolio turnover. We
five-year strategic plan and their manage risk by diversifying the Fund's
correspon- holdings across a variety of
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Broadcasting & Cable TV 12.7% 1. Omnicom Group Inc. 5.5%
Consumer Discretionary 75.4% 2. Movies & Entertainment 10.9 2. News Corp.-Class A 5.2
Consumer Staples 14.7 3. Hotels, Resorts & Cruise Lines 9.7 3. Abercrombie & Fitch Co.-Class A 3.4
Financials 4.2 4. Advertising 8.9 4. Walt Disney Co. (The) 2.6
Information Technology 1.9 5. Brewers 7.2 5. Starwood Hotels &
Money Market Funds Resorts Worldwide, Inc. 2.4
Plus Other Assets Less Liabilities 3.8 Total Net Assets $42.60 million 6. Comcast Corp.-Class A 2.3
7. MGM Mirage 2.3
Total Number of Holdings* 77 8. Crocs, Inc. 2.3
9. Diageo PLC 2.1
10. Polo Ralph Lauren Corp. 2.1
The Fund's holdings are subject to change,
and there is no assurance that the Fund
will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Leisure Fund
Holdings in footwear and brewers continued growing earnings, as well as [GREENBERG Mark D. Greenberg
benefited Fund performance both on an free cash flow. Underperformance from PHOTO] Chartered Financial
absolute and relative basis during the Starwood and Marriott was directly related Analyst, senior portfolio
year. However, our overweight to to concern over possible slower future manager, is portfolio manager of AIM V.I.
broadcasting and cable television stocks economic growth and slower consumer Leisure Fund. Mr. Greenberg began his
and hotels, resorts and cruise lines discretionary spending and travel. career in 1980, and media and
stocks detracted from relative Additionally, Starwood was affected by entertainment stocks became his focus in
performance. speculation of a takeover that ultimately 1983. He joined the Fund's advisor in
never transpired. 1996. Mr. Greenberg attended City
Performance relative to the S&P 500 University in London, England, and earned
Index also was affected by declines in the Portfolio changes are usually the his B.S.B.A. in economics with a
financials sector and significant gains in result of insight that comes from our specialization in finance from Marquette
the energy sector as companies in these bottom-up investment process and long-term University.
sectors are not considered "leisure" investment horizon. This long-term
companies and therefore do not align with investment horizon is one reason for the Assisted by the Leisure Team
our investment mandate. Fund's low portfolio turnover rate
relative to other domestic equity funds.
Top contributors to performance
included Crocs and Hilton Hotels. Crocs, We remind shareholders that our time
the increasingly popular footwear horizon for the stocks in the Fund is two
manufacturer, benefited from highly to three years. The Fund is positioned in
effective management and increases in line with its mandate; it has exposure to
sales and earnings. Concerns over rising a variety of leisure-related industries
inventory levels and fourth quarter based on our bottom-up, stock-by-stock
revenues caused volatility to increase for approach to investing. Most likely,
the stock towards the end of the year. domestic spending in this segment of the
Nonetheless, we believed the market economy will ebb and flow over short-term
underappreciated the brand's strong global periods; that is why we maintain a
appeal and attractive business model with long-term investment perspective and why
increasing barriers to entry. While we we urge you to do the same.
trimmed our position in Crocs prior to the
sell-off, we continued to hold the stock As always, we thank you for your continued
at the end of the year. investment in AIM V.I. Leisure Fund.
Hilton Hotels, on the other hand, Sources: (1)Lipper Inc.; (2) Bloomberg
benefited from a private equity offer from L.P.
The Blackstone Group (not a Fund holding)
which represented a 40% premium to The views and opinions expressed in
Hilton's closing price on July 2, 2007.(2) management's discussion of Fund
While a gain from a takeover is nice, we performance are those of A I M Advisors,
believe our fundamental research, Inc. These views and opinions are subject
disciplined valuation model and emphasis to change at any time based on factors
on making long-term forecasts is what such as market and economic conditions.
accounts for the long term success of the These views and opinions may not be relied
Fund. upon as investment advice or
recommendations, or as an offer for a
We owned Hilton for many years because particular security. The information is
our research determined few new hotels not a complete analysis of every aspect of
were being built, a trend we believed any market, country, industry, security or
would eventually translate to increases in the Fund. Statements of fact are from
room rates. We sold our position in Hilton sources considered reliable, but A I M
following the takeover announcement in Advisors, inc. makes no representation or
July. warranty as to their completeness or
accuracy. Although historical performance
Comcast, Starwood Hotels & Resorts is no guarantee of future results, these
Worldwide and Marriott International, on insights may help you understand our
the other hand, detracted from Fund investment management philosophy.
performance. Investors worried that
Comcast faced increased competition from
telecommunication companies such as AT&T ==========================================
and Verizon (not Fund holdings). However, FOR A DISCUSSION OF THE RISKS OF INVESTING
we believed there would not be significant IN YOUR FUND, INDEXES USED IN THIS REPORT
subscriber turnover during our typical AND YOUR FUND'S LONG-TERM PERFORMANCE,
investment horizon of two to three years. PLEASE TURN THE PAGE.
Additionally, Comcast ==========================================
AIM V.I. Leisure Fund
Your Fund's long-term performance
========================================== CANNOT GUARANTEE COMPARABLE FUTURE INSURANCE COMPANIES ISSUING VARIABLE
AVERAGE ANNUAL TOTAL RETURNS RESULTS; CURRENT PERFORMANCE MAY BE LOWER PRODUCTS. YOU CANNOT PURCHASE SHARES OF
OR HIGHER. PLEASE CONTACT YOUR VARIABLE THE FUND DIRECTLY. PERFORMANCE FIGURES
As of 12/31/07 PRODUCT ISSUER OR FINANCIAL ADVISOR FOR GIVEN REPRESENT THE FUND AND ARE NOT
SERIES I SHARES THE MOST RECENT MONTHEND VARIABLE PRODUCT INTENDED TO REFLECT ACTUAL VARIABLE
Inception (4/30/02) 7.64% PERFORMANCE. PERFORMANCE FIGURES REFLECT PRODUCT VALUES. THEY DO NOT REFLECT SALES
5 Years 12.24 FUND EXPENSES, REINVESTED DISTRIBUTIONS CHARGES, EXPENSES AND FEES ASSESSED IN
1 Year -0.82 AND CHANGES IN NET ASSET VALUE. INVESTMENT CONNECTION WITH A VARIABLE PRODUCT. SALES
SERIES II SHARES RETURN AND PRINCIPAL VALUE WILL FLUCTUATE CHARGES, EXPENSES AND FEES, WHICH ARE
Inception 7.38% SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN DETERMINED BY THE VARIABLE PRODUCT
5 Years 11.98 YOU SELL SHARES. ISSUERS, WILL VARY AND WILL LOWER THE
1 Year -1.13 TOTAL RETURN.
========================================== THE NET ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARES' INCEPTION DATE IS APRIL PROSPECTUS AS OF THE DATE OF THIS REPORT DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
30, 2004. RETURNS SINCE THAT DATE ARE FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
HISTORICAL. ALL OTHER RETURNS ARE THE 1.02% AND 1.27%, RESPECTIVELY.(1) THE AUTOMATED INFORMATION LINE, 866-702-4402.
BLENDED RETURNS OF THE HISTORICAL TOTAL ANNUAL FUND OPERATING EXPENSE RATIO AS MENTIONED ABOVE, FOR THE MOST RECENT
PERFORMANCE OF SERIES II SHARES SINCE SET FORTH IN THE MOST RECENT FUND MONTH-END PERFORMANCE INCLUDING VARIABLE
THEIR INCEPTION AND THE RESTATED PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, PLEASE CONTACT YOUR
HISTORICAL PERFORMANCE OF SERIES I SHARES FOR SERIES I AND SERIES II SHARES WAS VARIABLE PRODUCT ISSUER OR FINANCIAL
(FOR PERIODS PRIOR TO INCEPTION OF SERIES 1.27% AND 1.52%, RESPECTIVELY. THE EXPENSE ADVISOR.
II SHARES) ADJUSTED TO REFLECT THE RULE RATIOS PRESENTED ABOVE MAY VARY FROM THE
12B-1 FEES APPLICABLE TO THE SERIES II EXPENSE RATIOS PRESENTED IN OTHER SECTIONS HAD THE ADVISOR NOT WAIVED FEES AND/OR
SHARES. THE INCEPTION DATE OF SERIES I OF THIS REPORT THAT ARE BASED ON EXPENSES REIMBURSED EXPENSES, PERFORMANCE WOULD
SHARES IS APRIL 30, 2002. INCURRED DURING THE PERIOD COVERED BY THIS HAVE BEEN LOWER.
REPORT.
THE PERFORMANCE OF THE FUND'S SERIES I (1) Total annual operating expenses less
AND SERIES II SHARE CLASSES WILL DIFFER AIM V.I. LEISURE FUND, A SERIES any contractual fee waivers and/or
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS, expense reimbursements by the advisor
IS CURRENTLY OFFERED THROUGH in effect through at least April 30,
THE PERFORMANCE DATA QUOTED REPRESENT 2009. See current prospectus for more
PAST PERFORMANCE AND information.
====================================================================================================================================
Principal risks of investing in the Fund information, relatively low market Leveraging entails risks such as
liquidity, and the potential lack of magnifying changes in the value of the
Investing in developing countries can add strict financial and accounting controls portfolio's securities. Derivatives are
additional risk, such as high rates of and standards. subject to counterparty risk--the risk
inflation or sharply devalued currencies that the other party will not complete the
against the U.S. dollar. Transaction costs The prices of initial public offering transaction with the Fund.
are often higher, and there may be delays (IPO) securities may go up and down more
in settlement procedures. than prices of equity securities of There is no guarantee that the
companies with longer trading histories. investment techniques and risk analyses
Prices of equity securities change in In addition, companies offering securities used by the Fund's portfolio managers will
response to many factors including the in IPOs may have less experienced produce the desired results.
historical and prospective earnings of the management or limited operating histories.
issuer, the value of its assets, general There can be no assurance that the fund The prices of securities held by the
economic conditions, interest rates, will have favorable IPO investment Fund may decline in response to market
investor perceptions and market liquidity. opportunities. risks.
Foreign securities have additional The leisure sector depends on consumer The Fund's investments are concentrated
risks, including exchange rate changes, discretionary spending, which generally in a comparatively narrow segment of the
political and economic upheaval, the falls during economic downturns. economy. Consequently, the Fund may tend
relative lack of to be more volatile than other mutual
The Fund may use enhanced investment funds, and the value of the Fund's
techniques such as leveraging and investments may tend to rise and fall more
derivatives. rapidly.
Continued
AIM V.I. Leisure Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
About indexes used in this report do not reflect sales charges. Performance Additionally, the returns and net asset
of an index of funds reflects fund values shown throughout this report are at
The S&P 500--REGISTERED TRADEMARK-- Index expenses; performance of a market index the Fund level only and do not include
is a market capitalization-weighted index does not. variable product issuer charges. If such
covering all major areas of the U.S. charges were included, the total returns
economy. It is not the 500 largest Other information would be lower.
companies, but rather the most widely held
500 companies chosen with respect to The returns shown in the management's Industry classifications used in this
market size, liquidity, and their discussion of Fund performance are based report are generally according to the
industry. on net asset values calculated for Global Industry Classification Standard,
shareholder transactions. Generally which was developed by and is the
The Fund is not managed to track the accepted accounting principles require exclusive property and a service mark of
performance of any particular index, adjustments to be made to the net assets Morgan Stanley Capital International Inc.
including the index defined here, and of the Fund at period end for financial and Standard & Poor's.
consequently, the performance of the Fund reporting purposes, and as such, the net
may deviate significantly from the asset values for shareholder transactions The Chartered Financial
performance of the indexes. and the returns based on those net asset Analyst--REGISTERED TRADEMARK--
values may differ from the net asset (CFA--REGISTERED TRADEMARK--) designation
A direct investment cannot be made in values and returns reported in the is a globally recognized standard for
an index. Unless otherwise indicated, Financial Highlights. measuring the competence and integrity of
index results include reinvested investment professionals.
dividends, and they
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND AND INDEX DATA FROM 4/30/02
AIM V.I. LEISURE FUND-
DATE SERIES I SHARES S&P 500 INDEX(1)
4/30/02 $10000 $10000
5/02 10030 9927
6/02 9010 9220
7/02 8400 8501
8/02 8610 8557
9/02 8110 7628
10/02 8320 8299
11/02 8950 8786
12/02 8520 8271
1/03 8320 8054
2/03 8039 7933
3/03 8260 8010
4/03 8959 8670
5/03 9479 9126
6/03 9509 9242
7/03 9649 9406
8/03 9969 9589
9/03 9699 9487
10/03 10229 10023
11/03 10478 10112
12/03 10958 10641
1/04 11068 10837
2/04 11278 10987
3/04 11258 10822
4/04 11088 10652
5/04 11098 10798
6/04 11118 11008
7/04 10477 10643
8/04 10418 10686
9/04 10888 10802
10/04 11268 10967
11/04 11838 11411
12/04 12426 11799
1/05 12054 11511
2/05 12245 11753
3/05 12104 11545
4/05 11662 11326
5/05 11983 11686
6/05 12164 11703
7/05 12424 12138
8/05 12203 12028
9/05 12053 12125
10/05 11582 11923
11/05 12053 12373
12/05 12276 12378
1/06 12524 12705
2/06 12545 12740
3/06 12897 12898
4/06 13311 13071
5/06 13072 12696
6/06 13000 12712
7/06 12525 12791
8/06 12959 13095
9/06 13466 13432
10/06 14274 13869
11/06 14771 14133
12/06 15298 14331
1/07 15784 14548
2/07 15563 14264
3/07 15784 14423
4/07 16072 15062
5/07 16846 15587
6/07 16558 15328
7/07 16237 14853
8/07 16214 15076
9/07 16480 15639
10/07 16802 15888
11/07 15795 15223
12/07 15178 15118
====================================================================================================================================
SOURCE: (1)LIPPER INC.
AIM V.I. Leisure Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-73.74%
ADVERTISING-5.83%
Harte-Hanks, Inc. 9,377 $ 162,222
- ----------------------------------------------------------------------
Omnicom Group Inc. 48,812 2,320,034
======================================================================
2,482,256
======================================================================
APPAREL RETAIL-3.42%
Abercrombie & Fitch Co.-Class A 18,245 1,459,053
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.47%
Carter's, Inc.(b) 27,597 534,002
- ----------------------------------------------------------------------
Coach, Inc.(b) 15,551 475,550
- ----------------------------------------------------------------------
Polo Ralph Lauren Corp. 14,488 895,213
======================================================================
1,904,765
======================================================================
BREWERS-1.18%
Anheuser-Busch Cos., Inc. 9,633 504,191
======================================================================
BROADCASTING & CABLE TV-11.08%
Cablevision Systems Corp.-Class A(b) 35,764 876,218
- ----------------------------------------------------------------------
CBS Corp.-Class A 3,396 90,843
- ----------------------------------------------------------------------
CBS Corp.-Class B 3,397 92,568
- ----------------------------------------------------------------------
Clear Channel Communications, Inc. 12,700 438,404
- ----------------------------------------------------------------------
Comcast Corp.-Class A(b) 54,617 997,306
- ----------------------------------------------------------------------
EchoStar Communications Corp.-Class A(b) 14,840 559,765
- ----------------------------------------------------------------------
Liberty Global, Inc.-Class A(b) 4,582 179,569
- ----------------------------------------------------------------------
Liberty Global, Inc.-Series C(b)(c) 7,903 289,171
- ----------------------------------------------------------------------
Liberty Media Corp. Capital-Series A(b) 4,979 580,004
- ----------------------------------------------------------------------
Scripps Co. (E.W.) (The)-Class A 7,250 326,322
- ----------------------------------------------------------------------
Sinclair Broadcast Group, Inc.-Class A 22,438 184,216
- ----------------------------------------------------------------------
Virgin Media Inc. 6,252 107,159
======================================================================
4,721,545
======================================================================
CASINOS & GAMING-5.32%
Harrah's Entertainment, Inc. 6,615 587,082
- ----------------------------------------------------------------------
International Game Technology 16,070 705,955
- ----------------------------------------------------------------------
MGM Mirage(b) 11,611 975,556
======================================================================
2,268,593
======================================================================
CATALOG RETAIL-1.12%
Liberty Media Corp.-Interactive-Series A(b) 25,091 478,736
======================================================================
COMPUTER & ELECTRONICS RETAIL-1.83%
Best Buy Co., Inc. 10,341 544,453
- ----------------------------------------------------------------------
hhgregg, Inc.(b) 17,072 234,911
======================================================================
779,364
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
DEPARTMENT STORES-1.33%
Kohl's Corp.(b) 12,362 $ 566,180
======================================================================
DISTILLERS & VINTNERS-0.91%
Brown-Forman Corp.-Class B 5,223 387,077
======================================================================
FOOTWEAR-3.49%
Crocs, Inc.(b)(c) 26,287 967,624
- ----------------------------------------------------------------------
NIKE, Inc.-Class B 8,054 517,389
======================================================================
1,485,013
======================================================================
GENERAL MERCHANDISE STORES-0.89%
Target Corp. 7,624 381,200
======================================================================
HOME ENTERTAINMENT SOFTWARE-0.44%
Electronic Arts Inc.(b) 3,222 188,197
======================================================================
HOME IMPROVEMENT RETAIL-2.19%
Home Depot, Inc. (The) 21,625 582,577
- ----------------------------------------------------------------------
Lowe's Cos., Inc. 15,467 349,864
======================================================================
932,441
======================================================================
HOTELS, RESORTS & CRUISE LINES-5.99%
Carnival Corp.(d) 16,316 725,899
- ----------------------------------------------------------------------
Marriott International, Inc.-Class A 17,419 595,381
- ----------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 4,686 198,874
- ----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 23,416 1,031,007
======================================================================
2,551,161
======================================================================
HYPERMARKETS & SUPER CENTERS-0.55%
Wal-Mart Stores, Inc. 4,893 232,564
======================================================================
INTERNET SOFTWARE & SERVICES-1.51%
Google Inc.-Class A(b) 933 645,151
======================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-1.67%
iShares Russell 3000 Index Fund 2,818 238,234
- ----------------------------------------------------------------------
iShares S&P 500 Index Fund 1,596 234,037
- ----------------------------------------------------------------------
S&P 500 Depositary Receipts Trust-Series 1 1,624 237,445
======================================================================
709,716
======================================================================
MOVIES & ENTERTAINMENT-10.90%
News Corp.-Class A 107,634 2,205,421
- ----------------------------------------------------------------------
Time Warner Inc. 49,453 816,469
- ----------------------------------------------------------------------
Viacom Inc.-Class A(b) 6,888 302,934
- ----------------------------------------------------------------------
Viacom Inc.-Class B(b) 5,181 227,549
- ----------------------------------------------------------------------
Walt Disney Co. (The) 33,777 1,090,322
======================================================================
4,642,695
======================================================================
</Table>
AIM V.I. Leisure Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
PUBLISHING-2.18%
Belo Corp.-Class A 14,316 $ 249,671
- ----------------------------------------------------------------------
Gannett Co., Inc. 4,221 164,619
- ----------------------------------------------------------------------
McClatchy Co. (The)-Class A(c) 6,096 76,322
- ----------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 10,016 438,801
======================================================================
929,413
======================================================================
RESTAURANTS-3.34%
Burger King Holdings Inc. 14,618 416,759
- ----------------------------------------------------------------------
McDonald's Corp. 9,700 571,427
- ----------------------------------------------------------------------
Yum! Brands, Inc. 11,318 433,140
======================================================================
1,421,326
======================================================================
SOFT DRINKS-1.59%
PepsiCo, Inc. 8,900 675,510
======================================================================
SPECIALIZED REIT'S-0.76%
Felcor Lodging Trust Inc. 20,882 325,550
======================================================================
SPECIALTY STORES-1.75%
PetSmart, Inc. 31,599 743,525
======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $26,874,803) 31,415,222
======================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-22.48%
BELGIUM-2.50%
Compagnie Nationale a Portfeuille/Nationale
Portefeuille Maatschappij (Multi-Sector
Holdings)(e) 1,050 74,964
- ----------------------------------------------------------------------
Groupe Bruxelles Lambert S.A. (Multi-Sector
Holdings)(e) 2,879 367,015
- ----------------------------------------------------------------------
InBev N.V. (Brewers)(e) 7,569 623,275
======================================================================
1,065,254
======================================================================
BRAZIL-1.94%
Companhia de Bebidas das Americas-ADR
(Brewers) 12,157 826,676
======================================================================
DENMARK-1.07%
Carlsberg A.S.-Class B (Brewers)(e) 3,810 457,500
======================================================================
FRANCE-3.38%
Accor S.A. (Hotels, Resorts & Cruise
Lines)(e) 6,478 512,856
- ----------------------------------------------------------------------
JC Decaux S.A. (Advertising)(e) 11,123 435,011
- ----------------------------------------------------------------------
Pernod Ricard S.A. (Distillers & Vintners)(e) 2,144 492,884
======================================================================
1,440,751
======================================================================
HONG KONG-0.99%
Regal Hotels International Holdings Ltd.
(Hotels, Resorts & Cruise Lines)(e) 4,138,000 337,706
- ----------------------------------------------------------------------
Television Broadcasts Ltd.-ADR (Broadcasting
& Cable TV)(f) 6,976 83,829
======================================================================
421,535
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
JAPAN-0.46%
Sony Corp.-ADR (Consumer Electronics) 3,641 $ 197,706
======================================================================
MEXICO-1.16%
Coca-Cola Femsa S.A. B. de C.V.-ADR (Soft
Drinks) 10,052 495,363
======================================================================
NETHERLANDS-2.96%
Heineken Holding N.V. (Brewers)(e) 11,500 646,718
- ----------------------------------------------------------------------
Jetix Europe N.V. (Broadcasting & Cable
TV)(b) 23,032 615,095
======================================================================
1,261,813
======================================================================
SWEDEN-0.87%
Rezidor Hotel Group A.B. (Hotels, Resorts &
Cruise Lines) (Acquired 11/28/06; Cost
$20,647)(e)(g) 2,734 16,353
- ----------------------------------------------------------------------
Rezidor Hotel Group A.B. (Hotels, Resorts &
Cruise Lines)(e) 59,000 352,894
======================================================================
369,247
======================================================================
SWITZERLAND-2.14%
Compagnie Financiere Richemont S.A.-Class A
(Apparel, Accessories & Luxury Goods)(e)(h) 8,914 607,481
- ----------------------------------------------------------------------
Pargesa Holding S.A. (Multi-Sector
Holdings)(e) 2,723 302,105
======================================================================
909,586
======================================================================
UNITED KINGDOM-5.01%
Diageo PLC (Distillers & Vintners)(e) 42,579 909,729
- ----------------------------------------------------------------------
InterContinental Hotels Group PLC (Hotels,
Resorts & Cruise Lines)(e) 19,429 338,489
- ----------------------------------------------------------------------
WPP Group PLC (Advertising)(e) 69,225 884,620
======================================================================
2,132,838
======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $5,932,212) 9,578,269
======================================================================
MONEY MARKET FUNDS-2.98%
Liquid Assets Portfolio-Institutional
Class(i) 634,007 634,007
- ----------------------------------------------------------------------
Premier Portfolio-Institutional Class(i) 634,007 634,007
======================================================================
Total Money Market Funds (Cost
$1,268,014) 1,268,014
======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.20% (Cost
$34,075,029) 42,261,505
======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-2.45%
Liquid Assets Portfolio-Institutional (Cost
$1,042,535)(i)(j) 1,042,535 1,042,535
======================================================================
TOTAL INVESTMENTS-101.65% (Cost $35,117,564) 43,304,040
- ----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(1.65)% (701,428)
- ----------------------------------------------------------------------
NET ASSETS-100.00% $42,602,612
______________________________________________________________________
======================================================================
</Table>
AIM V.I. Leisure Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(c) All or a portion of this security was out on loan at December 31, 2007.
(d) Each unit represents one common share and one trust share.
(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 December 31, 2007 was $7,359,600,
which represented 17.27% of the Fund's Net Assets. See Note 1A.
(f) 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 December 31, 2007 represented
0.20% of the Fund's Net Assets. See Note 1A.
(g) 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 December 31, 2007 represented 0.04% of the
Fund's Net Assets. Unless otherwise indicated, this security is not
considered to be illiquid.
(h) Each unit represents one A bearer share in the company and one bearer share
participation certificate in Richemont S.A.
(i) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(j) 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. Leisure Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $32,807,015)* $40,993,491
- ------------------------------------------------------------
Investments in affiliated money market funds
(Cost $2,310,549) 2,310,549
- ------------------------------------------------------------
Total investments (Cost $35,117,564) 43,304,040
- ------------------------------------------------------------
Foreign currencies, at value (Cost $3,145) 3,095
- ------------------------------------------------------------
Receivables for:
Fund shares sold 326,057
- ------------------------------------------------------------
Dividends 83,814
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 12,531
============================================================
Total assets 43,729,537
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Trustee deferred compensation and retirement
plans 15,041
- ------------------------------------------------------------
Collateral upon return of securities loaned 1,042,535
- ------------------------------------------------------------
Fund expenses advanced 3,995
- ------------------------------------------------------------
Accrued administrative services fees 28,883
- ------------------------------------------------------------
Accrued distribution fees -- Series II 6
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 608
- ------------------------------------------------------------
Accrued transfer agent fees 92
- ------------------------------------------------------------
Accrued operating expenses 35,765
============================================================
Total liabilities 1,126,925
============================================================
Net assets applicable to shares outstanding $42,602,612
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $29,605,323
- ------------------------------------------------------------
Undistributed net investment income (loss) (149,365)
- ------------------------------------------------------------
Undistributed net realized gain 4,959,734
- ------------------------------------------------------------
Unrealized appreciation 8,186,920
============================================================
$42,602,612
____________________________________________________________
============================================================
NET ASSETS:
Series I $42,593,326
____________________________________________________________
============================================================
Series II $ 9,286
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 3,362,687
____________________________________________________________
============================================================
Series II 735
____________________________________________________________
============================================================
Series I:
Net asset value per share $ 12.67
____________________________________________________________
============================================================
Series II:
Net asset value per share $ 12.63
____________________________________________________________
============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $997,378 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$22,002) $ 716,743
- -------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$2,546) 37,496
=============================================================
Total investment income 754,239
=============================================================
EXPENSES:
Advisory fees 374,403
- -------------------------------------------------------------
Administrative services fees 174,691
- -------------------------------------------------------------
Custodian fees 17,347
- -------------------------------------------------------------
Distribution fees -- Series II 30
- -------------------------------------------------------------
Transfer agent fees 1,036
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 18,168
- -------------------------------------------------------------
Professional services fees 40,412
- -------------------------------------------------------------
Other 14,116
=============================================================
Total expenses 640,203
=============================================================
Less: Fees waived and expense offset
arrangement(s) (136,388)
=============================================================
Net expenses 503,815
=============================================================
Net investment income 250,424
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
from securities sold to affiliates of
$146,201) 5,411,784
- -------------------------------------------------------------
Foreign currencies 6,217
=============================================================
5,418,001
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (5,557,415)
- -------------------------------------------------------------
Foreign currencies (1,395)
=============================================================
(5,558,810)
=============================================================
Net realized and unrealized gain (loss) (140,809)
=============================================================
Net increase in net assets resulting from
operations $ 109,615
_____________________________________________________________
=============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 250,424 $ 279,276
- ----------------------------------------------------------------------------------------
Net realized gain 5,418,001 3,640,936
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (5,558,810) 7,348,588
========================================================================================
Net increase in net assets resulting from operations 109,615 11,268,800
========================================================================================
Distributions to shareholders from net investment income:
Series I (754,185) (576,999)
- ----------------------------------------------------------------------------------------
Series II (134) (129)
- ----------------------------------------------------------------------------------------
Total distributions from net investment income (754,319) (577,128)
========================================================================================
Distributions to shareholders from net realized gains:
Series I (2,658,589) (2,816,331)
- ----------------------------------------------------------------------------------------
Series II (579) (731)
- ----------------------------------------------------------------------------------------
Total distributions from net realized gains (2,659,168) (2,817,062)
========================================================================================
Decrease in net assets resulting from distributions (3,413,487) (3,394,190)
========================================================================================
Share transactions-net:
Series I (6,922,866) (9,244,726)
- ----------------------------------------------------------------------------------------
Series II (3,987) 859
========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (6,926,853) (9,243,867)
========================================================================================
Net increase (decrease) in net assets (10,230,725) (1,369,257)
========================================================================================
NET ASSETS:
Beginning of year 52,833,337 54,202,594
========================================================================================
End of year (including undistributed net investment income
(loss) of $(149,365) and $(61,783), respectively) $42,602,612 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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. Leisure 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 -- 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
AIM V.I. Leisure Fund
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 0.68%
__________________________________________________________________
===================================================================
</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 1.01% 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 Ltd. ("Invesco")
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 (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 year ended December 31, 2007, AIM waived advisory fees of $136,058.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $124,691
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 year ended December 31, 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 A I M
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 year ended December 31, 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 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $220,127 $ 6,220,406 $ (5,806,526) $ 634,007 $17,463
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 220,127 6,220,406 (5,806,526) 634,007 17,487
=================================================================================================
Subtotal $440,254 $12,440,812 $(11,613,052) $1,268,014 $34,950
_________________________________________________________________________________________________
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $ 6,016,360 $ (4,973,825) $1,042,535 $ 2,546
=================================================================================================
Total
Investments
in
Affiliates $440,254 $18,457,172 $(16,586,877) $2,310,549 $37,496
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $327,059, which resulted in net realized gains of
$146,201, and securities purchases of $2,898.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $330.
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 year ended December 31, 2007, the Fund paid legal fees of $3,670
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 SEC, 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 is a party to 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. Leisure Fund
During the year ended December 31, 2007, the Fund did not 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $997,378 were on
loan to brokers. The loans were secured by cash collateral of $1,042,535
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $2,546 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 975,708 $ 808,707
- --------------------------------------------------------------------------------------
Long-term capital gain 2,437,779 2,585,483
======================================================================================
Total distributions $3,413,487 $3,394,190
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ---------------------------------------------------------------------------
Undistributed ordinary income $ 766,717
- ---------------------------------------------------------------------------
Undistributed long-term gain 4,520,706
- ---------------------------------------------------------------------------
Net unrealized appreciation -- investments 7,734,564
- ---------------------------------------------------------------------------
Temporary book/tax differences (12,698)
- ---------------------------------------------------------------------------
Post October PFIC MTM deferral (12,000)
- ---------------------------------------------------------------------------
Shares of beneficial interest 29,605,323
===========================================================================
Total net assets $42,602,612
___________________________________________________________________________
===========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the treatment of passive foreign investment companies. The tax-basis net
unrealized appreciation on investments amount includes appreciation
(depreciation) on foreign currencies of $445.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
AIM V.I. Leisure 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 year ended December 31, 2007 was $7,484,673 and $18,535,060,
respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 9,981,009
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,246,890)
===============================================================================
Net unrealized appreciation of investment securities $ 7,734,119
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $35,569,921.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and passive foreign investment companies, on December 31, 2007,
undistributed net investment income (loss) was increased by $416,313,
undistributed net realized gain was decreased by $416,313. This reclassification
had no effect on the net assets of the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2007(a) 2006
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Series I 26,829 $ 342,162 95,922 $ 1,166,490
- --------------------------------------------------------------------------------------------------------------------
Series II -- -- -- --
====================================================================================================================
Issued as reinvestment of dividends:
Series I 256,214 3,412,774 249,510 3,393,330
- --------------------------------------------------------------------------------------------------------------------
Series II 54 713 63 859
====================================================================================================================
Reacquired:
Series I (741,988) (10,677,802) (1,093,508) (13,804,546)
- --------------------------------------------------------------------------------------------------------------------
Series II (315) (4,700) -- --
====================================================================================================================
(459,206) $ (6,926,853) (748,013) $ (9,243,867)
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it 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. 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 13--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s):
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-Advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Leisure 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
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.82 $ 11.86 $ 12.38 $ 10.96 $ 8.52
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09 0.07 0.04 0.00 (0.00)
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.15) 2.83 (0.19) 1.47 2.44
====================================================================================================================
Total from investment operations (0.06) 2.90 (0.15) 1.47 2.44
====================================================================================================================
Less distributions:
Dividends from net investment income (0.24) (0.16) (0.14) (0.04) --
- --------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.85) (0.78) (0.23) (0.01) --
====================================================================================================================
Total distributions (1.09) (0.94) (0.37) (0.05) --
====================================================================================================================
Net asset value, end of period $ 12.67 $ 13.82 $ 11.86 $ 12.38 $ 10.96
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(a) (0.79)% 24.61% (1.19)% 13.40% 28.64%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $42,593 $52,820 $54,192 $55,967 $34,424
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(b) 1.01% 1.16% 1.29% 1.26%
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.28%(b) 1.26% 1.31% 1.34% 1.64%
====================================================================================================================
Ratio of net investment income (loss) to average net assets 0.50%(b) 0.54% 0.34% 0.00% (0.14)%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 15% 14% 32% 15% 22%
____________________________________________________________________________________________________________________
====================================================================================================================
</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 do not reflect charges assessed
in connection with a variable product, which if included would reduce
total returns.
(b) Ratios are based on average daily net assets of $49,908,543.
<Table>
<Caption>
SERIES II
------------------------------------------------
APRIL 30, 2004
(COMMENCEMENT
YEAR ENDED DECEMBER 31, DATE)
------------------------------ 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) 0.05 0.04 0.02 (0.02)
- --------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.15) 2.82 (0.19) 1.35
==============================================================================================================
Total from investment operations (0.10) 2.86 (0.17) 1.33
==============================================================================================================
Less distributions:
Dividends from net investment income (0.20) (0.14) (0.13) (0.04)
- --------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.85) (0.78) (0.23) (0.01)
==============================================================================================================
Total distributions (1.05) (0.92) (0.36) (0.05)
==============================================================================================================
Net asset value, end of period $ 12.63 $13.78 $11.84 $ 12.37
______________________________________________________________________________________________________________
==============================================================================================================
Total return(a) (1.13)% 24.28% (1.37)% 11.98%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 9 $ 14 $ 11 $ 11
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(b) 1.26% 1.36% 1.45%(c)
- --------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.53%(b) 1.51% 1.56% 1.60%(c)
==============================================================================================================
Ratio of net investment income (loss) to average net assets 0.25%(b) 0.29% 0.14% (0.16)%(c)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(d) 15% 14% 32% 15%
______________________________________________________________________________________________________________
==============================================================================================================
</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 and do not
reflect charges assessed in connection with a variable product, which if
included would reduce total returns.
(b) Ratios are based on average daily net assets of $11,874.
(c) Annualized.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Leisure 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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Leisure Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Leisure Fund (one of the
funds constituting AIM Variable Insurance Funds, hereafter referred to as the
"Fund") at December 31, 2007, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Leisure Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
ENDING ENDING
BEGINNING ACCOUNT EXPENSES ACCOUNT EXPENSES ANNUALIZED
ACCOUNT VALUE VALUE PAID DURING VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $ 916.20 $ 4.88 $1,020.11 $5.14 1.01%
Series II 1,000.00 914.40 6.08 1,018.85 6.41 1.26
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Leisure Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Long-Term Capital Gain Dividends $2,437,779
Corporate Dividends Received
Deduction* 37.58%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the fund's fiscal year.
DISTRIBUTION INFORMATION
Shareholders were sent a notice from the Fund that set forth an estimate on a
per share basis of the source or sources from which the distribution was paid in
December of 2007. Subsequently, certain of these estimates have been corrected.
Listed below is a written statement of the sources of this distribution, as
corrected, on a generally accepted accounting principles ("GAAP") basis.
<Table>
<Caption>
GAIN FROM SALE OF
NET INCOME SECURITIES RETURN OF PRINCIPAL TOTAL DISTRIBUTION
- -----------------------------------------------------------------------------------------------------------------
12/10/07 Series I $0.0800 $0.8492 $0.1609 $1.0901
- -----------------------------------------------------------------------------------------------------------------
12/10/07 Series II $0.0363 $0.8492 $0.1606 $1.0461
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
Please note that the information in the preceding chart is for financial
accounting purposes only. Shareholders should be aware that the tax treatment of
distributions likely differs from GAAP treatment. The tax treatment of
distributions was set forth in a Form 1099-DIV for the 2007 calendar year. This
information is being provided to comply with certain U.S. Securities and
Exchange Commission requirements.
AIM V.I. Leisure Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Leisure Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Mid-Cap Blend
AIM V.I. Mid Cap
Core Equity Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. MID CAP CORE EQUITY FUND's investment objective is
securities is available without charge, long-term growth of capital.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
tab, click on Required Notices and then IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
click on Proxy Voting Activity. Next,
select the Fund from the drop-down menu.
The information is also available on the UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT ARE FROM
SEC Web site, sec.gov. 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
[AIM INVESTMENTSLOGO] BEFORE INVESTING.
- -- REGISTERED TRADEMARK -- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Mid Cap Core Equity Fund
Management's discussion of Fund performance stand industry challenges and evaluate the
sustainability of competitive advantages.
======================================================================================= Both the financial and business analyses
PERFORMANCE SUMMARY serve as a basis to construct valuation
models that help us estimate a company's
For the fiscal year ended December 31, 2007, AIM V.I. Mid Cap Core Equity Fund value. We use three primary valuation
delivered positive returns, excluding variable product issuer charges, and outperformed techniques, including discounted cash
the broad market S&P 500 Index, as well as the Fund's style-specific benchmark, the flow, traditional valuation multiples and
Russell Midcap Index. Overall results were driven in part by strength in the Fund's net asset value.
energy and health care holdings. Additionally, the Fund's relative results benefited
from avoiding both turbulence in the financials sector and weakness in the consumer We consider selling a stock when:
discretionary sector.
o It exceeds our target price.
Your Fund's long-term performance appears later in this report.
o We have not seen a demonstrable
FUND VS. INDEXES improvement in fundamentals.
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If o A more compelling investment opportunity
variable product issuer charges were included, returns would be lower. exists.
Series I Shares 9.55% Market conditions and your Fund
Series II Shares 9.29
S&P 500 Index(triangle) (Broad Market Index) 5.49 For the fiscal year ended December 31,
Russell Midcap Index(triangle) (Style-Specific Index) 5.60 2007, we delivered attractive returns for
Lipper VUF Mid-Cap Core Funds Index(triangle) (Peer Group Index) 5.30 shareholders and worked diligently to
Lipper Mid-Cap Core Funds Index(triangle) (Former Peer Group Index) 6.34 provide a wealth creation strategy that
takes a full-market-cycle
SOURCE: (triangle)LIPPER INC. perspective--over bull and bear
======================================================================================= markets--and can serve as a source of
stability within overall asset allocation.
How we invest ments for the Fund includes three phases: This objective has become increasingly
important as we mark the five-year
We manage your Fund as a core fund, o Financial analysis to evaluate ROIC and anniversary of the bull market(1) and
seeking to provide upside potential as capital allocation witness increased volatility in the
well as a measure of protection in financial markets.
difficult markets. As part of an overall o Business analysis to determine
well-diversified asset allocation competitive positioning Economic growth, as measured by the
strategy, the Fund may complement more change in gross domestic product,
aggressive value and growth investments. o Valuation analysis to identify increased 4.9% in the third quarter of
attractively valued companies 2007(2)--slightly above the second-quarter
We conduct fundamental research of growth rate and the highest rate over the
companies to gain a thorough understanding Financial analysis provides vital past 12 months. This represented strong
of their business prospects, appreciation insight into historical and potential growth despite expectations that the
potential and return on invested capital ROIC, a key indicator of business quality economy was in the later stages of the
(ROIC). The process we use to identify and caliber of management. Business current economic cycle and would be
potential invest- analysis allows us to identify key drivers
of the company, under-
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Specialty Chemicals 6.0% 1. Barr Pharmaceuticals Inc. 3.0%
Health Care 13.1% 2. Oil & Gas Exploration & Production 5.9 2. Sigma-Aldrich Corp. 2.9
Information Technology 10.9 3. Life Sciences Tools & Services 5.0 3. Henkel KGaA-Pfd. 2.8
Materials 10.6 4. Property & Casualty Insurance 3.8 4. Cadbury Schweppes PLC 2.5
Energy 9.4 5. Industrial Machinery 3.7 5. People's United Financial Inc. 2.5
Financials 9.4 6. International Flavors &
Consumer Staples 9.2 Total Net Assets $664.69 million Fragrances Inc. 2.2
Industrials 8.9 7. Chesapeake Energy Corp. 2.0
Consumer Discretionary 5.1 Total Number of Holdings* 67 8. Axis Capital Holdings Ltd. 2.0
Utilities 1.3 9. Coeur d'Alene Mines Corp. 1.8
Telecommunication Services 0.4 The Fund's holdings are subject to change, 10. Progressive Corp. (The) 1.8
Money Market Funds and there is no assurance that the Fund
Plus Other Assets Less Liabilities 21.7 will continue to hold any particular
security .
* Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Mid Cap Core Equity Fund
affected by the housing decline. The and weighed heavily on returns of The views and opinions expressed in
weakness in housing affected consumer financials stocks. Avoidance of these management's discussion of Fund
spending but did not influence job growth stocks helped the Fund's results versus performance are those of A I M Advisors,
in a meaningful way during the reporting the style-specific index, as financials Inc. These views and opinions are subject
period. Over the past year, we observed a was the worst performing sector of the to change at any time based on factors
tangible increase in yield spreads between market over the fiscal year. such as market and economic conditions.
the BBB corporate bond yields and the These views and opinions may not be relied
10-year U.S. Treasury, indicating a shift Although the Fund delivered better upon as investment advice or
in investors' risk appetite and increasing results than the Russell Midcap Index, recommendations, or as an offer for a
difficulty in obtaining financing. In our some aspects of the portfolio's particular security. The information is
opinion, the period of easy credit appears positioning detracted from relative not a complete analysis of every aspect of
to be over. Inflation, as measured by the performance. Notably, the Fund's largest any market, country, industry, security or
consumer price index, increased 4.1% in detractors from performance came from the Fund. Statements of fact are from
2007, largely due to energy costs, which information technology holding Sega Sammy sources considered reliable, but A I M
were up 17.4%.(3) This represents the Holdings Inc. The stock was under pressure Advisors, Inc. makes no representation or
fastest increase in almost two decades(4) as a result of regulatory changes in Japan warranty as to their completeness or
and a sharp increase versus 2.5% in pertaining to its Pachinko gaming devices. accuracy. Although historical performance
2006.(3) It is no longer a Fund holding. is no guarantee of future results, these
insights may help you understand our
Fund returns were largely driven by our The Fund's holding of 22.81% in cash at investment management philosophy.
overweight position in the energy sector the end of the period detracted from
versus the style-specific benchmark. overall returns. While cash may reduce Ronald S. Sloan
Strength in the global economy and returns in up markets, it serves to reduce [SLOAN Chartered Financial
emerging markets has taken oil prices from volatility during more turbulent or PHOTO] Analyst, senior portfolio
$61.05 per barrel in December 2006 to negative market environments. Overall, the manager, is lead manager of
$95.98 in December 2007.(1) The Fund's Fund's cash position resulted from our AIM V.I. Mid Cap Core Equity
exposure to this sector has been a fundamental research, as we invested only Fund. Mr. Sloan has been in the investment
consistent theme in the portfolio; when compelling investment opportunities industry since 1971. He joined AIM in
however, the nature of our exposure has arose, consistent with our intended wealth 1998. Mr. Sloan attended the University of
changed as the capital spending cycle has creation strategy. Missouri, where he earned both a B.S. in
matured. Early in the cycle, the primary business administration and an M.B.A.
beneficiaries were oil producers. Our The Fund's positioning at year end was
research indicated that as the capital somewhat more defensive than that of its Douglas Asiello
spending cycle matured, energy service style-specific index, as fundamental data [ASIELLO Chartered Financial
providers would do well, as oil producers suggested growth catalysts and sustainable PHOTO] Analyst, portfolio manager,
invested to maintain and update their profits tied to the credit cycle had shown is manager of AIM V.I. Mid
infrastructure. This benefited companies signs of diminishing. Among our largest Cap Core Equity Fund.
such as SMITH INTERNATIONAL INC., an oil overweight sectors were health care and Mr. Asiello joined AIM in 2001. He earned
services and equipment firm that has been consumer staples, while our underweight a B.A. in international relations, an
a long-term Fund holding. We believed that sectors included financials and consumer M.B.A. from The Wharton School at the
the firm's growth prospects were discretionary. University of Pennsylvania and an M.A. in
attractive because the company benefited international management from The Joseph
from the capital spending cycle, a We believe our competitive advantage is H. Lauder Institute of Management and
supportive commodity pricing cycle and a strict focus on identifying growth-value International Studies.
expanding exposure to opportunities in the anomalies--companies that we believe have
Eastern Hemisphere--during 2007, other strong prospects to grow shareholder Brian Nelson
investors began to agree. value, are managed by good stewards of [NELSON Chartered Financial
capital and are trading at attractive PHOTO] Analyst, portfolio man ager,
We have previously discussed our valuations. In our opinion, this allowed is manager of AIM V.I. Mid
rationale for decreasing the Fund's the Fund to serve as a source of stability Cap Core Equity Fund. Mr. Nelson has been
exposure to the financials sector. Our within our shareholders' overall asset in the investment industry since 1988. He
fundamental research raised concerns that allocation and facilitated our goal of earned a B.A. from the University of
increasingly lenient lending standards of striving to deliver above average California-Santa Barbara.
some regional banks and consumer financial risk-adjusted returns over a full market
companies would lead to higher default cycle. Assisted by the Mid/Large Cap Core Team
rates. These concerns materialized in 2007
with the controversy surrounding the Thank you for your continued investment ==========================================
subprime mortgage industry in AIM V.I. Mid Cap Core Equity Fund. FOR A DISCUSSION OF THE RISKS OF INVESTING
IN YOUR FUND, INDEXES USED IN THIS REPORT
Sources: (1) Bloomberg L.P; (2) Bureau of AND YOUR FUND'S LONG-TERM PERFORMANCE,
Economic Analysis; (3) Bureau of Labor PLEASE TURN THE PAGE.
Statistics; (4) The Wall Street Journal ==========================================
AIM V.I. Mid Cap Core Equity Fund
Your Fund's long-term performance
========================================== ADVISOR FOR THE MOST RECENT MONTH-END VARIABLE PRODUCTS. YOU CANNOT PURCHASE
AVERAGE ANNUAL TOTAL RETURNS VARIABLE PRODUCT PERFORMANCE. PERFORMANCE SHARES OF THE FUND DIRECTLY. PERFORMANCE
FIGURES REFLECT FUND EXPENSES, REINVESTED FIGURES GIVEN REPRESENT THE FUND AND ARE
As of 12/31/07 DISTRIBUTIONS AND CHANGES IN NET ASSET NOT INTENDED TO REFLECT ACTUAL VARIABLE
VALUE. INVESTMENT RETURN AND PRINCIPAL PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES I SHARES VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE CHARGES, EXPENSES AND FEES ASSESSED IN
Inception (9/10/01) 9.90% A GAIN OR LOSS WHEN YOU SELL SHARES. CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years 13.70 CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year 9.55 THE TOTAL ANNUAL FUND OPERATING EXPENSE DETERMINED BY THE VARIABLE PRODUCT
RATIO SET FORTH IN THE MOST RECENT FUND ISSUERS, WILL VARY AND WILL LOWER THE
SERIES II SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT TOTAL RETURN.
Inception (9/10/01) 9.64% FOR SERIES I AND SERIES II SHARES WAS
5 Years 13.42 1.06% AND 1.31%, RESPECTIVELY. THE EXPENSE THE MOST RECENT MONTH-END PERFORMANCE
1 Year 9.29 RATIOS PRESENTED ABOVE MAY VARY FROM THE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
EXPENSE RATIOS PRESENTED IN OTHER SECTIONS PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
========================================== OF THIS REPORT THAT ARE BASED ON EXPENSES AUTOMATED INFORMATION LINE, 866-702-4402.
INCURRED DURING THE PERIOD COVERED BY THIS AS MENTIONED ABOVE, FOR THE MOST RECENT
THE PERFORMANCE OF THE FUND'S SERIES I AND REPORT. MONTH-END PERFORMANCE INCLUDING VARIABLE
SERIES II SHARE CLASSES WILL DIFFER PRODUCT CHARGES, PLEASE CONTACT YOUR
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. AIM V.I. MID CAP CORE EQUITY FUND, A VARIABLE PRODUCT ISSUER OR FINANCIAL
SERIES PORTFOLIO OF AIM VARIABLE INSURANCE ADVISOR.
THE PERFORMANCE DATA QUOTED REPRESENT FUNDS, IS CURRENTLY OFFERED THROUGH
PAST PERFORMANCE AND CANNOT GUARANTEE INSURANCE COMPANIES ISSUING
COMPARABLE FUTURE RESULTS; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
CONTACT YOUR VARIABLE PRODUCT ISSUER OR
FINANCIAL
==================================================================================================================================
Principal risks of investing in the Fund the value of its assets, general economic tion, illiquidity, restricted resale or
conditions, interest rates, investor less frequent trading.
To the extent the Fund holds cash or cash perceptions and market liquidity.
equivalents rather than equity securities The prices of securities held by the
for risk management purposes, the Fund may Foreign securities have additional Fund may decline in response to market
not achieve its investment objective. risks, including exchange rate changes, risks.
political and economic upheaval, the
The value of convertible securities in relative lack of information, relatively The Fund may invest in obligations
which the Fund invests may be affected by low market liquidity, and the potential issued by agencies and instrumentalities
market interest rates--the risk that the lack of strict financial and accounting of the U.S. government that may vary in
issuer may default on interest or controls and standards. the level of support they receive from the
principal payments and the value of the U.S. government. The U.S. government may
underlying common stock into which these Interest rate risk refers to the risk choose not to provide financial support to
securities may be converted may decline as that bond prices generally fall as U.S. government-sponsored agencies or
a result. interest rates rise; conversely, bond instrumentalities if it is not legally
prices generally rise as interest rates obligated to do so. In this case, if the
Credit risk is the risk of loss on an fall. issuer defaulted, the fund holding
investment due to the deterioration of an securities of such issuer might not be
issuer's financial health. Such a Leveraging entails risks such as able to recover its investment from the
deterioration of financial health may magnifying changes in the value of the U.S. government.
result in a reduction of the credit rating portfolio's securities.
of the issuer's securities and may lead to About indexes used in this report
the issuer's inability to honor its There is no guarantee that the
contractual obligations, including making investment techniques and risk analyses The S&P 500--REGISTERED TRADEMARK-- INDEX
timely payment of interest and principal. used by the Fund's portfolio managers will is a market capitalization-weighted index
produce the desired results. covering all major areas of the U.S.
Investing in developing countries can economy. It is not the 500 largest
add additional risk, such as high rates of Small- and mid-capitalization companies companies, but rather the most widely held
inflation or sharply devalued currencies tend to be more vulnerable to adverse 500 companies chosen with respect to
against the U.S. dollar. Transaction costs developments and more volatile than larger market size, liquidity, and their
are often higher, and there may be delays companies. Investments in these sized industry.
in settlement procedures. Prices of equity companies may involve special risks,
securities change in response to many including those associated with dependence The unmanaged RUSSELL
factors including the historical and on a small management group, little or no MIDCAP--REGISTERED TRADEMARK-- INDEX
prospective earnings of the issuer, operating history, little or no track measures the performance of the 800
record of success, limited product lines, smallest companies in the Russell
less publicly available informa- 1000--REGISTERED TRADEMARK-- Index, which
represent approximately 30% of the total
market capitalization of the Russell
Continued
AIM V.I. Mid Cap Core Equity Fund
Past performance cannot guarantee value during the early years shown in the the investment. In other words, the space
comparable future results. chart. The vertical axis, the one that between $5,000 and $10,000 is the same
indicates the dollar value of an size as the space between $10,000 and
This chart, which is a logarithmic investment, is constructed with each $20,000, and so on.
chart, presents the fluctuations in the segment representing a percent change in
value of the Fund and its indexes. We the value of the investment. In this
believe that a logarithmic chart is more chart, each segment represents a doubling,
effective than other types of charts in or 100% change, in the value of
illustrating changes in
==================================================================================================================================
Continued from previous page
1000 Index. The Russell price-to-earnings ratio, price-to-book net asset values for shareholder
MIDCAP--REGISTERED TRADEMARK-- Index is a ratio, and three-year sales-per-share transactions and the returns based on
trademark/service mark of the Frank growth value, compared to the S&P MidCap those net asset values may differ from the
Russell Company. Russell-- REGISTERED 400 Index. net asset values and returns reported in
TRADEMARK-- is a trademark of the Frank the Financial Highlights. Additionally,
Russell Company. The Fund is not managed to track the the returns and net asset values shown
performance of any particular index, throughout this report are at the Fund
The Fund has elected to use the LIPPER including the indexes defined here, and level only and do not include variable
VARIABLE UNDERLYING FUNDS (VUF) MID-CAP consequently, the performance of the Fund product issuer charges. If such charges
CORE FUNDS INDEX as its peer group instead may deviate significantly from the were included, the total returns would be
of the Lipper Mid-Cap Core Funds Index. In performance of the indexes. lower.
2006, Lipper began publishing VUF indexes,
allowing the Fund to be compared with the A direct investment cannot be made in Industry classifications used in this
Lipper VUF Mid-Cap Core Funds Index. The an index. Unless otherwise indicated, report are generally according to the
unmanaged Lipper VUF Mid-Cap Core Funds index results include reinvested Global Industry Classification Standard,
Index is an equally weighted dividends, and they do not reflect sales which was developed by and is the
representation of the largest variable charges. Performance of an index of funds exclusive property and a service mark of
insurance underlying funds in the Lipper reflects fund expenses; performance of a Morgan Stanley Capital International Inc.
Mid-Cap Core Funds category. These funds market index does not. and Standard & Poor's.
have an average price-to-earnings ratio,
price-to-book ratio and three-year Other information The Chartered Financial
sales-per-share growth value, compared to Analyst--REGISTERED TRADEMARK--
the S&P MidCap 400 Index. The returns shown in the management's (CFA--REGISTERED TRADEMARK--) des-
discussion of Fund performance are based ignation is a globally recognized standard
The LIPPER MID-CAP CORE FUNDS INDEX is on net asset values calculated for for measuring the competence and integrity
an equally weighted representation of the shareholder transactions. Generally of investment professionals.
largest funds in the Lipper Mid-Cap Core accepted accounting principles require
Funds category. These funds have an adjustments to be made to the net assets
average of the Fund at period end for financial
reporting purposes, and as such, the
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
INDEX DATA FROM 8/31/01, FUND DATA FROM 9/10/01
AIM V.I. MID CAP AIM V.I. MID CAP
CORE EQUITY FUND- CORE EQUITY FUND- LIPPER VUF MID-CAP LIPPER MID-CAP CORE
DATE SERIES I SHARES SERIES II SHARES S&P 500 INDEX(1) RUSSELL MIDCAP INDEX(1) CORE FUNDS INDEX(1) FUNDS INDEX(1)
8/31/01 $10000 $10000 $10000 $10000
9/01 $ 9560 $ 9560 9193 8794 8687 8722
10/01 9920 9920 9368 9142 9186 9158
11/01 10361 10361 10086 9908 9798 9850
12/01 10738 10722 10175 10306 10331 10295
1/02 10728 10722 10026 10245 10232 10177
2/02 10849 10833 9833 10136 10228 10001
3/02 11300 11284 10203 10744 10842 10675
4/02 11150 11133 9585 10536 10707 10499
5/02 11220 11204 9514 10417 10581 10286
6/02 10529 10512 8837 9718 9837 9542
7/02 9577 9561 8148 8770 8789 8575
8/02 9797 9771 8201 8818 8832 8673
9/02 9015 8991 7311 8004 8082 7980
10/02 9356 9341 7954 8409 8442 8355
11/02 9957 9932 8421 8993 9025 8923
12/02 9547 9521 7927 8638 8650 8506
1/03 9316 9291 7720 8464 8427 8338
2/03 9166 9141 7604 8351 8251 8162
3/03 9136 9100 7677 8434 8328 8183
4/03 9687 9661 8309 9046 8935 8800
5/03 10509 10471 8747 9874 9697 9539
6/03 10639 10592 8858 9974 9828 9707
7/03 10950 10902 9015 10303 10144 10007
8/03 11350 11302 9190 10750 10612 10450
9/03 11080 11032 9093 10616 10405 10275
10/03 11561 11513 9607 11426 11212 11029
11/03 11761 11703 9691 11747 11534 11330
12/03 12155 12096 10199 12099 11885 11618
1/04 12397 12329 10387 12450 12145 11932
2/04 12619 12551 10531 12718 12422 12159
3/04 12578 12510 10372 12721 12425 12130
4/04 12649 12580 10209 12254 11981 11748
5/04 12799 12731 10349 12558 12223 11933
6/04 13142 13064 10550 12905 12593 12258
7/04 12609 12529 10201 12341 11983 11634
8/04 12558 12469 10242 12394 11910 11590
9/04 12791 12701 10353 12797 12358 11997
10/04 12993 12903 10511 13150 12646 12194
11/04 13527 13427 10936 13951 13400 12920
12/04 13835 13738 11308 14545 13900 13411
1/05 13561 13465 11033 14185 13582 13060
2/05 14036 13928 11265 14623 13967 13385
3/05 13931 13822 11066 14508 13851 13249
4/05 13488 13369 10856 14046 13233 12743
5/05 13868 13749 11201 14719 13927 13348
6/05 14090 13970 11217 15114 14361 13663
7/05 14744 14613 11634 15911 15107 14296
8/05 14764 14633 11528 15800 15121 14212
9/05 14627 14496 11621 16009 15304 14329
10/05 14184 14053 11427 15528 14759 13958
11/05 14743 14590 11859 16217 15478 14538
12/05 14889 14735 11863 16385 15671 14680
1/06 15545 15389 12177 17227 16531 15435
2/06 15415 15258 12210 17206 16479 15413
3/06 15612 15443 12362 17632 16898 15834
4/06 15732 15563 12528 17756 17111 15995
5/06 15284 15106 12168 17158 16440 15362
6/06 15152 14974 12184 17178 16451 15312
7/06 14945 14778 12259 16802 16079 15020
8/06 15175 14995 12551 17229 16364 15344
9/06 15601 15420 12874 17541 16537 15541
10/06 16049 15856 13293 18232 17135 16110
11/06 16388 16183 13546 18888 17676 16595
12/06 16563 16351 13736 18886 17717 16653
1/07 16956 16729 13943 19524 18216 17137
2/07 17017 16789 13671 19555 18276 17221
3/07 17299 17058 13824 19712 18471 17443
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
4/07 18022 17776 14436 20463 19147 17990
5/07 18561 18300 14939 21235 19979 18751
6/07 18231 17971 14691 20756 19685 18500
7/07 17753 17507 14236 19983 18853 17765
8/07 17483 17227 14449 20017 18868 17871
9/07 17961 17690 14989 20676 19386 18339
10/07 18537 18264 15227 21009 19772 18722
11/07 18096 17825 14591 20006 18764 17812
12/07 18138 17872 14490 19943 18656 17709
===================================================================================================================================
AIM V.I. Mid Cap Core Equity Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-75.57%
ADVERTISING-1.02%
Omnicom Group Inc. 142,190 $ 6,758,291
========================================================================
AEROSPACE & DEFENSE-0.83%
Goodrich Corp. 78,582 5,548,675
========================================================================
APPLICATION SOFTWARE-2.22%
Amdocs Ltd.(b) 150,986 5,204,488
- ------------------------------------------------------------------------
Cadence Design Systems, Inc.(b) 560,011 9,525,787
========================================================================
14,730,275
========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.14%
Legg Mason, Inc. 12,434 909,547
========================================================================
COMMUNICATIONS EQUIPMENT-0.31%
Polycom, Inc.(b) 74,570 2,071,555
========================================================================
COMPUTER HARDWARE-0.65%
Fujitsu Ltd. (Japan)(c) 644,000 4,320,048
========================================================================
COMPUTER STORAGE & PERIPHERALS-1.13%
QLogic Corp.(b) 530,831 7,537,800
========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.11%
Joy Global Inc. 111,678 7,350,646
========================================================================
DEPARTMENT STORES-0.45%
Kohl's Corp.(b) 65,749 3,011,304
========================================================================
DISTRIBUTORS-1.26%
Genuine Parts Co. 180,798 8,370,947
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.43%
Agilent Technologies, Inc.(b) 78,037 2,867,079
========================================================================
ELECTRONIC MANUFACTURING SERVICES-1.47%
Molex Inc. 249,142 6,801,577
- ------------------------------------------------------------------------
Tyco Electronics Ltd. 80,880 3,003,074
========================================================================
9,804,651
========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.26%
Republic Services, Inc. 266,536 8,355,904
========================================================================
FOOD RETAIL-0.68%
SUPERVALU Inc. 120,730 4,529,790
========================================================================
GAS UTILITIES-1.29%
UGI Corp. 314,994 8,583,587
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
HEALTH CARE EQUIPMENT-3.56%
Hospira, Inc.(b) 183,585 $ 7,828,064
- ------------------------------------------------------------------------
Varian Medical Systems, Inc.(b) 141,705 7,391,333
- ------------------------------------------------------------------------
Zimmer Holdings, Inc.(b) 127,259 8,418,183
========================================================================
23,637,580
========================================================================
HEALTH CARE SERVICES-0.74%
Quest Diagnostics Inc.(d) 92,887 4,913,722
========================================================================
HEALTH CARE TECHNOLOGY-0.77%
IMS Health Inc. 223,098 5,140,178
========================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.29%
Administaff, Inc. 302,901 8,566,040
========================================================================
INDUSTRIAL MACHINERY-3.67%
Atlas Copco A.B.-Class A (Sweden)(b)(c) 336,800 4,970,842
- ------------------------------------------------------------------------
Dover Corp. 154,704 7,130,307
- ------------------------------------------------------------------------
ITT Corp. 88,448 5,841,106
- ------------------------------------------------------------------------
Parker Hannifin Corp. 85,527 6,441,039
========================================================================
24,383,294
========================================================================
INSURANCE BROKERS-0.99%
Marsh & McLennan Cos., Inc. 248,492 6,577,583
========================================================================
LEISURE PRODUCTS-1.20%
Namco Bandai Holdings Inc. (Japan)(c)(d) 503,300 7,990,089
========================================================================
LIFE SCIENCES TOOLS & SERVICES-4.98%
Invitrogen Corp.(b) 78,294 7,313,443
- ------------------------------------------------------------------------
PerkinElmer, Inc. 184,571 4,802,538
- ------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 232,309 9,378,314
- ------------------------------------------------------------------------
Techne Corp.(b)(d) 175,305 11,578,895
========================================================================
33,073,190
========================================================================
METAL & GLASS CONTAINERS-1.25%
Pactiv Corp.(b) 311,054 8,283,368
========================================================================
OFFICE ELECTRONICS-1.39%
Xerox Corp. 570,380 9,234,452
========================================================================
OFFICE SERVICES & SUPPLIES-0.71%
Pitney Bowes Inc. 124,073 4,719,737
========================================================================
OIL & GAS DRILLING-0.77%
Noble Corp. 91,209 5,154,221
========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.70%
BJ Services Co. 280,528 6,805,609
- ------------------------------------------------------------------------
FMC Technologies, Inc.(b) 86,143 4,884,308
- ------------------------------------------------------------------------
Smith International, Inc. 85,176 6,290,248
========================================================================
17,980,165
========================================================================
</Table>
AIM V.I. Mid Cap Core Equity Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-5.89%
Chesapeake Energy Corp. 340,430 $ 13,344,856
- ------------------------------------------------------------------------
Newfield Exploration Co.(b) 89,678 4,726,030
- ------------------------------------------------------------------------
Penn West Energy Trust (Canada)(b) 286,409 7,446,634
- ------------------------------------------------------------------------
Pioneer Natural Resources Co. 105,896 5,171,961
- ------------------------------------------------------------------------
Whiting Petroleum Corp.(b) 146,633 8,454,859
========================================================================
39,144,340
========================================================================
PACKAGED FOODS & MEATS-2.89%
Cadbury Schweppes PLC (United Kingdom)(b)(c) 1,354,318 16,850,789
- ------------------------------------------------------------------------
Del Monte Foods Co. 251,748 2,381,536
========================================================================
19,232,325
========================================================================
PAPER PRODUCTS-1.54%
MeadWestvaco Corp. 327,294 10,244,302
========================================================================
PERSONAL PRODUCTS-2.91%
Avon Products, Inc. 224,453 8,872,627
- ------------------------------------------------------------------------
Estee Lauder Cos. Inc. (The)-Class A 240,490 10,487,769
========================================================================
19,360,396
========================================================================
PHARMACEUTICALS-3.04%
Barr Pharmaceuticals Inc.(b) 380,491 20,204,072
========================================================================
PRECIOUS METALS & MINERALS-1.83%
Coeur d'Alene Mines Corp.(b)(d) 2,457,418 12,139,645
========================================================================
PROPERTY & CASUALTY INSURANCE-3.76%
Axis Capital Holdings Ltd. 334,767 13,045,870
- ------------------------------------------------------------------------
Progressive Corp. (The)(b) 623,970 11,955,265
========================================================================
25,001,135
========================================================================
PUBLISHING-1.16%
Washington Post Co. (The)-Class B 9,722 7,694,283
========================================================================
REGIONAL BANKS-0.80%
SVB Financial Group(b)(d) 105,783 5,331,463
========================================================================
SEMICONDUCTORS-1.87%
Analog Devices, Inc. 192,759 6,110,460
- ------------------------------------------------------------------------
Linear Technology Corp.(d) 198,941 6,332,292
========================================================================
12,442,752
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
SPECIALIZED FINANCE-1.21%
Moody's Corp. 224,470 $ 8,013,579
========================================================================
SPECIALTY CHEMICALS-6.02%
International Flavors & Fragrances Inc. 305,912 14,723,544
- ------------------------------------------------------------------------
Rohm and Haas Co. 116,387 6,176,658
- ------------------------------------------------------------------------
Sigma-Aldrich Corp. 349,711 19,094,221
========================================================================
39,994,423
========================================================================
SYSTEMS SOFTWARE-1.46%
McAfee Inc.(b) 137,477 5,155,388
- ------------------------------------------------------------------------
Symantec Corp.(b) 280,181 4,522,121
========================================================================
9,677,509
========================================================================
THRIFTS & MORTGAGE FINANCE-2.45%
People's United Financial Inc. 916,788 16,318,826
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.47%
SK Telecom Co., Ltd.-ADR (South Korea) 103,818 3,097,929
========================================================================
Total Domestic Common Stocks (Cost
$434,725,559) 502,300,697
========================================================================
PREFERRED STOCK-2.76%
HOUSEHOLD PRODUCTS-2.76%
Henkel KGaA-Pfd. (Germany) (Cost
$13,886,854)(b)(c) 327,912 18,347,252
========================================================================
MONEY MARKET FUNDS-22.63%
Liquid Assets Portfolio-Institutional
Class(e) 75,182,699 75,182,699
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 75,182,699 75,182,699
========================================================================
Total Money Market Funds (Cost
$150,365,398) 150,365,398
========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.96% (Cost
$598,977,811) 671,013,347
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN MONEY MARKET
FUNDS-2.14%
Liquid Assets Portfolio-Institutional Class
(Cost $14,246,147)(e)(f) 14,246,147 14,246,147
========================================================================
TOTAL INVESTMENTS-103.10% (Cost $613,223,958) 685,259,494
========================================================================
OTHER ASSETS LESS LIABILITIES-(3.10)% (20,573,208)
========================================================================
NET ASSETS-100.00% $664,686,286
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(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 December 31, 2007 was $52,479,020,
which represented 7.90% of the Fund's Net Assets. See Note 1A.
(d) All or a portion of this security was out on loan at December 31, 2007.
(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. Mid Cap Core Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $448,612,413)* $520,647,949
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $164,611,545) 164,611,545
=============================================================
Total investments (Cost $613,223,958) 685,259,494
=============================================================
Cash 18,033
- -------------------------------------------------------------
Foreign currencies, at value (Cost $1,193,376) 1,191,122
- -------------------------------------------------------------
Receivables for:
Fund shares sold 363,935
- -------------------------------------------------------------
Dividends 1,122,556
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 24,475
=============================================================
Total assets 687,979,615
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 7,807,403
- -------------------------------------------------------------
Investments purchased from affiliates 299,330
- -------------------------------------------------------------
Fund shares reacquired 336,026
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 59,358
- -------------------------------------------------------------
Collateral upon return of securities loaned 14,246,147
- -------------------------------------------------------------
Accrued administrative services fees 422,138
- -------------------------------------------------------------
Accrued distribution fees -- Series II 49,146
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 657
- -------------------------------------------------------------
Accrued transfer agent fees 6,532
- -------------------------------------------------------------
Accrued operating expenses 66,592
=============================================================
Total liabilities 23,293,329
=============================================================
Net assets applicable to shares outstanding $664,686,286
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $524,098,556
- -------------------------------------------------------------
Undistributed net investment income 8,055,236
- -------------------------------------------------------------
Undistributed net realized gain 60,497,811
- -------------------------------------------------------------
Unrealized appreciation 72,034,683
=============================================================
$664,686,286
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $585,607,672
_____________________________________________________________
=============================================================
Series II $ 79,078,614
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 40,189,961
_____________________________________________________________
=============================================================
Series II 5,471,924
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 14.57
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 14.45
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $13,969,776 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$415,648) $ 8,975,926
- -------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$166,003) 6,267,344
=============================================================
Total investment income 15,243,270
=============================================================
EXPENSES:
Advisory fees 4,900,090
- -------------------------------------------------------------
Administrative services fees 1,850,711
- -------------------------------------------------------------
Custodian fees 42,067
- -------------------------------------------------------------
Distribution fees -- Series II 180,185
- -------------------------------------------------------------
Transfer agent fees 27,536
- -------------------------------------------------------------
Trustees' and officer's fees and benefits 35,839
- -------------------------------------------------------------
Other 77,653
=============================================================
Total expenses 7,114,081
=============================================================
Less: Fees waived and expense offset
arrangement(s) (109,792)
=============================================================
Net expenses 7,004,289
=============================================================
Net investment income 8,238,981
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains
from securities sold to affiliates of
$32,909) 62,480,495
- -------------------------------------------------------------
Foreign currencies (144,883)
=============================================================
62,335,612
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (10,815,055)
- -------------------------------------------------------------
Foreign currencies 2,456
=============================================================
(10,812,599)
=============================================================
Net realized and unrealized gain 51,523,013
=============================================================
Net increase in net assets resulting from
operations $ 59,761,994
_____________________________________________________________
=============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,238,981 $ 5,790,981
- ------------------------------------------------------------------------------------------
Net realized gain 62,335,612 53,482,109
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (10,812,599) 7,335,543
==========================================================================================
Net increase in net assets resulting from operations 59,761,994 66,608,633
==========================================================================================
Distributions to shareholders from net investment income:
Series I (1,301,490) (5,369,075)
- ------------------------------------------------------------------------------------------
Series ll (37,603) (394,014)
==========================================================================================
Total distributions from net investment income (1,339,093) (5,763,089)
==========================================================================================
Distributions to shareholders from net realized gains:
Series l (8,489,530) (57,207,085)
- ------------------------------------------------------------------------------------------
Series ll (1,129,701) (5,625,901)
==========================================================================================
Total distributions from net realized gains (9,619,231) (62,832,986)
==========================================================================================
Decrease in net assets resulting from distributions (10,958,324) (68,596,075)
==========================================================================================
Share transactions-net:
Series l (40,138,176) (2,215,259)
- ------------------------------------------------------------------------------------------
Series ll 18,100,448 6,883,123
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (22,037,728) 4,667,864
==========================================================================================
Net increase in net assets 26,765,942 2,680,422
==========================================================================================
NET ASSETS:
Beginning of year 637,920,344 635,239,922
==========================================================================================
End of year (including undistributed net investment income
of $8,055,236 and $(91,298), respectively) $664,686,286 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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.
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 Ltd. ("Invesco")
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.
AIM V.I. Mid Cap Core Equity 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 (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 year ended December 31, 2007, AIM waived advisory fees of $101,360.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$166,896 for accounting and fund administrative services and reimbursed
$1,683,815 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 year ended December 31, 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 A I M
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 year ended December 31, 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 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 tables below show the transactions in and earnings from
investments in an affiliated money market fund for the year ended December 31,
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 12/31/07 INCOME
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $38,447,715 $166,653,298 $(129,918,314) $ 75,182,699 $3,052,445
- --------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 38,447,715 166,653,298 (129,918,314) 75,182,699 3,048,896
==================================================================================================
Subtotal $76,895,430 $333,306,596 $(259,836,628) $150,365,398 $6,101,341
==================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $243,874,504 $(229,628,357) $ 14,246,147 $ 166,003
==================================================================================================
Total
Investments
in
Affiliates $76,895,430 $577,181,100 $(489,464,985) $164,611,545 $6,267,344
__________________________________________________________________________________________________
==================================================================================================
</Table>
* Net of compensation to counterparties.
AIM V.I. Mid Cap Core Equity Fund
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 year ended December 31, 2007, the Fund
engaged in securities sales of $663,475, which resulted in net realized gains of
$32,909, and securities purchases of $2,665,907.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $8,432.
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 year ended December 31, 2007, the Fund paid legal fees of $5,570
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 SEC, 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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $13,969,776 were
on loan to brokers. The loans were secured by cash collateral of $14,246,147
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $166,003 for securities lending transactions, which
are net of compensation to counterparties.
AIM V.I. Mid Cap Core Equity Fund
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years December 31, 2007 and
2006 was as follows:
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 1,339,093 $13,589,126
- ----------------------------------------------------------------------------------------
Long-term capital gain 9,619,231 55,006,949
========================================================================================
Total distributions $10,958,324 $68,596,075
________________________________________________________________________________________
========================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 14,969,544
- ----------------------------------------------------------------------------
Undistributed long-term gain 54,171,439
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 71,590,796
- ----------------------------------------------------------------------------
Temporary book/tax differences (55,561)
- ----------------------------------------------------------------------------
Post-October Capital loss deferral (88,488)
- ----------------------------------------------------------------------------
Shares of beneficial interest 524,098,556
============================================================================
Total net assets $664,686,286
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies of $(853).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
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 year ended December 31, 2007 was $348,958,351 and
$440,580,151, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 85,410,823
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (13,819,174)
==============================================================================
Net unrealized appreciation of investment securities $ 71,591,649
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $613,667,845.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on December 31, 2007, undistributed net
investment income was increased by $1,246,646, undistributed net realized gain
was decreased by $-1,246,646. This reclassification had no effect on the net
assets of the Fund.
AIM V.I. Mid Cap Core Equity Fund
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007(a) DECEMBER 31, 2006
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 3,861,535 $ 56,702,650 1,804,056 $ 25,439,433
- ------------------------------------------------------------------------------------------------------------------------
Series II 2,574,352 37,303,201 962,594 13,444,373
========================================================================================================================
Issued as reinvestment of dividends:
Series I 658,441 9,791,025 4,608,241 62,349,500
- ------------------------------------------------------------------------------------------------------------------------
Series II 79,139 1,167,305 448,244 6,019,915
========================================================================================================================
Reacquired:
Series I (7,309,460) (106,631,851) (6,405,942) (90,004,192)
- ------------------------------------------------------------------------------------------------------------------------
Series II (1,410,426) (20,370,058) (907,250) (12,581,165)
========================================================================================================================
(1,546,419) $ (22,037,728) 509,943 $ 4,667,864
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are 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 13--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
INVESCO Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements") . This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Mid Cap Core Equity 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
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.52 $ 13.61 $ 13.11 $ 12.06 $ 9.53
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.19 0.14 0.06 0.03(a) 0.00(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.11 1.39 0.94 1.63 2.60
================================================================================================================================
Total from investment operations 1.30 1.53 1.00 1.66 2.60
================================================================================================================================
Less distributions:
Dividends from net investment income (0.04) (0.14) (0.07) (0.02) --
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) (1.48) (0.43) (0.59) (0.07)
================================================================================================================================
Total distributions (0.25) (1.62) (0.50) (0.61) (0.07)
================================================================================================================================
Net asset value, end of period $ 14.57 $ 13.52 $ 13.61 $ 13.11 $ 12.06
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 9.55% 11.24% 7.62% 13.82% 27.31%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $585,608 $581,154 $584,860 $496,606 $293,162
================================================================================================================================
Ratio of expenses to average net assets 1.00%(c)(d) 1.04% 1.03% 1.04% 1.07%
================================================================================================================================
Ratio of net investment income to average net assets 1.23%(c) 0.93% 0.50% 0.25% 0.01%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 62% 83% 70% 55% 37%
________________________________________________________________________________________________________________________________
================================================================================================================================
</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 based on average daily net assets of $610,081,786.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursement was
1.01%.
<Table>
<Caption>
SERIES II
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.42 $ 13.52 $ 13.04 $ 12.01 $ 9.51
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.13 0.10 0.03 (0.00)(a) (0.03)(a)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.12 1.38 0.92 1.62 2.60
==============================================================================================================================
Total from investment operations 1.25 1.48 0.95 1.62 2.57
==============================================================================================================================
Less distributions:
Dividends from net investment income (0.01) (0.10) (0.04) (0.00) --
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.21) (1.48) (0.43) (0.59) (0.07)
==============================================================================================================================
Total distributions (0.22) (1.58) (0.47) (0.59) (0.07)
==============================================================================================================================
Net asset value, end of period $ 14.45 $ 13.42 $ 13.52 $ 13.04 $ 12.01
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 9.29% 10.98% 7.27% 13.57% 27.05%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $79,079 $56,766 $50,380 $33,495 $ 4,874
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.25%(c)(d) 1.29% 1.28% 1.29% 1.32%
==============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.98%(c) 0.68% 0.25% (0.00)% (0.24)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate 62% 83% 70% 55% 37%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</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 based on average daily net assets of $72,073,952.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.26%
AIM V.I. Mid Cap Core Equity 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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds and Shareholders of
AIM V. I. Mid Cap Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Mid Cap Core Equity Fund
(one of the funds constituting AIM Variable Insurance Funds, hereafter referred
to as the "Fund") at December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Mid Cap Core Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $995.40 $5.03 $1,020.16 $5.09 1.00%
Series II 1,000.00 994.30 6.28 1,018.90 6.36 1.25
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Mid Cap Core Equity Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Long-Term Capital Gain Dividends $9,619,231
Corporate Dividends Received Deduction* 56.61%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Mid Cap Core Equity Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Mid Cap Core Equity Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
FIXED INCOME AIM V.I. MONEY MARKET FUND
December 31, 2007
Cash Equivalents
ANNUAL REPORT TO SHAREHOLDERS
[COVER GLOBE IMAGE]
AIM V.I. MONEY MARKET FUND's investment objective
is to provide as high a level of current income as is
consistent with the preservation of capital and liquidity.
The Fund 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 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.
=================================================
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.
=================================================
================================================= YOUR GOALS. OUR SOLUTIONS [AIM INVESTMENTS LOGO APPEARS HERE]
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE --Registered Trademark-- --Registered Trademark--
=================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AIM V.I. MONEY MARKET FUND
============================================================================== by lowering its federal funds target
PERFORMANCE SUMMARY rate by one-half a percentage point on
September 18.(3)
Yields on shares of AIM V.I. Money Market Fund declined during the year ended
December 31, 2007. The seven-day SEC yield on the Fund's Series I shares was While the September rate cut was larger
4.56% at the beginning of the year and 4.16% at its close. The seven-day SEC than expected, two subsequent
yield on the Fund's Series II shares was 4.31% at the start of the year and quarter-point cuts on October 31 and
3.91% at its close. As of December 31, 2007, the Fund's total net assets stood December 11 were fully anticipated by
at $49.00 million and the Fund's weighted average maturity was 22 days. markets.(3)
==============================================================================
Treasury yields fell and the U.S.
HOW WE INVEST quarters of 2007, respectively. Initial Treasury yield curve steepened by the
estimates suggested the economy expanded end of the year as investors fled risky
The Fund invests only in high-quality at an annualized rate of 0.6%(1) in the assets and turned instead to the
U.S. dollar denominated short term debt fourth quarter. relative safety of government
obligations, including: securities. This flight to safety
Inflation, as measured by the core resulted in a significant demand for
o Securities issued by the U.S. Consumer Price Index (which excludes money market funds.
government and its agencies. volatile food and energy prices),
increased at an annual rate of 2.4%(2) in Despite concerns about the
o Bankers' acceptances, certificates December, up from a 2.1%(2) pace in the implications of the credit crunch on the
of deposit and time deposits from third quarter. The broader headline broader economy, for the year ended
U.S. and foreign banks. Consumer Price Index rose even faster, December 31, 2007, the Lehman Brothers
due primarily to rising gasoline prices. U.S. Aggregate Bond index, which
o Repurchase agreements. represents the performance of
Nonetheless, at the close of 2007 investment-grade fixed income
o Commercial paper. there was considerable uncertainty about investments, returned 6.97%(4). It
what lay ahead for the economy in 2008. outperformed the S&P 500 Index, which
o Taxable municipal securities. Since the summer, global financial represents the performance of the U.S.
markets experienced significant stock market and which returned 5.49%(4),
o Master notes. volatility. Investors witnessed a but underperformed the Lehman Brothers
widespread and disorderly risk repricing U.S. Treasury Index, which represents
o Cash equivalents. after a prolonged period of the performance of U.S. Treasury
exceptionally benign financial securities and which returned 9.01%.(4)
The Fund may invest a portion of its conditions. U.S. subprime lending first
assets in U.S. dollar denominated came to widespread public attention in Sources: (1) Bureau of Economic
foreign securities. early 2007, and by summer it emerged as Analysis; (2) Bureau of Labor
a major area of concern to the markets. Statistics; (3) U.S. Federal Reserve
The Fund invests in accordance with Board; (4)Lipper Inc.
industry-standard requirements for money The spillover from the housing and
market funds for the quality, maturity subprime markets, credit risk repricing The views and opinions expressed in
and diversification of investments. In and heightened investor risk sensitivity management's discussion of Fund
selecting securities for the Fund, we dramatically diminished liquidity and performance are those of A I M Advisors,
focus on securities that offer safety, reduced credit availability. Inc. These views and opinions are
liquidity and a competitive yield. Consequently, the U.S. Federal Reserve subject to change at any time based on
Board (the Fed) began adding liquidity factors such as market and economic
MARKET CONDITIONS AND YOUR FUND to the system by cutting the discount conditions. These views and opinions may
rate by one-half a percentage point on not be relied upon as investment advice
The U.S. economy expanded throughout August 17 and or recommendations, or as an offer for a
2007. The annualized rate of growth in particular security. The information is
gross domestic product accelerated from not a complete analysis of every aspect
0.6% to 3.8% to 4.9%(1)n the first, of any market country, industry,
second and third security or the Fund. Statements of fact
are from sources considered reliable,
but A I M Advisors, Inc. makes no
representation or warranty as to their
completeness or accuracy. Although
historical performance is no guarantee
of future results, these insights may
help you understand our investment
management philosophy.
Team managed by A I M Advisors, Inc.
========================================== ========================================================
PERFORMANCE QUOTED IS PAST PERFORMANCE AND AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED
CANNOT GUARANTEE COMPARABLE FUTURE BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
RESULTS; CURRENT PERFORMANCE MAY BE LOWER OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
OR HIGHER. VISIT AIMINVESTMENTS.COM FOR PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER
THE MOST RECENT MONTH-END PERFORMANCE. SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE
FUND.
========================================== ========================================================
AIM V.I. MONEY MARKET FUND
========================================== PRINCIPAL RISKS OF INVESTING IN THE FUND The Fund may invest in obligations
PORTFOLIO COMPOSITION issued by agencies and instrumentalities
Credit risk is the risk of loss on an of the U.S. government that may vary in
Maturity distribution of Fund holdings investment due to the deterioration of the level of support they receive from
in days, as of 12/31/07 an issuer's financial health. Such a the U.S. government. The U.S. government
deterioration of financial health may may choose not to provide financial
1-7 51.7% result in a reduction of the credit support to U.S. government-sponsored
8-30 28.1 rating of the issuer's securities and agencies or instrumentalities if it is
31-90 18.2 may lead to the issuer's inability to not legally obligated to do so. In this
91-180 2.0 honor its contractual obligations, case, if the issuer defaulted, the fund
181+ 0.0 including making timely payment of holding securities of such issuer might
========================================== interest and principal. not be able to recover its investment
from the U.S. government
Foreign securities have additional
The numbers of days to maturity of each risks, including exchange rate changes, ABOUT INDEXES USED IN THIS REPORT
holding is determined in accordance with political and economic upheaval, the
the provisions of Rule 2a-7 of the relative lack of information, relatively The LEHMAN BROTHERS U.S. AGGREGATE BOND
Investment Company Act of 1940. low market liquidity, and the potential INDEX covers U.S. investment-grade
lack of strict financial and accounting fixed-rate bonds with components for
THE PERFORMANCE DATA QUOTED REPRESENT controls and standards. government and corporate securities,
PAST PERFORMANCE AND CANNOT GUARANTEE mortgage pass-throughs, and asset-backed
COMPARABLE FUTURE RESULTS; CURRENT Interest rate risk refers to the securities.
PERFORMANCE MAY BE LOWER OR HIGHER. risk that bond prices generally fall as
PLEASE SEE YOUR VARIABLE PRODUCT ISSUER interest rates rise; conversely, bond The S&P 500--registered
OR FINANCIAL ADVISOR FOR THE MOST RECENT prices generally rise as interest rates trademark--Index is a market
MONTH-END VARIABLE PRODUCT PERFORMANCE. fall. capitalization-weighted index covering
PERFORMANCE FIGURES REFLECT FUND all major areas of the U.S. economy. It
EXPENSES, REINVESTED DISTRIBUTIONS AND There is no guarantee that the is not the 500 largest companies, but
CHANGES IN NET ASSET VALUE. INVESTMENT investment techniques and risk analyses rather the most widely held 500
RETURN AND PRINCIPAL VALUE WILL used by the Fund's portfolio managers companies chosen with respect to market
FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR will produce the desired results. size, liquidity, and their industry.
LOSS WHEN YOU SELL SHARES.
The prices of securities held by the The unmanaged LEHMAN BROTHERS U.S.
AIM V.I. MONEY MARKET FUND, A SERIES Fund may decline in response to market TREASURY INDEX, which represents the
PORTFOLIO OF AIM VARIABLE INSURANCE risks. performance of public obligations of the
FUNDS, IS CURRENTLY OFFERED THROUGH U.S. Treasury with a remaining maturity
INSURANCE COMPANIES ISSUING VARIABLE The value of, payment of interest of one year or more, is compiled by
PRODUCTS. YOU CANNOT PURCHASE SHARES OF on, repayment of principal for and the Lehman Brothers, a global investment
THE FUND DIRECTLY. PERFORMANCE FIGURES ability of the Fund to sell a municipal bank.
GIVEN REPRESENT THE FUND AND ARE NOT security may be affected by
INTENDED TO REFLECT ACTUAL VARIABLE constitutional amendments, legislative
PRODUCT VALUES. THEY DO NOT REFLECT enactments, executive orders,
SALES CHARGES, EXPENSES AND FEES administrative regulations, voter
ASSESSED IN CONNECTION WITH A VARIABLE initiatives and the economics of the
PRODUCT. SALES CHARGES, EXPENSES AND regions in which the issuers in which
FEES, WHICH ARE DETERMINED BY THE the Fund invests are located.
VARIABLE PRODUCT ISSUERS, WILL VARY AND
WILL LOWER THE TOTAL RETURN. If the seller of a repurchase
agreement in which the Fund invests
THE MOST RECENT MONTH-END defaults on its obligation or declares
PERFORMANCE DATA AT THE FUND LEVEL, bankruptcy, the Fund may experience
EXCLUDING VARIABLE PRODUCT CHARGES, IS delays in selling the securities
AVAILABLE ON THIS AIM AUTOMATED underlying the repurchase agreement.
INFORMATION LINE, 866-702-4402.
To the extent that the Fund is
AS MENTIONED ABOVE, FOR THE MOST RECENT concentrated in securities of issuers in
MONTH-END PERFORMANCE INCLUDING VARIABLE the banking and financial services
PRODUCT CHARGES, PLEASE CONTACT YOUR industries, the Fund's performance will
VARIABLE PRODUCT ISSUER OR FINANCIAL depend on the overall condition of those
ADVISOR. industries. The value of these
securities can be sensitive to changes
in government regulation and interest
rates and economic downturns in the
United States and abroad.
AIM V.I. Money Market Fund
SCHEDULE OF INVESTMENTS
December 31, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER-34.65%(a)
ASSET-BACKED SECURITIES- COMMERCIAL LOANS/
LEASES-9.15%
Amstel Funding Corp. (Acquired 12/04/07; Cost
$496,250) 6.00%(b)(c) 01/18/08 $ 500 $ 498,583
- --------------------------------------------------------------------------------
(Acquired 12/04/07; Cost $1,188,216)
6.00%(b)(c) 01/22/08 1,998 1,193,807
- --------------------------------------------------------------------------------
(Acquired 12/07/07; Cost $793,611)
6.25%(b)(c) 01/22/08 800 797,084
- --------------------------------------------------------------------------------
Atlantis One Funding Corp. (Acquired
10/26/07; Cost $1,975,800) 4.84%(b)(c) 01/24/08 2,000 1,993,816
================================================================================
4,483,290
================================================================================
ASSET-BACKED SECURITIES-FULLY SUPPORTED
BANK-12.61%
Concord Minutemen Capital Co., LLC-Series A,
(Multi CEP's-Liberty Hampshire Co., LLC,
agent) (Acquired 10/24/07; Cost $1,966,533)
5.02%(b) 02/21/08 2,000 1,985,777
- --------------------------------------------------------------------------------
Ticonderoga Funding LLC (CEP-Bank of America,
N.A.) (Acquired 11/09/07; Cost $1,692,952)
4.85%(b) 01/22/08 1,710 1,705,162
- --------------------------------------------------------------------------------
Variable Funding Capital Co., LLC
(CEP-Wachovia Bank, N.A.) (Acquired
11/26/07; Cost $2,478,333) 5.20%(b) 01/25/08 2,500 2,491,333
================================================================================
6,182,272
================================================================================
ASSET-BACKED SECURITIES-MULTI-PURPOSE-8.10%
Atlantic Asset Securitization LLC (Acquired
11/02/07; Cost $1,975,258) 4.75%(b) 01/16/08 1,995 1,991,052
- --------------------------------------------------------------------------------
Gemini Securitization Corp., LLC (Acquired
12/04/07; Cost $1,972,093) 5.52%(b) 03/04/08 2,000 1,980,680
================================================================================
3,971,732
================================================================================
ASSET-BACKED SECURITIES-TRADE
RECEIVABLES-2.85%
CAFCO, LLC (Acquired 10/24/07; Cost
$1,381,554) 4.89%(b) 01/29/08 1,400 1,394,675
================================================================================
REGIONAL BANKS-1.94%
Danske Corp. 4.25%(c) 02/01/08 955 951,505
================================================================================
Total Commercial Paper (Cost $16,983,474) 16,983,474
================================================================================
VARIABLE RATE DEMAND NOTES-21.45%(d)
INSURED-0.47%(e)
Omaha (City of), Nebraska; (Riverfront
Redevelopment Project); Series 2002 B,
Special Obligation Taxable RB (INS-Ambac
Assurance Corp.) 4.91%(f) 02/01/13 230 230,000
================================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
<Caption>
LETTER OF CREDIT ENHANCED-20.98%(g)
A Mining Group LLC; Series 2006, Incremental
Taxable Bonds (LOC-Wachovia Bank, N.A.)
5.22%(f) 06/01/29 $ 200 $ 200,000
- --------------------------------------------------------------------------------
Albany (City of), New York Industrial
Development Agency (Albany Medical Center
Hospital); Series 2006 B, Taxable IDR
(LOC-RBS Citizens, N.A.) 4.86%(f) 05/01/35 985 985,000
- --------------------------------------------------------------------------------
Albuquerque (City of), New Mexico (KTech
Corp. Project); Series 2002, Taxable RB
(LOC-Wells Fargo Bank, N.A.) 4.90% 08/01/25 650 650,000
- --------------------------------------------------------------------------------
Corp. Finance Managers Inc., Integrated Loan
Program; Series 2003 B, PARTs (LOC-Wells
Fargo Bank, N.A.) 4.90%(f) 02/02/43 2,045 2,045,000
- --------------------------------------------------------------------------------
EPC Allentown, LLC; Series 2005, Taxable
Floating Rate Bonds (LOC-Wachovia Bank,
N.A.) 5.11%(f) 07/01/30 3,200 3,200,000
- --------------------------------------------------------------------------------
Roman Catholic Diocese of Charlotte; Series
2002, Taxable Floating Rate Bonds
(LOC-Wachovia Bank, N.A.) 5.11%(f) 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.) 5.17%(f) 09/01/17 2,000 2,000,000
================================================================================
10,280,000
================================================================================
Total Variable Rate Demand Notes (Cost
$10,510,000) 10,510,000
================================================================================
CERTIFICATES OF DEPOSIT-10.21%
Barclays Bank PLC 4.93% 02/25/08 2,000 2,000,015
- --------------------------------------------------------------------------------
UBS A.G. 5.38% 06/02/08 1,000 1,000,000
- --------------------------------------------------------------------------------
Unicredito Italiano S.p.A. (United Kingdom)
4.96%(c) 02/26/08 2,000 2,000,030
================================================================================
Total Certificates of Deposit (Cost
$5,000,045) 5,000,045
================================================================================
MEDIUM-TERM NOTES-5.51%
Metropolitan Life Global Funding I
Floating Rate MTN (Acquired 11/10/04; Cost
$700,525) 4.97%(b)(h) 01/28/08 700 700,049
- --------------------------------------------------------------------------------
Societe Generale S.A. Unsec. Floating Rate
MTN 5.23%(c)(h) 08/01/08 2,000 2,000,000
================================================================================
Total Medium-Term Notes (Cost $2,700,049) 2,700,049
================================================================================
MASTER NOTE AGREEMENTS-4.08%
Merrill Lynch Mortgage Capital, Inc.
(Acquired 10/10/07; Cost $2,000,000)
4.63%(b)(f)(i) 01/08/08 2,000 2,000,000
================================================================================
FUNDING AGREEMENTS-2.04%
New York Life Insurance Co. (Acquired
04/04/07; Cost $1,000,000) 5.29%(b)(h)(j) 04/04/08 1,000 1,000,000
================================================================================
</Table>
AIM V.I. Money Market Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT
MATURITY (000) VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES-2.04%
ASSET-BACKED SECURITIES-FULLY SUPPORTED
BANK-2.04%
RACERS Trust Series 2004-6-MM, Floating Rate
Notes (CEP-Lehman Brothers Holdings Inc.)
(Acquired 04/13/07; Cost $1,000,000)
4.95%(b)(h) 01/22/08 $1,000 $1,000,000
================================================================================
TOTAL INVESTMENTS (excluding Repurchase
Agreements)-79.98% (Cost $39,193,568) 39,193,568
================================================================================
</Table>
<Table>
<Caption>
REPURCHASE
AMOUNT
- -----------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-20.16%(k)
Fortis Bank S.A., Joint agreement dated
12/31/07, aggregate maturing value
$800,204,444 (collateralized by Corporate
obligations valued at $840,000,000;
0.00%-6.00%, 12/25/34-07/10/52) 4.60%,
01/02/08(c) 2,000,511 2,000,000
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
REPURCHASE
AMOUNT VALUE
- -----------------------------------------------------------------------------------
Greenwich Capital Markets, Inc., Joint
agreement dated 12/31/07, aggregate
maturing value $1,300,343,056
(collateralized by U.S. Government
obligations valued at $1,326,003,952;
4.00%-8.00%, 09/01/11-11/01/47) 4.75%,
01/02/08 $7,882,634 $ 7,880,554
===================================================================================
Total Repurchase Agreements (Cost
$9,880,554) 9,880,554
===================================================================================
TOTAL INVESTMENTS-100.14% (Cost
$49,074,122)(l)(m) 49,074,122
- -----------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES- (0.14)% (66,674)
- -----------------------------------------------------------------------------------
NET ASSETS-100.00% $49,007,448
___________________________________________________________________________________
===================================================================================
</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
STRIPS - Separately Traded Registered Interest and Principal Security
Unsec. - Unsecured
</Table>
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 December 31, 2007 was
$20,732,018, which represented 42.30% 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:
Netherlands: 9.15%; other countries less than 5%: 14.19%.
(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 December 31, 2007.
(e) Principal and/or interest payments are secured by the bond insurance company
listed.
(f) 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.
(g) Principal and interest payments are fully enhanced by a letter of credit
from the bank listed or a predecessor bank, branch or subsidiary.
(h) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2007.
(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 December 31, 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 December 31, 2007 represented 2.04% 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. 18.6%
------------------------------------------------------------------------
Wells Fargo Bank, N.A. 5.5
------------------------------------------------------------------------
Amstel Funding Corp. 5.1
________________________________________________________________________
========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. Money Market Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, excluding repurchase agreements,
at value (Cost $39,193,568) $39,193,568
- -----------------------------------------------------------
Repurchase agreements (Cost $9,880,554) 9,880,554
===========================================================
Total investments (Cost $49,074,122) 49,074,122
===========================================================
Receivables for:
Fund shares sold 45,264
- -----------------------------------------------------------
Interest 148,901
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 46,645
===========================================================
Total assets 49,314,932
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 189,826
- -----------------------------------------------------------
Dividends 30
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 53,820
- -----------------------------------------------------------
Accrued administrative services fees 22,851
- -----------------------------------------------------------
Accrued distribution fees -- Series II 1,517
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 564
- -----------------------------------------------------------
Accrued transfer agent fees 507
- -----------------------------------------------------------
Accrued operating expenses 38,369
===========================================================
Total liabilities 307,484
===========================================================
Net assets applicable to shares outstanding $49,007,448
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $49,001,104
- -----------------------------------------------------------
Undistributed net investment income 6,344
===========================================================
$49,007,448
___________________________________________________________
===========================================================
NET ASSETS:
Series I $46,492,430
___________________________________________________________
===========================================================
Series II $ 2,515,018
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 46,491,132
___________________________________________________________
===========================================================
Series II 2,514,890
___________________________________________________________
===========================================================
Series I:
Net asset value per share $ 1.00
___________________________________________________________
===========================================================
Series II:
Net asset value per share $ 1.00
___________________________________________________________
===========================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Interest $2,529,247
___________________________________________________________
===========================================================
EXPENSES:
Advisory fees 190,574
- -----------------------------------------------------------
Administrative services fees 137,152
- -----------------------------------------------------------
Custodian fees 3,470
- -----------------------------------------------------------
Distribution fees-Series II 5,817
- -----------------------------------------------------------
Transfer agent fees 4,748
- -----------------------------------------------------------
Trustees' and officer's fees and benefits 18,036
- -----------------------------------------------------------
Professional services fees 42,732
- -----------------------------------------------------------
Other 12,534
===========================================================
Total expenses 415,063
===========================================================
Net investment income 2,114,184
===========================================================
Net increase in net assets resulting from
operations $2,114,184
___________________________________________________________
===========================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,114,184 $ 2,025,521
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Series I (2,016,504) (1,928,189)
- ----------------------------------------------------------------------------------------
Series II (97,680) (97,332)
========================================================================================
Decrease in net assets resulting from distributions (2,114,184) (2,025,521)
========================================================================================
Share transactions-net:
Series I 2,924,198 (1,354,278)
- ----------------------------------------------------------------------------------------
Series II 173,554 (738,190)
========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 3,097,752 (2,092,468)
========================================================================================
Net increase (decrease) in net assets 3,097,752 (2,092,468)
========================================================================================
NET ASSETS:
Beginning of year 45,909,696 48,002,164
========================================================================================
End of year (including undistributed net investment income
of $6,344 and $6,344, respectively) $49,007,448 $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
December 31, 2007
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 rade 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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
AIM V.I. Money Market Fund
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. 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 Ltd. ("Invesco") 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.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $87,152
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 year ended December 31, 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 A I M
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 year ended December 31, 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--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
AIM V.I. Money Market Fund
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 year ended December 31, 2007, the Fund paid legal fees of $3,655
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
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.
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--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years December 31, 2007 and
2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from ordinary income $2,114,184 $2,025,521
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ---------------------------------------------------------------------------
Undistributed ordinary income $ 52,932
- ---------------------------------------------------------------------------
Temporary book/tax differences (46,588)
- ---------------------------------------------------------------------------
Shares of beneficial interest 49,001,104
===========================================================================
Total net assets $49,007,448
___________________________________________________________________________
===========================================================================
</Table>
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
AIM V.I. Money Market Fund
NOTE 6--SHARE INFORMATION
<Table>
<Caption>
Changes in Shares Outstanding
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED Year ended
DECEMBER 31, 2007 (a) December 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 33,843,692 $33,843,692 29,676,430 $29,676,430
- ----------------------------------------------------------------------------------------------------------------------
Series II 611,826 611,826 808,564 808,564
======================================================================================================================
Issued as reinvestment of dividends:
Series I 2,016,467 2,016,467 1,928,164 1,928,164
- ----------------------------------------------------------------------------------------------------------------------
Series II 97,676 97,676 97,332 97,332
======================================================================================================================
Reacquired:
Series I (32,935,961) (32,935,961) (32,958,863) (32,958,863)
- ----------------------------------------------------------------------------------------------------------------------
Series II (535,948) (535,948) (1,644,095) (1,644,095)
======================================================================================================================
3,097,752 $ 3,097,752 (2,092,468) $(2,092,468)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 85% 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 7--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
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
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================================================================================
Net investment income 0.04 0.04 0.02 0.01 0.01
====================================================================================================================
Less dividends from net investment income (0.04) (0.04) (0.02) (0.01) (0.01)
====================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(a) 4.54% 4.27% 2.51% 0.69% 0.58%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,492 $43,568 $44,923 $54,008 $77,505
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets 0.86%(b) 0.90% 0.82% 0.75% 0.66%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of net investment income to average net assets 4.45%(b) 4.20% 2.46% 0.67% 0.59%
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Total returns do not reflect
charges assessed in connection with a variable product, which if
included would reduce total returns.
(b) Ratios are based on average daily net assets of $45,316,964.
AIM V.I. Money Market Fund
NOTE 8--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==================================================================================================================
Net investment income 0.04 0.04 0.02 0.004 0.003
==================================================================================================================
Less dividends from net investment income (0.04) (0.04) (0.02) (0.004) (0.003)
==================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(a) 4.28% 4.01% 2.26% 0.44% 0.33%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,515 $2,341 $3,080 $ 6,076 $ 2,382
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 1.11%(b) 1.15% 1.07% 1.00% 0.91%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of net investment income to average net assets 4.20%(b) 3.95% 2.21% 0.42% 0.34%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Total returns do not reflect
charges assessed in connection with a variable product, which if
included would reduce total returns.
(b) Ratios are based on average daily net assets of $2,326,628.
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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Money Market Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Money Market Fund (one of
the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those financial
highlights.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Money Market Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,022.20 $4.43 $1,020.82 $4.43 0.87%
Series II 1,000.00 1,020.90 5.71 1,019.56 5.70 1.12
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Money Market Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year -- end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
FEDERAL AND STATE INCOME TAX
<Table>
Corporate Dividends Received Deduction* 0%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the fund's fiscal year.
AIM V.I. Money Market Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Money Market Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
DOMESTIC EQUITY
Small Cap
AIM V.I. Small Cap
Equity Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. SMALL CAP EQUITY FUND's investment
request, from our Client Services objective is long-term growth of capital.
department at 800-410-4246 or on the
AIM Web site, AIMinvestments.com. On
the home page, scroll down and click
on 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
drop-down menu. The information is IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
also available on the SEC Web site,
sec.gov.
UNLESS OTHERWISE NOTED, ALL DATA IN THIS 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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Small Cap Equity Fund
Management's discussion of Fund performance liness" of a stock purchase. We review trading
volume characteristics and trend analysis to
================================================================================ make sure there are no signs of stock
PERFORMANCE SUMMARY deterioration. This also serves as a risk
management measure that helps us confirm our
For the year ended December 31, 2007, and excluding variable product issuer high conviction candidates.
charges, AIM V.I. Small Cap Equity Fund produced positive returns and
outperformed its style-specific index, the Russell 2000 Index. Outperformance We consider selling or trimming a stock when:
versus the Russell 2000 Index was driven by solid stock selection across
sectors. o The company's fundamental business prospects
deteriorate.
The Fund performed in line with the broad market, as measured by the S&P 500
Index, as large cap stocks performed well during the year. The S&P 500 Index is o A stock hits its target price.
heavily oriented to large-cap stocks.
o The company's technical profile deteriorates.
Your Fund's long-term performance appears later in this report.
Market conditions and your Fund
FUND VS. INDEXES
Despite high market volatility late in the year,
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If major U.S. equity markets finished 2007 in
variable product issuer charges were included, returns would be lower. positive territory.1 In the first part of the
year, strong economic growth, favorable
Series I Shares 5.19% corporate earnings and increased merger and
Series II Shares 4.84 acquisition activity drove equity markets
S&P 500 Index(triangle) (Broad Market Index) 5.49 higher. However, concerns about the credit
Russell 2000 Index(triangle) (Style-Specific Index) -1.57 markets, continued weakness in housing and
Lipper VUF Small-Cap Core Funds Index(triangle) (Peer Group Index) -0.89 rising oil prices weighed heavily on investor
Lipper Small-Cap Core Funds Index(triangle) (Former Peer Group Index) 1.92 sentiment during much of the second half of the
year.
SOURCE: (triangle)LIPPER INC.
================================================================================ In this environment, mid- and large-cap stocks
generally outperformed small-cap stocks.1
How we invest diversified across all sectors. Additionally, growth stocks generally
outperformed value stocks.1 With the exception
We focus on small-cap companies with STOCK SELECTION: We select stocks of the financials and consumer discretionary
long-term growth opportunities, as based on an analysis of individual sectors, positive performance was broad among
demonstrated by consistent and companies. Our three-step selection Russell 2000 Index sectors with the best returns
accelerating earnings growth. Our process includes: found in the materials, energy and heath care
investment philosophy involves: sectors.
o Fundamental analysis. Building
PORTFOLIO CONSTRUCTION: We align the financial models and conducting
Fund with the S&P SmallCap 600 Index, in-depth interviews with company
the benchmark we believe best management.
represents the small-cap-core asset
class. We seek to control risk by o Valuation analysis. Identifying
keeping the Fund's sector weightings in attractively valued stocks given their
line with the benchmark by staying growth potential over a one- to
fully two-year horizon.
o Timeliness analysis. Identifying the
"time-
======================================= ====================================== =================================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Industrial Machinery 4.8% 1. UAP Holding Corp. 1.7%
Information Technology 21.0% 2. Regional Banks 3.6 2. Bio-Rad Laboratories, Inc.-Class A 1.5
Industrials 16.4 3. Oil & Gas Exploration & 3. Haemonetics Corp. 1.5
Health Care 13.0 Production 3.6 4. Capella Education Co. 1.5
Financials 11.8 4. Life Sciences Tools & Services 3.3 5. Tupperware Brands Corp. 1.5
Consumer Discretionary 11.0 5. Data Processing & 6. Comtech Telecommunications Corp. 1.4
Materials 7.5 Outsourced Services 3.2 7. Omnicell, Inc. 1.4
Energy 6.7 8. Comstock Resources, Inc. 1.3
Consumer Staples 4.1 Total Net Assets $168.32 million 9. Energen Corp. 1.3
Telecommunication Services 2.6 10. Kadant Inc. 1.3
Utilities 1.8 Total Number of Holdings* 108
Money Market Funds Plus
Other Assets Less Liabilities 4.1
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
======================================= ====================================== =================================================
AIM V.I. Small Cap Equity Fund
The Fund benefited from positive ings that performed well included HITTITE country, industry, security or the Fund.
absolute performance in seven out of 10 MICROWAVE (which we sold before the end of Statements of fact are from sources
market sectors, with the highest positive the year) and POWER INTEGRATIONS. considered reliable, but A I M Advisors,
impact on performance coming from holdings Inc. makes no representation or warranty
in the industrials, energy and information Two other holdings that were among the as to their completeness or accuracy.
technology (IT) sectors. On a relative Fund's top five contributors to Although historical performance is no
basis, the Fund outperformed the Russell performance included energy equipment and guarantee of future results, these
2000 Index in seven sectors, with the services firms OCEANEERING INTL. and NATCO insights may help you understand our
widest margin of outperformance in the GROUP. Both companies benefited from investment management philosophy.
financials, industrials and IT sectors. strong growth in revenue and earnings
during the year. Juliet S. Ellis
The financials sector was the weakest [ELLIS Chartered Financial Analyst,
performing sector in the Russell 2000 Underperformance versus the Russell PHOTO] senior portfolio manager, is
Index during the year, as investors were 2000 Index was concentrated in the lead manager of AIM V.I.
concerned about the extent of potential consumer discretionary sector, where the Small Cap Equity Fund. Before joining AIM
subprime loan defaults and the impact on Fund's holdings generally underperformed in 2004, Ms. Ellis served as senior
many financial companies. While the Fund those of the index. Two specialty retail portfolio manager of two small-cap funds
had negative returns in the financials holdings were among the leading detractors with more than $2 billion in assets at
sector, it outperformed the Russell 2000 from Fund performance: WET SEAL and another firm. She began her investment
Index in this sector due to stock CHARMING SHOPPES. Additionally, media career in 1981. She is a cum laude and
selection and an underweight position. holding Gatehouse Media was a significant Phi Beta Kappa graduate of Indiana
Specifically, underweight positions in detractor from Fund performance. While we University with a B.A. in economics and
banking and real estate investment trust sold Wet Seal and Charming Shoppes during political science.
holdings were key contributors to the year, we continued to own GATEHOUSE
outperformance versus the Russell 2000 MEDIA at the close of the year. Juan R. Hartsfield
Index. [HARTSFIELD Chartered Financial Analyst,
The Fund also underperformed the PHOTO] portfolio manager, is manager
The industrials sector rallied for much Russell 2000 Index in the consumer staples of AIM V.I. Small Cap Equity
of the year, and the Fund benefited from and health care sectors by a narrow Fund. He began his investment career in
solid stock selection in several margin, largely due to stock selection. 2000 as an equity analyst and later was
industries within the sector, including named a portfolio manager. He joined AIM
machinery and trading The most significant changes to overall in 2004. Mr. Hartsfield earned a B.S. in
companies/distributors. An example of a positioning of the Fund included additions petroleum engineering from The University
machinery holding that performed well was in the IT, health care and materials of Texas and an M.B.A. from the
CHART INDUSTRIES, a company that designs sectors and reductions in the financials, University of Michigan. Assisted by the
equipment used in low temperature energy and industrials sectors. All Small Cap Core/Growth Team
applications including the liquefaction of changes to the Fund were based on our
natural gas. In the trading bottom-up stock selection process of
company/distributor industry, UAP Holding identifying high quality growth companies
also made a significant contribution to trading at what we believe are attractive
performance. UAP HOLDING distributes valuations.
products that help protect crops, seeds,
fertilizers and pesticides. Both companies Although we are pleased to have
benefited from strong demand for their provided positive returns for our
products during the year. investors for 2007, we always strive to
improve performance and help you meet your
The Fund also outperformed the Russell financial goals. We thank you for your
2000 Index in the IT sector, largely due commitment to AIM V.I. Small Cap Equity
to solid stock selection. Within this Fund.
sector, areas of strength included IT
services stocks and Source: (1)Lipper Inc.
semiconductors/semiconductor equipment
stocks. One IT services holding that made The views and opinions expressed in
a meaningful contribution to Fund management's discussion of Fund
performance was CYBERSOURCE, a company performance are those of A I M Advisors,
that provides software and services that Inc. These views and opinions are subject
help ensure that e-commerce and other to change at any time based on factors
Internet-based transactions are processed such as market and economic conditions.
securely. Semiconductor hold- These views and opinions may not be relied ==========================================
upon as investment advice or
recommendations, or as an offer for a FOR A DISCUSSION OF THE RISKS OF
particular security. The information is INVESTING IN YOUR FUND, INDEXES USED IN
not a complete analysis of every aspect of THIS REPORT AND YOUR FUND'S LONG-TERM
any market, PERFORMANCE, PLEASE TURN THE PAGE.
==========================================
AIM V.I. Small Cap Equity Fund
Your Fund's long-term performance
=========================================== INVESTMENT RETURN AND PRINCIPAL VALUE THE FUND AND ARE NOT INTENDED TO REFLECT
AVERAGE ANNUAL TOTAL RETURNS WILL FLUCTUATE SO THAT YOU MAY HAVE A ACTUAL VARIABLE PRODUCT VALUES. THEY DO
GAIN OR LOSS WHEN YOU SELL SHARES. NOT REFLECT SALES CHARGES, EXPENSES AND
As of 12/31/07 FEES ASSESSED IN CONNECTION WITH A
SERIES I SHARES THE NET ANNUAL FUND OPERATING EXPENSE VARIABLE PRODUCT. SALES CHARGES, EXPENSES
Inception (8/29/03) 12.45% RATIO SET FORTH IN THE MOST RECENT FUND AND FEES, WHICH ARE DETERMINED BY THE
1 Year 5.19 PROSPECTUS AS OF THE DATE OF THIS REPORT VARIABLE PRODUCT ISSUERS, WILL VARY AND
FOR SERIES I AND SERIES II SHARES WAS WILL LOWER THE TOTAL RETURN.
SERIES II SHARES 1.16% AND 1.41%, RESPECTIVELY.1 THE TOTAL
Inception (8/29/03) 12.20% ANNUAL FUND OPERATING EXPENSE RATIO SET THE MOST RECENT MONTH-END PERFORMANCE
1 Year 4.84 FORTH IN THE MOST RECENT FUND PROSPECTUS DATA AT THE FUND LEVEL, EXCLUDING
=========================================== AS OF THE DATE OF THIS REPORT FOR SERIES VARIABLE PRODUCT CHARGES, IS AVAILABLE ON
I AND SERIES II SHARES WAS 1.29% AND THIS AIM AUTOMATED INFORMATION LINE,
THE PERFORMANCE OF THE FUND'S SERIES I AND 1.54%, RESPECTIVELY. THE EXPENSE RATIOS 866-702-4402. AS MENTIONED ABOVE, FOR THE
SERIES II SHARE CLASSES WILL DIFFER PRESENTED ABOVE MAY VARY FROM THE EXPENSE MOST RECENT MONTH-END PERFORMANCE
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. RATIOS PRESENTED IN OTHER SECTIONS OF INCLUDING VARIABLE PRODUCT CHARGES,
THIS REPORT THAT ARE BASED ON EXPENSES PLEASE CONTACT YOUR VARIABLE PRODUCT
THE PERFORMANCE DATA QUOTED REPRESENT INCURRED DURING THE PERIOD COVERED BY ISSUER OR FINANCIAL ADVISOR.
PAST PERFORMANCE AND CANNOT GUARANTEE THIS REPORT.
COMPARABLE FUTURE RESULTS; CURRENT HAD THE ADVISOR NOT WAIVED FEES AND/OR
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE AIM V.I. SMALL CAP EQUITY FUND, A REIMBURSED EXPENSES IN THE PAST,
CONTACT YOUR VARIABLE PRODUCT ISSUER OR SERIES PORTFOLIO OF AIM VARIABLE PERFORMANCE WOULD HAVE BEEN LOWER.
FINANCIAL ADVISOR FOR THE MOST RECENT INSURANCE FUNDS, IS CURRENTLY OFFERED
MONTH-END VARIABLE PRODUCT PERFORMANCE. THROUGH INSURANCE COMPANIES ISSUING (1) Total annual operating expenses less
PERFORMANCE FIGURES REFLECT FUND EXPENSES, VARIABLE PRODUCTS. YOU CANNOT PURCHASE any contractual fee waivers and/or
REINVESTED DISTRIBUTIONS AND CHANGES IN SHARES OF THE FUND DIRECTLY. PERFORMANCE expense reimbursements by the advisor
NET ASSET VALUE. FIGURES GIVEN REPRESENT in effect through at least April 30,
2009. See current prospectus for more
information.
===================================================================================================================================
Principal risks of investing in the Fund response to many factors including the Fund's portfolio managers will produce
historical and prospective earnings of the desired results.
Since a large percentage of the Fund's the issuer, the value of its assets,
assets may be invested in securities of a general economic conditions, interest Investing in a fund that invests in
limited number of companies, each rates, investor perceptions and market smaller companies involves risks not
investment has a greater effect on the liquidity. associated with investing in more
Fund's overall performance, and any change established companies, such as business
in the value of those securities could Foreign securities have additional risk, stock price fluctuations and
significantly affect the value of your risks, including exchange rate changes, illiquidity.
investment in the Fund. political and economic upheaval, the
relative lack of information, relatively The Fund invests in synthetic
The value of convertible securities in low market liquidity, and the potential instruments, the value of which may not
which the Fund invests may be affected by lack of strict financial and accounting correlate perfectly with the overall
market interest rates-the risk that the controls and standards. securities markets. Rising interest rates
issuer may default on interest or and market price fluctuations will affect
principal payments and the value of the The prices of initial public offering the performance of the Fund's investments
underlying common stock into which these (IPO) securities may go up and down more in synthetic instruments.
securities may be converted may decline as than prices of equity securities of
a result. companies with longer trading histories. About indexes used in this report
In addition, companies offering
Investing in developing countries can securities in IPOs may have less The S&P 500--REGISTERED TRADEMARK-- Index
add additional risk, such as high rates of experienced management or limited is a market capitalization-weighted index
inflation or sharply devalued currencies operating histories. There can be no covering all major areas of the U.S.
against the U.S. dollar. Transaction costs assurance that the fund will have economy. It is not the 500 largest
are often higher, and there may be delays favorable IPO investment opportunities. companies, but rather the most widely
in settlement procedures. held 500 companies chosen with respect to
There is no guarantee that the market size, liquidity, and their
Prices of equity securities change in investment techniques and risk analyses industry.
used by the
Continued
AIM V.I. Small Cap Equity Fund
Past performance cannot guarantee comparable future results.
===================================================================================================================================
Continued from previous page
The Russell 2000--REGISTERED TRADEMARK-- an equally weighted representation of the net asset values calculated for
Index measures the performance of the 2,000 largest funds in the Lipper Small-Cap shareholder transactions. Generally
smallest companies in the Russell Core Funds category. These funds accepted accounting principles require
3000--REGISTERED TRADEMARK-- Index, which typically have an average adjustments to be made to the net assets
represents approximately 8% of the total price-to-earnings ratio, price-to-book of the Fund at period end for financial
market capitalization of the Russell 3000 ratio, and three-year sales-per-share reporting purposes, and as such, the net
Index. The Russell 2000 Index and the growth value, compared to the S&P asset values for shareholder transactions
Russell 3000 Index are trademarks/service SmallCap 600 Index. and the returns based on those net asset
marks of the Frank Russell Company. values may differ from the net asset
RUSSELL--REGISTERED TRADEMARK-- is a The S&P SMALLCAP 600 INDEX is a values and returns reported in the
trademark of the Frank Russell Company. market-value weighted index that consists Financial Highlights. Additionally, the
of 600 small-cap domestic stocks chosen returns and net asset values shown
The Fund has elected to use the LIPPER for market size, liquidity and industry throughout this report are at the Fund
VARIABLE UNDERLYING FUNDS (VUF) SMALL-CAP group representation. level only and do not include variable
CORE FUNDS INDEX as its peer group instead product issuer charges. If such charges
of the Lipper Small-Cap Core Funds Index. The Fund is not managed to track the were included, the total returns would be
In 2006, Lipper began publishing VUF performance of any particular index, lower.
indexes, allowing the Fund to be compared including the indexes defined here, and
with the Lipper VUF Small-Cap Core Funds consequently, the performance of the Fund Industry classifications used in this
Index. The unmanaged Lipper VUF Small-Cap may deviate significantly from the report are generally according to the
Core Funds Index is an equally weighted performance of the indexes. Global Industry Classification Standard,
representation of the largest variable which was developed by and is the
insurance underlying funds in the Lipper A direct investment cannot be made in exclusive property and a service mark of
Small-Cap Core Funds category. These funds an index. Unless otherwise indicated, Morgan Stanley Capital International Inc.
typically have an average price-to-earnings index results include reinvested and Standard & Poor's.
ratio, price-to-book ratio, and three-year dividends, and they do not reflect sales
sales-per-share growth value compared to charges. Performance of an index of funds The Chartered Financial
the S&P 500 Index. reflects fund expenses; performance of a Analyst--REGISTERED TRADEMARK--
market index does not. (CFA--REGISTERED TRADEMARK--) designation
The LIPPER SMALL-CAP CORE FUNDS INDEX is is a globally recognized standard for
Other information measuring the competence and integrity of
investment professionals.
The returns shown in the management's
discussion of Fund performance are based
on
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 8/29/03, INDEX DATA FROM 8/31/03
AIM V.I. SMALL CAP AIM V.I. SMALL CAP SMALL-CAP CORE
EQUITY FUND-SERIES I EQUITY FUND-SERIES II S&P 500 RUSSELL LIPPER VUF SMALL-CAP LIPPER
DATE SHARES SHARES INDEX(1) 2000 INDEX(1) CORE FUNDS INDEX(1) FUNDS INDEX(1)
8/29/03 $10000 $10000
8/03 10000 10000 $10000 $10000 $10000 $10000
9/03 9830 9830 9894 9815 9777 9783
10/03 10650 10650 10454 10640 10478 10552
11/03 10990 10990 10545 11017 10862 10932
12/03 11393 11387 11098 11241 11196 11236
1/04 11713 11707 11302 11729 11517 11592
2/04 11964 11958 11459 11834 11707 11793
3/04 12074 12068 11286 11945 11793 11921
4/04 11563 11548 11109 11336 11334 11512
5/04 11694 11678 11261 11516 11478 11612
6/04 12034 12018 11480 12001 11916 12107
7/04 11183 11167 11100 11193 11197 11469
8/04 10732 10717 11145 11135 11091 11369
9/04 11163 11137 11265 11658 11562 11934
10/04 11433 11418 11437 11888 11742 12130
11/04 12224 12208 11900 12919 12619 13088
12/04 12465 12439 12305 13301 12956 13299
1/05 12065 12038 12005 12746 12464 12914
2/05 12445 12419 12257 12962 12785 13215
3/05 12185 12158 12041 12591 12506 12883
4/05 11484 11458 11812 11870 11845 12187
5/05 12205 12168 12188 12647 12508 12840
6/05 12506 12469 12205 13135 12887 13278
7/05 13066 13028 12659 13967 13607 14067
8/05 12916 12879 12544 13708 13398 13937
9/05 13105 13069 12645 13751 13454 14070
10/05 12875 12829 12434 13324 13006 13638
11/05 13565 13509 12904 13971 13612 14261
12/05 13475 13429 12909 13907 13533 14304
1/06 14506 14440 13251 15154 14553 15394
2/06 14566 14501 13286 15112 14479 15293
3/06 14976 14901 13452 15845 15096 15966
4/06 15257 15181 13632 15843 15164 16086
5/06 14925 14861 13240 14953 14409 15310
6/06 14806 14730 13258 15049 14359 15206
7/06 14406 14329 13340 14560 13909 14689
8/06 14777 14689 13657 14991 14195 14980
9/06 14917 14829 14008 15115 14316 15050
10/06 15537 15439 14464 15986 15019 15778
11/06 16028 15930 14739 16406 15465 16238
12/06 15825 15728 14946 16461 15508 16264
1/07 16054 15947 15172 16737 15776 16555
2/07 16138 16030 14876 16604 15737 16592
3/07 16252 16134 15042 16782 15927 16775
4/07 16680 16561 15708 17083 16284 17254
5/07 17389 17259 16256 17784 16932 17998
6/07 17243 17102 15986 17523 16721 17816
7/07 16325 16195 15491 16324 15772 16883
8/07 16720 16581 15722 16694 15965 16948
9/07 17200 17060 16310 16981 16232 17310
10/07 17637 17486 16569 17468 16589 17728
11/07 16658 16507 15876 16214 15474 16541
12/07 16637 16480 15766 16203 15370 16577
===================================================================================================================================
SOURCE: (1)LIPPER INC.
AIM V.I. Small Cap Equity Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.86%
AEROSPACE & DEFENSE-1.48%
- -----------------------------------------------------------------------
Aeroviroment Inc. 25,683 $ 621,529
- -----------------------------------------------------------------------
Curtiss-Wright Corp. 37,346 1,874,769
=======================================================================
2,496,298
=======================================================================
AIRLINES-1.11%
Allegiant Travel Co.(b) 57,972 1,863,220
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.91%
Fossil, Inc.(b) 36,565 1,534,999
=======================================================================
APPLICATION SOFTWARE-1.21%
Blackbaud, Inc. 72,495 2,032,760
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.96%
Affiliated Managers Group, Inc.(b)(c) 13,718 1,611,316
=======================================================================
BIOTECHNOLOGY-0.26%
InterMune, Inc.(b)(c) 32,528 433,598
=======================================================================
BUILDING PRODUCTS-1.68%
Goodman Global, Inc.(b) 69,611 1,708,254
- -----------------------------------------------------------------------
NCI Building Systems, Inc.(b) 38,717 1,114,662
=======================================================================
2,822,916
=======================================================================
CATALOG RETAIL-0.58%
PC Mall, Inc.(b)(c) 104,128 969,432
=======================================================================
COMMUNICATIONS EQUIPMENT-2.41%
Comtech Telecommunications Corp.(b) 44,888 2,424,401
- -----------------------------------------------------------------------
OpNext, Inc.(b) 96,998 858,432
- -----------------------------------------------------------------------
Starent Networks Corp.(b) 42,789 780,899
=======================================================================
4,063,732
=======================================================================
COMPUTER STORAGE & PERIPHERALS-0.82%
Emulex Corp.(b) 85,029 1,387,673
=======================================================================
CONSTRUCTION & ENGINEERING-0.84%
Quanta Services, Inc.(b) 53,811 1,412,001
=======================================================================
CONSTRUCTION MATERIALS-0.93%
Texas Industries, Inc. 22,444 1,573,324
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.22%
CyberSource Corp.(b) 98,383 1,748,266
- -----------------------------------------------------------------------
Euronet Worldwide, Inc.(b)(c) 53,910 1,617,300
- -----------------------------------------------------------------------
Wright Express Corp.(b) 58,086 2,061,472
=======================================================================
5,427,038
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
DIVERSIFIED CHEMICALS-1.10%
FMC Corp. 34,064 $ 1,858,191
=======================================================================
DIVERSIFIED METALS & MINING-1.01%
Compass Minerals International, Inc. 41,455 1,699,655
=======================================================================
EDUCATION SERVICES-2.22%
Capella Education Co.(b) 38,003 2,487,676
- -----------------------------------------------------------------------
Universal Technical Institute Inc.(b)(c) 73,606 1,251,302
=======================================================================
3,738,978
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.26%
Genlyte Group Inc. (The)(b) 22,242 2,117,438
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-3.04%
Benchmark Electronics, Inc.(b) 84,082 1,490,774
- -----------------------------------------------------------------------
Methode Electronics, Inc. 117,137 1,925,732
- -----------------------------------------------------------------------
Park Electrochemical Corp. 60,325 1,703,578
=======================================================================
5,120,084
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.23%
ABM Industries Inc 39,226 799,818
- -----------------------------------------------------------------------
Waste Connections, Inc.(b) 40,986 1,266,468
=======================================================================
2,066,286
=======================================================================
FOOD RETAIL-1.17%
Ruddick Corp. 57,010 1,976,537
=======================================================================
GAS UTILITIES-1.30%
Energen Corp. 33,995 2,183,499
=======================================================================
HEALTH CARE DISTRIBUTORS-1.07%
Owens & Minor, Inc. 42,409 1,799,414
=======================================================================
HEALTH CARE EQUIPMENT-0.57%
ev3 Inc.(b)(c) 74,855 951,407
=======================================================================
HEALTH CARE FACILITIES-0.74%
Skilled Healthcare Group Inc.-Class A(b) 85,143 1,245,642
=======================================================================
HEALTH CARE SERVICES-1.76%
Cross Country Healthcare, Inc.(b) 87,515 1,246,214
- -----------------------------------------------------------------------
Gentiva Health Services, Inc.(b) 89,902 1,711,734
=======================================================================
2,957,948
=======================================================================
HEALTH CARE SUPPLIES-2.31%
Haemonetics Corp.(b) 39,693 2,501,453
- -----------------------------------------------------------------------
Medical Action Industries Inc.(b) 66,148 1,379,186
=======================================================================
3,880,639
=======================================================================
HEALTH CARE TECHNOLOGY-1.41%
Omnicell, Inc.(b) 88,280 2,377,380
=======================================================================
</Table>
AIM V.I. Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
HOME ENTERTAINMENT SOFTWARE-0.90%
THQ Inc.(b) 53,871 $ 1,518,624
=======================================================================
HOTELS, RESORTS & CRUISE LINES-0.87%
Ambassadors Group, Inc. 21,102 386,378
- -----------------------------------------------------------------------
Red Lion Hotels Corp.(b) 108,400 1,078,580
=======================================================================
1,464,958
=======================================================================
HOUSEHOLD APPLIANCES-1.16%
Snap-on Inc. 40,360 1,946,966
=======================================================================
HOUSEWARES & SPECIALTIES-1.46%
Tupperware Brands Corp. 74,396 2,457,300
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.73%
Kforce Inc.(b) 125,204 1,220,739
=======================================================================
INDUSTRIAL MACHINERY-4.77%
Chart Industries, Inc.(b) 66,032 2,040,389
- -----------------------------------------------------------------------
Kadant Inc.(b) 72,983 2,165,405
- -----------------------------------------------------------------------
RBC Bearings Inc.(b) 47,667 2,071,608
- -----------------------------------------------------------------------
Valmont Industries, Inc. 19,709 1,756,466
=======================================================================
8,033,868
=======================================================================
INSURANCE BROKERS-0.91%
Hilb Rogal and Hobbs Co. 37,830 1,534,763
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.60%
Alaska Communications Systems Group Inc. 89,680 1,345,200
- -----------------------------------------------------------------------
Cincinnati Bell Inc.(b) 262,643 1,247,554
- -----------------------------------------------------------------------
NTELOS Holdings Corp. 59,816 1,775,937
=======================================================================
4,368,691
=======================================================================
INTERNET RETAIL-0.63%
Audible, Inc.(b)(c) 118,933 1,060,882
=======================================================================
INTERNET SOFTWARE & SERVICES-2.96%
Ariba, Inc.(b) 162,438 1,811,184
- -----------------------------------------------------------------------
DealerTrack Holdings Inc.(b) 36,946 1,236,583
- -----------------------------------------------------------------------
Open Text Corp. (Canada)(b)(c) 61,236 1,925,872
=======================================================================
4,973,639
=======================================================================
INVESTMENT BANKING & BROKERAGE-0.74%
CMET Finance Holdings, Inc. (Acquired
12/08/03; Cost $20,000)(b)(d)(e) 200 3,004
- -----------------------------------------------------------------------
Thomas Weisel Partners Group, Inc.(b) 90,099 1,237,059
=======================================================================
1,240,063
=======================================================================
IT CONSULTING & OTHER SERVICES-0.39%
EnerNOC, Inc.(b) 13,509 663,292
=======================================================================
LEISURE PRODUCTS-0.25%
Smith & Wesson Holding Corp.(b)(c) 69,745 425,445
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
LIFE SCIENCES TOOLS & SERVICES-3.29%
Bio-Rad Laboratories, Inc.-Class A(b) 24,620 $ 2,551,124
- -----------------------------------------------------------------------
Dionex Corp.(b) 15,623 1,294,522
- -----------------------------------------------------------------------
eResearch Technology, Inc.(b) 143,339 1,694,267
=======================================================================
5,539,913
=======================================================================
METAL & GLASS CONTAINERS-1.57%
AptarGroup, Inc. 46,522 1,903,215
- -----------------------------------------------------------------------
Bway Holding Co.(b) 75,779 738,845
=======================================================================
2,642,060
=======================================================================
MOVIES & ENTERTAINMENT-1.01%
World Wrestling Entertainment, Inc.-Class A 115,479 1,704,470
=======================================================================
MULTI-UTILITIES-0.44%
Avista Corp. 34,755 748,623
=======================================================================
OFFICE REIT'S-0.93%
Alexandria Real Estate Equities, Inc. 15,358 1,561,448
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-3.07%
Complete Production Services, Inc.(b) 86,464 1,553,758
- -----------------------------------------------------------------------
NATCO Group Inc.-Class A(b) 34,360 1,860,594
- -----------------------------------------------------------------------
Oceaneering International, Inc.(b) 26,124 1,759,452
=======================================================================
5,173,804
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.62%
Comstock Resources, Inc.(b) 65,177 2,216,018
- -----------------------------------------------------------------------
Parallel Petroleum Corp.(b) 100,312 1,768,500
- -----------------------------------------------------------------------
Penn Virginia Corp. 48,376 2,110,645
=======================================================================
6,095,163
=======================================================================
PACKAGED FOODS & MEATS-2.97%
Flowers Foods, Inc. 90,982 2,129,888
- -----------------------------------------------------------------------
J & J Snack Foods Corp. 45,397 1,420,018
- -----------------------------------------------------------------------
TreeHouse Foods, Inc.(b) 62,732 1,442,209
=======================================================================
4,992,115
=======================================================================
PHARMACEUTICALS-1.57%
Axcan Pharma Inc. (Canada)(b) 73,572 1,692,156
- -----------------------------------------------------------------------
Sciele Pharma, Inc.(b) 4,202 85,931
- -----------------------------------------------------------------------
ViroPharma Inc.(b) 109,222 867,223
=======================================================================
2,645,310
=======================================================================
PROPERTY & CASUALTY INSURANCE-2.78%
Assured Guaranty Ltd.(b) 69,934 1,856,048
- -----------------------------------------------------------------------
FPIC Insurance Group, Inc.(b) 34,464 1,481,263
- -----------------------------------------------------------------------
Philadelphia Consolidated Holding Corp.(b) 34,216 1,346,400
=======================================================================
4,683,711
=======================================================================
PUBLISHING-0.41%
GateHouse Media, Inc.(c) 78,639 690,450
=======================================================================
</Table>
AIM V.I. Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.64%
Jones Lang LaSalle Inc. 15,035 $ 1,069,891
=======================================================================
REGIONAL BANKS-3.64%
Columbia Banking System, Inc. 54,862 1,631,047
- -----------------------------------------------------------------------
First Financial Bankshares, Inc.(c) 23,244 875,137
- -----------------------------------------------------------------------
Signature Bank(b) 36,058 1,216,958
- -----------------------------------------------------------------------
Sterling Bancshares, Inc. 157,268 1,755,111
- -----------------------------------------------------------------------
Sterling Financial Corp. 38,613 648,312
=======================================================================
6,126,565
=======================================================================
RESTAURANTS-1.20%
IHOP Corp.(c) 27,560 1,008,145
- -----------------------------------------------------------------------
Papa John's International, Inc.(b) 44,509 1,010,354
=======================================================================
2,018,499
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.17%
ATMI, Inc.(b) 60,927 1,964,896
=======================================================================
SEMICONDUCTORS-3.13%
DSP Group, Inc.(b) 89,073 1,086,691
- -----------------------------------------------------------------------
Power Integrations, Inc.(b) 50,173 1,727,456
- -----------------------------------------------------------------------
Semtech Corp.(b) 98,825 1,533,764
- -----------------------------------------------------------------------
Supertex, Inc.(b)(c) 29,264 915,671
=======================================================================
5,263,582
=======================================================================
SPECIALIZED REIT'S-1.20%
LaSalle Hotel Properties 36,093 1,151,367
- -----------------------------------------------------------------------
Universal Health Realty Income Trust 24,716 875,935
=======================================================================
2,027,302
=======================================================================
SPECIALTY CHEMICALS-1.66%
A. Schulman, Inc. 65,104 1,402,991
- -----------------------------------------------------------------------
H.B. Fuller Co. 62,109 1,394,347
=======================================================================
2,797,338
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
SPECIALTY STORES-0.34%
Ulta Salon Cosmetics & Fragrance Inc.(b) 33,154 $ 568,591
=======================================================================
STEEL-1.24%
Carpenter Technology Corp. 27,772 2,087,621
=======================================================================
SYSTEMS SOFTWARE-1.06%
Double-Take Software, Inc.(b) 82,260 1,786,687
=======================================================================
TECHNOLOGY DISTRIBUTORS-0.68%
Agilysys, Inc. 75,124 1,135,875
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-1.67%
UAP Holding Corp. 72,895 2,813,747
=======================================================================
TRUCKING-1.60%
Landstar System, Inc. 29,046 1,224,289
- -----------------------------------------------------------------------
Marten Transport, Ltd.(b) 105,693 1,474,417
=======================================================================
2,698,706
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $148,886,215) 161,347,002
=======================================================================
MONEY MARKET FUNDS-3.86%
Liquid Assets Portfolio-Institutional
Class(f) 3,250,664 3,250,664
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 3,250,665 3,250,665
=======================================================================
Total Money Market Funds (Cost
$6,501,329) 6,501,329
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.72% (Cost
$155,387,544) 167,848,331
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-4.33%
Liquid Assets Portfolio-Institutional Class
(Cost $7,280,225)(f)(g) 7,280,225 7,280,225
=======================================================================
TOTAL INVESTMENTS-104.05% (Cost $162,667,769) 175,128,556
=======================================================================
OTHER ASSETS LESS LIABILITIES-(4.05)% (6,810,676)
=======================================================================
NET ASSETS-100.00% $168,317,880
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) 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.
(b) Non-income producing security.
(c) All or a portion of this security was out on loan at December 31, 2007.
(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 December 31, 2007 represented less than 0.01%
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.
(e) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at December
31, 2007 represented less than 0.01% of the Fund's Net Assets. See Note 1A.
(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. Small Cap Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $148,886,215)* $161,347,002
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $13,781,554) 13,781,554
=============================================================
Total investments (Cost $162,667,769) 175,128,556
=============================================================
Foreign currencies, at value (Cost $47) 55
- -------------------------------------------------------------
Receivables for:
Investments sold 177,186
- -------------------------------------------------------------
Fund shares sold 674,059
- -------------------------------------------------------------
Dividends 147,714
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 24,247
=============================================================
Total assets 176,151,817
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 340,444
- -------------------------------------------------------------
Fund shares reacquired 29,775
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 28,391
- -------------------------------------------------------------
Collateral upon return of securities loaned 7,280,225
- -------------------------------------------------------------
Accrued administrative services fees 101,554
- -------------------------------------------------------------
Accrued distribution fees -- Series II 15
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 469
- -------------------------------------------------------------
Accrued transfer agent fees 1,282
- -------------------------------------------------------------
Accrued operating expenses 51,782
=============================================================
Total liabilities 7,833,937
=============================================================
Net assets applicable to shares outstanding $168,317,880
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $155,423,675
- -------------------------------------------------------------
Undistributed net investment income (loss) (22,863)
- -------------------------------------------------------------
Undistributed net realized gain 456,272
- -------------------------------------------------------------
Unrealized appreciation 12,460,796
=============================================================
$168,317,880
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $168,285,625
_____________________________________________________________
=============================================================
Series II $ 32,255
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 10,838,332
_____________________________________________________________
=============================================================
Series II 2,096
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 15.53
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 15.39
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $7,113,253 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends $1,101,546
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$26,551) 262,148
============================================================
Total investment income 1,363,694
============================================================
EXPENSES:
Advisory fees 999,034
- ------------------------------------------------------------
Administrative services fees 372,087
- ------------------------------------------------------------
Custodian fees 25,165
- ------------------------------------------------------------
Distribution fees -- Series II 1,061
- ------------------------------------------------------------
Transfer agent fees 10,139
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 18,468
- ------------------------------------------------------------
Other 69,516
============================================================
Total expenses 1,495,470
============================================================
Less: Fees waived and expense offset
arrangement(s) (40,500)
============================================================
Net expenses 1,454,970
============================================================
Net investment income (loss) (91,276)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from investment securities
(includes net gains from securities sold to
affiliates of $2,102,439) 4,840,940
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities (528,978)
- ------------------------------------------------------------
Foreign currencies 6
============================================================
(528,972)
============================================================
Net realized and unrealized gain 4,311,968
============================================================
Net increase in net assets resulting from
operations $4,220,692
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (91,276) $ (40,026)
- -----------------------------------------------------------------------------------------
Net realized gain 4,840,940 4,835,605
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (528,972) 4,648,572
=========================================================================================
Net increase in net assets resulting from operations 4,220,692 9,444,151
=========================================================================================
Distributions to shareholders from net investment
income -- Series I (69,477) --
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Series I (4,648,828) (3,592,564)
- -----------------------------------------------------------------------------------------
Series II (761) (33,971)
=========================================================================================
Total distributions from net realized gains (4,649,589) (3,626,535)
=========================================================================================
Decrease in net assets resulting from distributions (4,719,066) (3,626,535)
=========================================================================================
Share transactions-net:
Series I 75,616,355 44,759,517
- -----------------------------------------------------------------------------------------
Series II (897,270) 89,165
=========================================================================================
Net increase in net assets resulting from share
transactions 74,719,085 44,848,682
=========================================================================================
Net increase in net assets 74,220,711 50,666,298
=========================================================================================
NET ASSETS:
Beginning of year 94,097,169 43,430,871
=========================================================================================
End of year (including undistributed net investment income
(loss) of $(22,863) and $(111,189), respectively) $168,317,880 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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. Small Cap Equity Fund
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.
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 Ltd. ("Invesco") 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 year ended December 31, 2007, AIM waived advisory fees of $39,163.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $322,087
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 year ended December 31, 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 A I M
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 year ended December 31, 2007, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
AIM V.I. Small Cap Equity 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $1,516,665 $ 43,691,488 $(41,957,489) $ 3,250,664 $117,842
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 1,516,665 43,691,489 (41,957,489) 3,250,665 117,755
=================================================================================================
Subtotal $3,033,330 $ 87,382,977 $(83,914,978) $ 6,501,329 $235,597
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $ 29,971,680 $(22,691,455) $ 7,280,225 $ 26,551
=================================================================================================
Total
Investments
in
Affiliates $3,033,330 $117,354,657 $106,606,433 $13,781,554 $262,148
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 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 $808,994.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $1,337.
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 year ended December 31, 2007, the Fund paid legal fees of $3,839
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 is a party to 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. Small Cap 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $7,113,253 were
on loan to brokers. The loans were secured by cash collateral of $7,280,225
received by the Fund and subsequently invested in an affiliated money market
fund. For the year ended December 31, 2007, the Fund received dividends on cash
collateral investments of $26,551 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- --------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $1,375,449 $ 912,136
- --------------------------------------------------------------------------------------
Long-term capital gain 3,343,617 2,714,399
======================================================================================
Total distributions $4,719,066 $3,626,535
______________________________________________________________________________________
======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 562,820
- ----------------------------------------------------------------------------
Undistributed long-term gain 115,434
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 12,238,814
- ----------------------------------------------------------------------------
Temporary book/tax differences (22,863)
- ----------------------------------------------------------------------------
Shares of beneficial interest 155,423,675
============================================================================
Total net assets $168,317,880
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the tax deferral of losses on certain straddles. The tax-basis net unrealized
appreciation on investments amount includes appreciation on foreign currencies
of $9.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward as of December 31, 2007.
AIM V.I. Small Cap 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 year ended December 31, 2007 was $120,561,308 and
$55,919,185, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $24,845,603
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (12,606,798)
===============================================================================
Net unrealized appreciation of investment securities $12,238,805
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $162,889,751.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses,
passive foreign investment companies and expenses related to the plan of
reorganization, on December 31, 2007, undistributed net investment income was
increased by $257,894, undistributed net realized gain was decreased by $249,214
and shares of beneficial interest decreased by $8,680. Further, as a result of
tax deferrals acquired in the reorganization of AIM V.I. Small Cap Growth Fund
into the Fund, on May 1, 2007, undistributed net investment income was decreased
by $8,815, undistributed net realized gain was decreased by $134,237 and shares
of beneficial interest increased by $143,052. These reclassifications had no
effect on the net assets of the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007(A) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 5,013,005 $ 80,543,288 4,127,247 $ 61,970,339
- ----------------------------------------------------------------------------------------------------------------------
Series II 2,377 39,660 3,739 55,902
======================================================================================================================
Issued as reinvestment of dividends:
Series I 294,710 4,718,304 233,132 3,592,564
- ----------------------------------------------------------------------------------------------------------------------
Series II 48 761 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 (1,881,501) (30,057,063) (1,398,963) (20,803,386)
- ----------------------------------------------------------------------------------------------------------------------
Series II (68,936) (1,129,527) (49) (708)
======================================================================================================================
4,646,895 $ 74,719,085 2,967,324 $ 44,848,682
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 85% 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 13--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s).
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") (the "New
Sub-advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
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
-------------------------------------------------------------------
AUGUST 29, 2003
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
-------------------------------------------- TO 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) (0.01)(a) (0.01)(a) (0.06)(a) (0.06)(a) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.81 2.37 1.07 1.13 1.41
=================================================================================================================================
Total from investment operations 0.80 2.36 1.01 1.07 1.40
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.01) -- -- (0.00) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.45) (0.63) -- -- (0.01)
=================================================================================================================================
Total distributions (0.46) (0.63) -- (0.00) (0.02)
=================================================================================================================================
Net asset value, end of period $ 15.53 $ 15.19 $ 13.46 $ 12.45 $11.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.19% 17.44% 8.11% 9.41% 13.94%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $168,286 $93,243 $42,752 $25,964 $2,231
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.12%(c) 1.15% 1.22% 1.30% 1.32%(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.15%(c) 1.33% 1.57% 2.01% 12.86%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.07)%(c) (0.06)% (0.44)% (0.56)% (0.44)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 45% 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 based on average daily net assets of $128,958,741.
(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 December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $17,709,035 and sold of $19,432,514 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 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
SERIES II
--------------------------------------------------------------
AUGUST 29, 2003
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
--------------------------------------- TO 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) (0.05)(a) (0.04)(a) (0.08)(a) (0.08)(a) (0.02)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.79 2.36 1.06 1.13 1.41
============================================================================================================================
Total from investment operations 0.74 2.32 0.98 1.05 1.39
============================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.00) (0.00)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.45) (0.63) -- -- (0.01)
============================================================================================================================
Total distributions (0.45) (0.63) -- (0.00) (0.01)
============================================================================================================================
Net asset value, end of period $15.39 $15.10 $13.41 $12.43 $11.38
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 4.84% 17.20% 7.88% 9.23% 13.88%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 32 $ 854 $ 679 $ 622 $ 569
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.37%(c) 1.40% 1.42% 1.45% 1.47%(d)
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.40%(c) 1.58% 1.82% 2.26% 13.11%(d)
============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.32)%(c) (0.31)% (0.64)% (0.71)% (0.59)%(d)
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(e) 45% 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 based on average daily net assets of $424,153.
(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 December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $17,709,035 and sold of $19,432,514 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
V.I. Small Cap Growth Fund into the 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 A I M
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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 401(k) plan. Based on orders issued by
the MDL Court, all claims asserted against the AIM Funds that have been
AIM V.I. Small Cap Equity Fund
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Small Cap Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Small Cap Equity Fund (one
of the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2004 were
audited by another independent registered public accounting firm whose report
dated February 4, 2005 expressed an unqualified opinion on those financial
highlights.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Small Cap Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $965.40 $5.50 $1,019.61 $5.65 1.11%
Series II 1,000.00 964.10 6.73 1,018.35 6.92 1.36
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Small Cap Equity Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2007:
FEDERAL AND STATE INCOME TAX
<Table>
Long-Term Capital Gain Dividends $3,343,616
Corporate Dividends Received Deduction* 52.48%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Small Cap Equity Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Small Cap Equity Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
SECTOR EQUITY
Sectors
AIM V.I. Technology Fund
Annual Report to Shareholders - December 31, 2007
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 [COVER GLOBE IMAGE]
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 AIM V.I. TECHNOLOGY FUND's investment
determine how to vote proxies objective is capital growth.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS
Us tab, click on Required Notices and REPORT IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET
then click on Proxy Voting Activity. ASSETS.
Next, select the Fund from the
drop-down menu. The information is UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT ARE
also available on the SEC Web site, FROM A I M MANAGEMENT GROUP INC.
sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- -- REGISTERED TRADEMARK -- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Technology Fund
Management's discussion of Fund performance We may reduce or eliminate exposure to
a stock when:
=======================================================================================
PERFORMANCE SUMMARY o A more attractive investment opportunity
is identified.
The information technology (IT) sector produced strong returns for the year ended
December 31, 2007. The IT sector's strength benefited Fund performance relative to its o A company's fundamentals change.
broad market index. However, the Fund under-performed its style-specific benchmark, the
S&P GSTI Index, mainly due to security selection and an overweight position in the o Its management or strategic direction
semiconductor industry, as well as security selection and an underweight position in changes.
Internet software and services stocks.
o Its earnings are disrupted or
Your Fund's long-term performance appears later in this report. disappoint.
FUND VS. INDEXES o Its valuation becomes excessive
compared to similar investment
Total returns, 12/31/06-12/31/07, excluding variable product issuer charges. If opportunities.
variable product issuer charges were included, returns would be lower.
Market conditions and your Fund
Series I Shares 7.70%
Series II Shares 7.48 The year was characterized by extremes.
S&P 500 Index(triangle) (Broad Market Index) 5.49 Subprime loan concerns, record high crude
S&P GSTI Index(triangle) (Style-Specific Index) 16.94 oil prices, a weak housing market and a
Lipper VUF Science & Technology Funds Category Average(triangle) (Peer Group) 18.10 weak U.S. dollar increased fears of
Lipper Science & Technology Funds Index(triangle) (Former Peer Group Index) 16.76 recession and worries about a potentially
SOURCE: (triangle) LIPPER INC. negative effect on consumer spending.
======================================================================================= These factors affected investor sentiment
which caused market volatility to increase
How we invest We typically invest a majority of the during the year. Yet, despite concerns
Fund's assets in core over a slowing economy, several major
We seek attractively valued, well-managed holdings--market-leading technology market indexes ended the year in positive
companies in the IT sector with the companies that demonstrate the ability to territory after setting all-time closing
potential to generate attractive returns. maintain or improve market share highs during the year.(1) Strong global
We use a research oriented bottom-up regardless of economic conditions. These growth, steady corporate earnings and
investment approach combining companies are believed to have a strategic continued merger and acquisition activity
quantitative, fundamental and valuation advantage over their competition. The drove equity markets higher for much of
analysis to select securities in remainder of the portfolio is invested in 2007. Against this backdrop, energy,
industries such as hardware, software, tactical holdings--securities of materials and utilities were among the
semiconductors, telecommunications faster-growing, more volatile technology best performing sectors of the S&P 500
equipment and services and service-related companies that we believe to be emerging Index.(1) Conversely, financials, consumer
companies in the IT sector. leaders in their fields. discretionary and health care were the
weakest performing sectors.(1)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* TOTAL NET ASSETS AND HOLDINGS
By sector 1. Apple Inc. 5.0% Total Net Assets $158.87 million
Information Technology 82.6% 2. Google Inc.-Class A 4.0
Telecommunication Services 6.0 3. EMC Corp. 3.0 Total Number of Holdings* 51
Financials 0.7 4. Hewlett-Packard Co. 3.0
Consumer Discretionary 0.6 5. Adobe Systems Inc. 3.0
Money Market Funds 6. Microsoft Corp. 2.7
Plus Other Assets Less Liabilities 10.1 7. Research In Motion Ltd. 2.7
8. Cisco Systems, Inc. 2.7
The Fund's holdings are subject to change, 9. Activision, Inc. 2.6
and there is no assurance that the Fund 10. Nokia Oyj-ADR 2.5
will continue to hold any particular
security.
* Excluding money market fund holdings.
========================================== ========================================== ==========================================
AIM V.I. Technology Fund
On an absolute basis, holdings in position in F5 Networks as we viewed Lanny H. Sachnowitz
computer hardware and home entertainment future earnings estimates to be inflated. [SACHNOWITZ Senior portfolio
software contributed the most to Fund PHOTO] manager, is lead
performance during the year, while Changes in the Fund's holdings during manager of AIM V.I.
semiconductor holdings were the primary the year were primarily a result of Technology Fund. He joined AIM in 1987 and
detractors from performance. Relative to shifting of responsibilities among our was named a portfolio manager in 1991. Mr.
the S&P GSTI Index, strong security management team. We continued to focus on Sachnowitz earned a B.S. in finance from
selection and an overweight in home companies that are leaders in their the University of Southern California and
entertainment software, as well as markets or are taking market share, and an M.B.A. from the University of Houston.
security selection in communications prefer companies going through strong
equipment, benefited Fund performance. On product cycles whose earnings estimates Assisted by the Technology Team
the other hand, our overweight and are likely to be exceeded.
security selection in semiconductors, as Effective February 4, 2008, after the
well as our security selection and As always, we thank you for your close of the reporting period, Warren
underweight in Internet software and continued investment in AIM V.I. Tennant was added to the portfolio
services, detracted from relative Technology Fund. management team. Lanny Sachnowitz left the
performance. team.
Source: (1)Lipper Inc.
Stocks that enhanced Fund performance
included APPLE, RESEARCH IN MOTION and The views and opinions expressed in
Nintendo. Apple benefited from the launch management's discussion of Fund
of the IPHONE--TRADEMARK-- during the performance are those of A I M Advisors,
year. Additionally, Apple continued to Inc. These views and opinions are subject
increase market share in key markets to change at any time based on factors
domestically and abroad. This is such as market and economic conditions.
particularly true in the personal computer These views and opinions may not be relied
market, an area in which the company has upon as investment advice or
the ability to command a higher profit recommendations, or as an offer for a
margin for its products. Blackberry-- particular security. The information is
REGISTERED TRADEMARK-- maker Research In not a complete analysis of every aspect of
Motion benefited from strong increases in any market, country, industry, security or
subscriber accounts and revenue from the Fund. Statements of fact are from
devices. Momentum continued for Nintendo sources considered reliable, but A I M
with the Wii--TRADEMARK-- platform. In Advisors, Inc. makes no representation or
fact, the Wii was so well received by the warranty as to their completeness or
marketplace that the company had a hard accuracy. Although historical performance
time keeping up with demand during the is no guarantee of future results, these
year. insights may help you understand our
investment management philosophy.
Detractors from Fund performance
included VERIFONE, DIGITAL RIVER AND F5
NETWORKS. Verifone, a global leader in
secure electronic payment solutions,
disappointed during the fourth quarter
when the company announced accounting
problems. Digital River, which operates as
an e-commerce outsourcing company, lowered
its outlook for the year citing
slower-than-anticipated business from key
clients such as Fund holding Microsoft. In
general, semiconductor holdings were down
toward the end of the year as concerns
over slowing domestic economic growth
increased. This was particularly true for
semiconductor holding F5 Networks, a
company focused on making data centers ==========================================
more efficient by reducing or FOR A DISCUSSION OF THE RISKS OF INVESTING
redistributing the load on servers. We IN YOUR FUND, INDEXES USED IN THIS REPORT
continued to own Verifone and Digital AND YOUR FUND'S LONG-TERM PERFORMANCE,
River at the close of the year; however, PLEASE TURN THE PAGE.
we sold our ==========================================
AIM V.I. Technology Fund
Your Fund's long-term performance
==========================================
AVERAGE ANNUAL TOTAL RETURNS SERIES I AND SERIES II SHARE CLASSES WILL THE PERIOD COVERED BY THIS REPORT.
DIFFER PRIMARILY DUE TO DIFFERENT CLASS
As of 12/31/07 EXPENSES. AIM V.I. TECHNOLOGY FUND, A SERIES
PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
SERIES I SHARES THE PERFORMANCE DATA QUOTED REPRESENT IS CURRENTLY OFFERED THROUGH INSURANCE
Inception (5/20/97) 4.04% PAST PERFORMANCE AND CANNOT GUARANTEE COMPANIES ISSUING VARIABLE PRODUCTS. YOU
10 Years 2.87 COMPARABLE FUTURE RESULTS; CURRENT CANNOT PURCHASE SHARES OF THE FUND
5 Years 13.07 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE DIRECTLY. PERFORMANCE FIGURES GIVEN
1 Year 7.70 CONTACT YOUR VARIABLE PRODUCT ISSUER OR REPRESENT THE FUND AND ARE NOT INTENDED TO
FINANCIAL ADVISOR FOR THE MOST RECENT REFLECT ACTUAL VARIABLE PRODUCT VALUES.
SERIES II SHARES MONTH-END VARIABLE PRODUCT PERFORMANCE. THEY DO NOT REFLECT SALES CHARGES,
10 Years 2.60% PERFORMANCE FIGURES REFLECT FUND EXPENSES, EXPENSES AND FEES ASSESSED IN CONNECTION
5 Years 12.77 REINVESTED DISTRIBUTIONS AND CHANGES IN WITH A VARIABLE PRODUCT. SALES CHARGES,
1 Year 7.48 NET ASSET VALUE. INVESTMENT RETURN AND EXPENSES AND FEES, WHICH ARE DETERMINED BY
========================================== PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU THE VARIABLE PRODUCT ISSUERS, WILL VARY
MAY HAVE A GAIN OR LOSS WHEN YOU SELL AND WILL LOWER THE TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS APRIL SHARES.
30, 2004. RETURNS SINCE THAT DATE ARE THE MOST RECENT MONTH-END PERFORMANCE
HISTORICAL. ALL OTHER RETURNS ARE THE THE TOTAL ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
BLENDED RETURNS OF THE HISTORICAL RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
PERFORMANCE OF SERIES II SHARES SINCE PROSPECTUS AS OF THE DATE OF THIS REPORT AUTOMATED INFORMATION LINE, 866-702-4402.
THEIR INCEPTION AND THE RESTATED FOR SERIES I AND SERIES II SHARES WAS AS MENTIONED ABOVE, FOR THE MOST RECENT
HISTORICAL PERFORMANCE OF SERIES I SHARES 1.12% AND 1.37%, RESPECTIVELY. THE EXPENSE MONTH-END PERFORMANCE INCLUDING VARIABLE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, PLEASE CONTACT YOUR
II SHARES) ADJUSTED TO REFLECT THE RULE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS VARIABLE PRODUCT ISSUER OR FINANCIAL
12B-1 FEES APPLICABLE TO SERIES II SHARES. OF THIS REPORT THAT ARE BASED ON EXPENSES ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS INCURRED DURING
MAY 20, 1997.
THE PERFORMANCE OF THE FUND'S
====================================================================================================================================
Principal risks of investing in the Fund The prices of initial public offering About indexes used in this report
(IPO) securities may go up and down more
Portfolio turnover is greater than most than prices of equity securities of The S&P 500--REGISTERED TRADEMARK-- Index
funds, which may affect the Fund's companies with longer trading histories. is a market capitalization-weighted index
performance due to higher brokerage In addition, companies offering securities covering all major areas of the U.S.
commissions. Active trading may also in IPOs may have less experienced economy. It is not the 500 largest
increase short-term gains and losses, management or limited operating histories. companies, but rather the most widely held
which may also result in taxable gain There can be no assurance that the fund 500 companies chosen with respect to
distributions to the Fund's shareholders. will have favorable IPO investment market size, liquidity, and their
opportunities. industry.
Investing in developing countries can
add additional risk, such as high rates of There is no guarantee that the The S&P GSTI Index is a modified
inflation or sharply devalued currencies investment techniques and risk analyses capitalization-weighted index composed of
against the U.S. dollar. Transaction costs used by the Fund's portfolio managers will companies involved in the technology
are often higher, and there may be delays produce the desired results. industry.
in settlement procedures.
The prices of securities held by the The Fund has elected to use the Lipper
Prices of equity securities change in Fund may decline in response to market Variable Underlying Funds (VUF) Science &
response to many factors including the risks. Technology Funds Category Average as its
historical and prospective earnings of the peer group instead of the Lipper Science &
issuer, the value of its assets, general The Fund's investments are concentrated Technology Funds Index. In 2006, Lipper
economic conditions, interest rates, in a comparatively narrow segment of the began publishing VUF indexes, allowing the
investor perceptions and market liquidity. economy. Consequently, the Fund may tend Fund to be compared with the Lipper VUF
to be more volatile than other mutual Science & Technology Funds Category
Foreign securities have additional funds, and the value of the Fund's Average. The unmanaged Lipper VUF Science
risks, including exchange rate changes, investments may tend to rise and fall more & Technology Funds Category Average
political and economic upheaval, the rapidly. represents the average of all the variable
relative lack of information, relatively insurance underlying Science & Technology
low market liquidity, and the potential Many of the products and services Funds tracked by Lipper Inc. These funds
lack of strict financial and accounting offered in technology-related industries invest at least 65% of their
controls and standards. are subject to rapid obsolescence, which
may lower the value of the securities of Continued
the companies in this sector.
AIM V.I. Technology Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
portfolios in science and technology Other information Industry classifications used in this
stocks. report are generally according to the
The returns shown in the management's Global Industry Classification Standard,
The LIPPER SCIENCE & TECHNOLOGY FUNDS discussion of Fund performance are based which was developed by and is the
INDEX is an equally weighted on net asset values calculated for exclusive property and a service mark of
representation of the largest funds in the shareholder transactions. Generally Morgan Stanley Capital International Inc.
Lipper Science & Technology Funds accepted accounting principles require and Standard & Poor's.
category. These funds invest at least 65% adjustments to be made to the net assets
of their portfolios in science and of the Fund at period end for financial
technology stocks. reporting purposes, and as such, the net
asset values for shareholder transactions
The Fund is not managed to track the and the returns based on those net asset
performance of any particular index, values may differ from the net asset
including the indexes defined here, and values and returns reported in the
consequently, the performance of the Fund Financial Highlights. Additionally, the
may deviate significantly from the returns and net asset values shown
performance of the indexes. throughout this report are at the Fund
level only and do not include variable
A direct investment cannot be made in product issuer charges. If such charges
an index. Unless otherwise indicated, were included, the total returns would be
index results include reinvested lower.
dividends, and they do not reflect sales
charges. Performance of an index of funds
reflects fund expenses; performance of a
market index does not.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 5/20/97, INDEX DATA FROM 5/31/97
LIPPER VUF SCIENCE & LIPPER SCIENCE &
AIM V.I. TECHNOLOGY TECHNOLOGY FUNDS TECHNOLOGY FUNDS
DATE FUND-SERIES I SHARES S&P 500 INDEX(1) S&P GSTI INDEX(1) CATEGORY AVERAGE(1) INDEX(1)
5/20/97 $10000
5/97 10000 $10000 $10000 $10000 $10000
6/97 10000 10445 10129 10114 10093
7/97 11870 11275 11942 11395 11508
8/97 11970 10644 11666 11484 11580
9/97 12510 11227 12017 12019 12071
10/97 11799 10852 10983 11097 10795
11/97 11699 11354 11162 11072 10703
12/97 11479 11549 10630 10740 10202
1/98 11529 11677 11182 10883 10382
2/98 12569 12518 12396 12243 11618
3/98 13059 13159 12598 12455 11712
4/98 13300 13294 13312 12988 12215
5/98 12590 13066 12403 12212 11320
6/98 13680 13596 13481 12964 11983
7/98 12650 13452 13778 12534 11871
8/98 10299 11509 11283 9909 9642
9/98 11100 12247 12889 10955 10780
10/98 11569 13241 13837 11913 11603
11/98 12450 14043 15449 13136 12903
12/98 14429 14852 17981 15258 14990
1/99 16865 15473 20870 16838 16932
2/99 15165 14992 18365 15379 15165
3/99 17600 15592 19935 17011 16710
4/99 18104 16196 20563 17356 16919
5/99 17953 15813 20339 17531 16895
6/99 20499 16689 22732 19430 19090
7/99 20198 16170 22513 19373 19084
8/99 21747 16090 23685 20068 20134
9/99 22421 15649 23922 20561 20407
10/99 25733 16639 24769 22532 22557
11/99 30120 16977 28231 25597 25902
12/99 37367 17976 33962 30817 32067
1/00 37337 17073 31864 29892 31731
2/00 49796 16750 37645 36539 40278
3/00 47087 18388 39336 35827 39052
4/00 41804 17835 35906 32803 34493
5/00 37043 17469 31950 29579 30331
6/00 43214 17899 35881 32726 34928
7/00 41382 17620 34207 31256 33081
8/00 48317 18713 38656 35502 38101
9/00 44998 17726 32395 31633 34194
10/00 40669 17650 29948 29049 30444
11/00 28387 16260 23089 22495 22595
12/00 28620 16340 21110 22557 22359
1/01 30990 16919 24573 25055 24626
2/01 21256 15377 17761 19020 18209
3/01 16807 14404 15294 16405 15541
4/01 21225 15522 18213 19427 18575
5/01 19793 15626 17487 18559 17709
6/01 19419 15246 17534 18152 17416
7/01 17906 15096 16285 16810 16021
8/01 15182 14152 14165 14644 14020
9/01 11227 13009 11299 11822 11011
10/01 13235 13257 13113 13454 12679
11/01 15555 14274 15348 15366 14525
12/01 15505 14399 15077 15494 14595
1/02 15454 14189 15061 15140 14340
2/02 13083 13916 13049 13228 12425
3/02 14536 14439 13978 14357 13556
4/02 12618 13564 12265 12560 11943
5/02 11922 13464 11765 11949 11318
6/02 10207 12506 10102 10435 9827
7/02 8997 11531 9079 9326 8778
8/02 8614 11607 8962 9166 8570
9/02 7161 10346 7363 7833 7379
10/02 8261 11256 8971 9175 8495
11/02 9552 11918 10541 10571 9792
====================================================================================================================================
SOURCE: (1) LIPPER INC.
====================================================================================================================================
[MOUNTAIN CHART]
12/02 8240 11218 9005 9259 8555
1/03 8221 10925 8925 9200 8505
2/03 8322 10761 9062 9217 8539
3/03 8150 10865 8960 9191 8533
4/03 8917 11759 9894 10091 9331
5/03 9926 12378 10999 11209 10406
6/03 9824 12536 10971 11292 10479
7/03 10258 12758 11601 11824 11042
8/03 11074 13006 12403 12612 11849
9/03 10661 12868 12221 12292 11533
10/03 11862 13596 13415 13476 12693
11/03 12074 13715 13674 13653 12885
12/03 11972 14434 13884 13851 12946
1/04 12447 14699 14537 14488 13582
2/04 12235 14903 14125 14269 13368
3/04 11912 14678 13735 14013 13085
4/04 11185 14448 12935 13133 12184
5/04 11720 14646 13652 13738 12791
6/04 11922 14931 13988 13980 13014
7/04 10721 14437 12662 12579 11593
8/04 10328 14495 12031 12040 11126
9/04 10812 14652 12448 12556 11644
10/04 11518 14875 13108 13309 12302
11/04 12173 15477 13848 14108 12988
12/04 12526 16004 14289 14572 13478
1/05 11820 15614 13344 13675 12670
2/05 11891 15942 13370 13682 12703
3/05 11517 15660 13045 13294 12364
4/05 11023 15363 12378 12804 11868
5/05 11961 15851 13503 13926 12923
6/05 11739 15874 13241 13826 12773
7/05 12314 16464 14134 14658 13543
8/05 12194 16314 14025 14562 13458
9/05 12335 16446 14169 14912 13718
10/05 12113 16172 13918 14666 13421
11/05 12869 16783 14848 15460 14164
12/05 12798 16789 14578 15479 14202
1/06 13575 17233 15119 16418 15076
2/06 13443 17280 14886 16197 14829
3/06 13918 17495 15221 16629 15198
4/06 14110 17730 15122 16651 15196
5/06 12920 17220 14011 15351 14045
6/06 12759 17243 13818 15090 13789
7/06 12164 17349 13227 14431 13125
8/06 12860 17762 14262 15318 13856
9/06 13545 18219 14834 15825 14305
10/06 13777 18812 15428 16291 14686
11/06 14281 19170 15986 17025 15317
12/06 14140 19438 15887 16950 15159
1/07 14221 19732 16146 17251 15403
2/07 14100 19347 15816 17077 15291
3/07 14029 19563 15888 17169 15375
4/07 14443 20430 16684 17740 15902
5/07 14907 21142 17402 18587 16519
6/07 15099 20791 17540 18842 16726
7/07 15039 20147 17417 18739 16711
8/07 15523 20448 17921 19089 17062
9/07 16259 21212 18664 20084 17956
10/07 17005 21550 19912 21358 19049
11/07 15340 20649 18351 19865 17613
12/07 15229 20506 18578 19930 17699
====================================================================================================================================
AIM V.I. Technology Fund
SCHEDULE OF INVESTMENTS(A)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-72.22%
APPLICATION SOFTWARE-5.99%
Adobe Systems Inc.(b) 110,111 $ 4,705,043
- -----------------------------------------------------------------------
Amdocs Ltd.(b) 65,872 2,270,608
- -----------------------------------------------------------------------
Autodesk, Inc.(b) 51,156 2,545,522
=======================================================================
9,521,173
=======================================================================
COMMUNICATIONS EQUIPMENT-9.51%
Cisco Systems, Inc.(b) 157,212 4,255,729
- -----------------------------------------------------------------------
CommScope, Inc.(b) 43,102 2,121,049
- -----------------------------------------------------------------------
Corning Inc. 74,061 1,776,723
- -----------------------------------------------------------------------
Foundry Networks, Inc.(b) 113,315 1,985,279
- -----------------------------------------------------------------------
Harris Corp. 34,584 2,167,725
- -----------------------------------------------------------------------
OpNext, Inc.(b) 63,320 560,382
- -----------------------------------------------------------------------
Polycom, Inc.(b) 80,966 2,249,236
=======================================================================
15,116,123
=======================================================================
COMPUTER HARDWARE-9.16%
Apple Inc.(b) 40,136 7,950,139
- -----------------------------------------------------------------------
Dell Inc.(b) 76,428 1,873,250
- -----------------------------------------------------------------------
Hewlett-Packard Co. 93,690 4,729,471
=======================================================================
14,552,860
=======================================================================
COMPUTER STORAGE & PERIPHERALS-3.94%
EMC Corp.(b) 256,080 4,745,162
- -----------------------------------------------------------------------
Network Appliance, Inc.(b) 60,985 1,522,186
=======================================================================
6,267,348
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.08%
VeriFone Holdings, Inc.(b) 73,762 1,714,967
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.72%
Amphenol Corp.-Class A 59,070 2,739,076
=======================================================================
HOME ENTERTAINMENT SOFTWARE-3.76%
Activision, Inc.(b) 141,163 4,192,541
- -----------------------------------------------------------------------
Electronic Arts Inc.(b) 30,375 1,774,204
=======================================================================
5,966,745
=======================================================================
INTERNET RETAIL-0.61%
Amazon.com, Inc.(b) 10,387 962,252
=======================================================================
INTERNET SOFTWARE & SERVICES-9.82%
Akamai Technologies, Inc.(b) 45,938 1,589,455
- -----------------------------------------------------------------------
Digital River, Inc.(b) 53,854 1,780,952
- -----------------------------------------------------------------------
eBay Inc.(b) 48,857 1,621,564
- -----------------------------------------------------------------------
Equinix, Inc.(b) 16,192 1,636,525
- -----------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
INTERNET SOFTWARE & SERVICES-(CONTINUED)
Google Inc.-Class A(b) 9,104 $ 6,295,234
- -----------------------------------------------------------------------
Omniture, Inc.(b) 80,381 2,675,883
=======================================================================
15,599,613
=======================================================================
IT CONSULTING & OTHER SERVICES-2.30%
Accenture Ltd.-Class A 101,350 3,651,641
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.67%
BlueStream Ventures L.P. (Acquired
08/03/00-06/05/07; Cost
$3,048,405)(b)(c)(d)(e) -- 1,068,339
=======================================================================
SEMICONDUCTOR EQUIPMENT-2.33%
FormFactor Inc.(b) 48,980 1,621,238
- -----------------------------------------------------------------------
KLA-Tencor Corp. 43,149 2,078,056
=======================================================================
3,699,294
=======================================================================
SEMICONDUCTORS-13.23%
Broadcom Corp.-Class A(b) 132,903 3,474,084
- -----------------------------------------------------------------------
Intersil Corp.-Class A 135,151 3,308,496
- -----------------------------------------------------------------------
National Semiconductor Corp. 135,726 3,072,837
- -----------------------------------------------------------------------
Netlogic Microsystems Inc.(b)(f) 53,777 1,731,619
- -----------------------------------------------------------------------
NVIDIA Corp.(b) 94,092 3,201,010
- -----------------------------------------------------------------------
Texas Instruments Inc. 111,817 3,734,688
- -----------------------------------------------------------------------
Xilinx, Inc. 114,226 2,498,123
=======================================================================
21,020,857
=======================================================================
SYSTEMS SOFTWARE-6.04%
McAfee Inc.(b) 61,571 2,308,912
- -----------------------------------------------------------------------
Microsoft Corp. 120,660 4,295,496
- -----------------------------------------------------------------------
Oracle Corp.(b) 132,120 2,983,270
=======================================================================
9,587,678
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.06%
American Tower Corp.-Class A(b) 76,640 3,264,864
=======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $99,896,235) 114,732,830
=======================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-17.71%
CANADA-2.70%
Research In Motion Ltd. (Communications
Equipment)(b) 37,876 4,295,138
=======================================================================
FINLAND-2.47%
Nokia Oyj-ADR (Communications Equipment) 102,216 3,924,072
=======================================================================
HONG KONG-1.98%
China Mobile Ltd.-ADR (Wireless
Telecommunication Services) 36,188 3,143,652
=======================================================================
</Table>
AIM V.I. Technology Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
ISRAEL-1.28%
NICE Systems Ltd.-ADR (Communications
Equipment)(b) 58,979 $ 2,024,159
=======================================================================
JAPAN-2.45%
Nintendo Co., Ltd. (Home Entertainment
Software)(g) 6,400 3,895,159
=======================================================================
MEXICO-2.00%
America Movil S.A.B de C.V.-Series L-ADR
(Wireless Telecommunication Services) 51,805 3,180,309
=======================================================================
SWITZERLAND-1.04%
Logitech International S.A. (Computer Storage
& Peripherals)(b) 45,144 1,654,076
=======================================================================
TAIWAN-3.79%
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services)(g) 367,249 2,269,015
- -----------------------------------------------------------------------
Siliconware Precision Industries Co.-ADR
(Semiconductors)(f) 182,296 1,620,611
- -----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Semiconductors) 213,785 2,129,299
=======================================================================
6,018,925
=======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $17,876,389) 28,135,490
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-10.08%
Liquid Assets Portfolio-Institutional
Class(h) 8,005,820 $ 8,005,820
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(h) 8,005,820 8,005,820
=======================================================================
Total Money Market Funds (Cost
$16,011,640) 16,011,640
=======================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-100.01% (Cost
$133,784,264) 158,879,960
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-0.51%
Liquid Assets Portfolio-Institutional Class
(Cost $808,678)(h)(i) 808,678 808,678
=======================================================================
TOTAL INVESTMENTS-100.52% (Cost $134,592,942) 159,688,638
- -----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.52)% (820,139)
- -----------------------------------------------------------------------
NET ASSETS-100.00% $158,868,499
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) 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.
(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 value of this security at December 31, 2007 represented 0.67% of the
Fund's Net Assets. This security is considered to be illiquid. The Fund is
limited to investing 15% of net assets in illiquid securities at the time of
purchase.
(d) The Fund has a remaining commitment of $135,000 to purchase additional
interests in BlueStream Ventures L.P., which is subject to the terms of the
limited partnership agreement.
(e) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at December
31, 2007 represented 0.67% of the Fund's Net Assets. See Note 1A.
(f) All or a portion of this security was out on loan at December 31, 2007.
(g) 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 December 31, 2007 was $6,164,174,
which represented 3.88% of the Fund's Net Assets. See Note 1A.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(i) 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
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $117,772,624)* $142,868,320
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $16,820,318) 16,820,318
=============================================================
Total investments (Cost $134,592,942) 159,688,638
=============================================================
Foreign currencies, at value (Cost $41,278) 41,539
- -------------------------------------------------------------
Receivables for:
Fund shares sold 113,047
- -------------------------------------------------------------
Dividends 56,542
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 45,262
=============================================================
Total assets 159,945,028
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 52,606
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 57,262
- -------------------------------------------------------------
Collateral upon return of securities loaned 808,678
- -------------------------------------------------------------
Accrued administrative services fees 104,386
- -------------------------------------------------------------
Accrued distribution fees -- Series II 87
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 616
- -------------------------------------------------------------
Accrued transfer agent fees 3,487
- -------------------------------------------------------------
Accrued operating expenses 49,407
=============================================================
Total liabilities 1,076,529
=============================================================
Net assets applicable to shares outstanding $158,868,499
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $576,805,296
- -------------------------------------------------------------
Undistributed net investment income (loss) (44,279)
- -------------------------------------------------------------
Undistributed net realized gain (loss) (442,988,475)
- -------------------------------------------------------------
Unrealized appreciation 25,095,957
=============================================================
$158,868,499
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $158,738,763
_____________________________________________________________
=============================================================
Series II $ 129,736
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 10,511,166
_____________________________________________________________
=============================================================
Series II 8,680
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 15.10
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 14.95
_____________________________________________________________
=============================================================
</Table>
* At December 31, 2007, securities with an aggregate value of $788,715 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$86,135) $ 904,959
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$21,623) 306,123
============================================================
Total investment income 1,211,082
============================================================
EXPENSES:
Advisory fees 1,262,711
- ------------------------------------------------------------
Administrative services fees 464,910
- ------------------------------------------------------------
Custodian fees 19,704
- ------------------------------------------------------------
Distribution fees -- Series II 351
- ------------------------------------------------------------
Transfer agent fees 25,488
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 21,667
- ------------------------------------------------------------
Other 64,012
============================================================
Total expenses 1,858,843
============================================================
Less: Fees waived and expense offset
arrangement(s) (9,062)
============================================================
Net expenses 1,849,781
============================================================
Net investment income (loss) (638,699)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains
from securities sold to affiliates of
$635,351) 13,142,651
- ------------------------------------------------------------
Foreign currencies 14,885
- ------------------------------------------------------------
Option contracts written 32,351
============================================================
13,189,887
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (106,582)
- ------------------------------------------------------------
Foreign currencies (5,874)
============================================================
(112,456)
============================================================
Net realized and unrealized gain 13,077,431
============================================================
Net increase in net assets resulting from
operations $12,438,732
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (638,699) $ (984,658)
- ------------------------------------------------------------------------------------------
Net realized gain 13,189,887 21,884,080
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (112,456) (3,764,080)
==========================================================================================
Net increase in net assets resulting from operations 12,438,732 17,135,342
==========================================================================================
Share transactions-net:
Series I (27,010,839) (34,499,934)
- ------------------------------------------------------------------------------------------
Series II (14,017) (22,638)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (27,024,856) (34,522,572)
==========================================================================================
Net increase (decrease) in net assets (14,586,124) (17,387,230)
==========================================================================================
NET ASSETS:
Beginning of year 173,454,623 190,841,853
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(44,279) and $(59,795), respectively) $158,868,499 $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
December 31, 2007
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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 -- 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
AIM V.I. Technology Fund
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. 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.
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 0.68%
__________________________________________________________________
===================================================================
</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 Ltd. ("Invesco")
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 year ended December 31, 2007, AIM waived advisory fees of $4,423.
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 year ended December 31, 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
AIM V.I. Technology Fund
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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $414,910
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio -- Institutional
Class $1,538,853 $36,309,179 $(29,842,212) $ 8,005,820 $142,274
- -------------------------------------------------------------------------------------------------
Premier
Portfolio -- Institutional
Class 1,538,853 36,309,179 (29,842,212) 8,005,820 142,226
=================================================================================================
Subtotal $3,077,706 $72,618,358 $(59,684,424) $16,011,640 $284,500
_________________________________________________________________________________________________
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio -- Institutional
Class $ -- $ 13,878,999 $ (13,070,321) $ 808,678 $ 3,925
- -------------------------------------------------------------------------------------------------
Premier
Portfolio -- Institutional
Class 5,333,168 58,150,008 (63,483,176) -- 17,698
=================================================================================================
Subtotal $5,333,168 $ 72,029,007 $ (76,553,497) $ 808,678 $ 21,623
=================================================================================================
Total
Investments
in
Affiliates $8,410,874 $144,647,365 $(136,237,921) $16,820,318 $306,123
_________________________________________________________________________________________________
=================================================================================================
</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 year ended December 31, 2007, the Fund
engaged in securities sales of $3,126,246, which resulted in net realized gains
of $635,351, and securities purchases of $493,286.
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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $4,639.
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 year ended December 31, 2007, the Fund paid legal fees of $4,034
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 SEC, 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 is a party to 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 year ended December 31, 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 by the
securities lending provider. 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 December 31, 2007, securities with an aggregate value of $788,715 were on
loan to brokers. The loans were secured by cash collateral of $808,678 received
by the Fund and subsequently invested in an affiliated money market fund. For
the year ended December 31, 2007, the Fund received dividends on cash collateral
investments of $21,623 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- -----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -----------------------------------------------------------------------------------
Beginning of period -- $ --
- -----------------------------------------------------------------------------------
Written 233 32,351
- -----------------------------------------------------------------------------------
Expired (233) (32,351)
===================================================================================
End of period -- $ --
___________________________________________________________________________________
===================================================================================
</Table>
AIM V.I. Technology Fund
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
There were no ordinary income or long-term capital gain distributions paid
during the years ended December 31, 2007 and 2006.
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- -----------------------------------------------------------------------------
Net unrealized appreciation -- investments 26,220,708
- -----------------------------------------------------------------------------
Temporary book/tax differences (44,279)
- -----------------------------------------------------------------------------
Capital loss carryforward (443,796,498)
- -----------------------------------------------------------------------------
Post-October capital loss deferral (316,728)
- -----------------------------------------------------------------------------
Shares of beneficial interest 576,805,296
=============================================================================
Total net assets $ 158,868,499
_____________________________________________________________________________
=============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales and
the treatment of partnerships. The tax-basis net unrealized appreciation on
investments amount includes appreciation on foreign currencies of $261.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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, 2007 to utilizing $442,360,803 of capital loss carryforward in the fiscal
year ended December 31, 2008.
The Fund utilized $13,418,361 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2008 $256,455,919
- -----------------------------------------------------------------------------
December 31, 2009 153,547,080
- -----------------------------------------------------------------------------
December 31, 2010 33,793,499
=============================================================================
Total capital loss carryforward $443,796,498
_____________________________________________________________________________
=============================================================================
</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 year ended December 31, 2007, was $95,824,042 and
$136,500,061, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $32,598,068
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,377,621)
===============================================================================
Net unrealized appreciation of investment securities $26,220,447
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $133,468,191.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, net operating losses, expiration of capital loss carryforward, and
partnerships, on December 31, 2007, undistributed net investment income (loss)
was increased by $654,215, undistributed net realized gain (loss) was increased
by $33,973,411 and shares of beneficial interest decreased by $34,627,626. This
reclassification had no effect on the net assets of the Fund.
AIM V.I. Technology Fund
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------
2007(a) 2006
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,069,689 $ 31,052,670 1,867,275 $ 24,826,913
- ------------------------------------------------------------------------------------------------------------------------
Series II 1,031 14,874 870 10,943
========================================================================================================================
Reacquired:
Series I (3,920,382) (58,063,509) (4,533,608) (59,326,847)
- ------------------------------------------------------------------------------------------------------------------------
Series II (1,948) (28,891) (2,551) (33,581)
========================================================================================================================
(1,851,610) $(27,024,856) (2,668,014) $(34,522,572)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 67% 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 14--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust approved
certain proposals to be presented for shareholder approval at a special meeting
of the shareholders of the Trust intended to be held on February 29, 2008 (the
"Special Meeting"). At the Special Meeting, shareholders of record as of the
close of business on November 30, 2007, are entitled to vote their respective
shares on several proposals that including, among others the following
proposal(s):
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers") ("the New
Sub-Advisory Arrangements"). This proposal is intended to benefit the Fund and
its shareholders by permitting AIM to utilize the additional resources and
talent of these affiliated sub-advisers in managing the Fund. Because AIM would
pay all of the sub-advisory fees of the sub-advisers, the new sub-advisory
arrangements would not affect the fees the Fund pays pursuant to the advisory
agreement. If approved by shareholders, the New Sub-advisory Arrangements are
expected to become effective on or about May 1, 2008.
AIM V.I. Technology Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
SERIES I
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.02 $ 12.69 $ 12.42 $ 11.87 $ 8.17
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.08) (0.07) (0.04)(a) (0.08)
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.14 1.41 0.34 0.59 3.78
=========================================================================================================================
Total from investment operations 1.08 1.33 0.27 0.55 3.70
=========================================================================================================================
Net asset value, end of period $ 15.10 $ 14.02 $ 12.69 $ 12.42 $ 11.87
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 7.70% 10.48% 2.17% 4.63% 45.29%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $158,739 $173,321 $190,700 $200,556 $171,546
=========================================================================================================================
Ratio of expenses to average net assets 1.10%(c) 1.12% 1.12% 1.15% 1.10%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.38)%(c) (0.54)% (0.60)% (0.39)%(a) (0.85)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 59% 116% 114% 137% 89%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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) 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 based on average daily net assets of $168,221,301.
<Table>
<Caption>
SERIES II
-----------------------------------------------
APRIL 30, 2004
(COMMENCEMENT
YEAR ENDED DECEMBER 31, DATE) TO
----------------------------- 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) (0.10) (0.12) (0.11) (0.05)(a)
- -------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.14 1.41 0.34 1.35
=============================================================================================================
Total from investment operations 1.04 1.29 0.23 1.30
=============================================================================================================
Net asset value, end of period $14.95 $13.91 $12.62 $12.39
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 7.48% 10.22% 1.86% 11.72%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 130 $ 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) 59% 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 based on average daily net assets of $140,198.
(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 16--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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V.I. Technology Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Technology Fund (one of
the funds constituting AIM Variable Insurance Funds, hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for the each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2007 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Technology Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,008.70 $5.62 $1,019.61 $5.65 1.11%
Series II 1,000.00 1,007.40 6.88 1,018.35 6.92 1.36
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2007, through December 31, 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
184/365 to reflect the most recent fiscal half year.
AIM V.I. Technology Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Technology Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
SECTOR EQUITY
Sectors
AIM V.I. Utilities Fund
Annual Report to Shareholders - December 31, 2007
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, [COVER GLOBE IMAGE]
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 AIM V.I. UTILITIES FUND's investment objectives
how to vote proxies relating to portfolio are capital growth and income.
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 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 UNLESS OTHERWISE STATED, INFORMATION PRESENTED IN THIS REPORT
to AIMinvestments.com, access the About Us IS AS OF DECEMBER 31, 2007, AND IS BASED ON TOTAL NET ASSETS.
tab, click on Required Notices and then
click on Proxy Voting Activity. Next, UNLESS OTHERWISE NOTED, ALL DATA IN THIS REPORT
select the Fund from the drop-down menu. ARE FROM A I M MANAGEMENT GROUP INC.
The information is also available on the
SEC Web site, sec.gov.
=============================================================
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
[AIM INVESTMENTS LOGO] BEFORE INVESTING.
- --REGISTERED TRADEMARK-- =============================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
A I M DISTRIBUTORS, INC.
AIM V.I. Utilities Fund
Management's discussion of Fund performance We seek to control risk by:
======================================================================================= o Diversifying across most industries and
PERFORMANCE SUMMARY sub-industries within the utilities
sector.
Investor preference for large dividend-paying equities boosted the performance of
many utilities stocks during the year ended December 31, 2007. This helped AIM V.I. o Owning both regulated and unregulated
Utilities Fund post positive returns for the year. The Fund outperformed its broad utilities--unregulated companies provide
market index, the S&P 500 Index, as the utilities sector was among the strongest greater growth potential, while regulated
performing sectors during the year.(triangle) Utilities stocks benefited from an firms provide more stable dividends and
increase in merger and acquisition activity, as well as investor preference for principal.
their generally more defensive character and their tendency to pay dividends.
o Generally avoiding excessive
Your Fund's long-term performance appears later in this report. concentration of assets in a small number
of stocks.
FUND VS. INDEXES
o Maintaining a reasonable cash position
Total returns, 12/31/06--12/31/07, excluding variable product issuer charges. If to avoid having to sell stocks during
variable product issuer charges were included, returns would be lower. market downturns.
Series I Shares 20.64% We may sell a stock for any of the
Series II Shares 20.32 following reasons:
S&P 500 Index(triangle) (Broad Market Index) 5.49
Lipper VUF Utility Funds Category Average(triangle) (Peer Group) 22.97 o Earnings growth is threatened because of
Lipper Utility Funds Index(triangle) (Former Peer Group Index) 17.20 deterioration in the firm's fundamentals
SOURCE: (triangle)LIPPER INC. or change in the operating environment.
=======================================================================================
o Valuation becomes too high.
How we invest We look for companies that could
potentially benefit from industry trends, o Corporate strategy changes.
We invest primarily in natural gas, such as increased demand for certain
electricity and telecommunication services products and deregulation of state markets Market conditions and your Fund
companies, selecting stocks based on our and that are attractively valued relative
quantitative and fundamental analysis of to the rest of the market. We also monitor The year was characterized by extremes.
individual companies. Our quantitative and may adjust industry and position Subprime loan concerns, record high crude
analysis focuses on positive cash flows weights according to prevailing economic oil prices, a weak housing market and a
and predictable earnings. Our fundamental trends such as gross domestic product weak U.S. dollar increased fears of
analysis seeks strong balance sheets, growth and interest rate changes. recession and worries about a potentially
competent management and sustainable negative effect on consumer spending.
dividends and distributions. These factors affected investor sentiment
which caused market volatility to increase
========================================== ========================================== during the year. Yet, despite concerns
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* over a slowing economy, several major
market indexes ended the year in positive
By industry 1. AT&T Inc. 5.6% territory after setting all-time closing
Electric Utilities 37.2% 2. Exelon Corp. 4.8 highs during the year.(1) Strong global
Multi-Utilities 22.0 3. Entergy Corp. 4.5 growth, steady corporate earnings and
Integrated Telecommunication 4. FPL Group, Inc. 4.1 continued merger and acquisition activity
Services 12.2 5. Williams Cos., Inc. (The) 4.1 drove equity markets higher for much of
Oil & Gas Storage & Transportation 10.0 6. NRG Energy, Inc. 3.8 2007.(1) Against this backdrop, energy,
Gas Utilities 8.9 7. Edison International 3.7 materials and utilities were among the
Independent Power Producers 8. Questar Corp. 3.6 best performing sectors of the S&P 500
& Energy Traders 6.1 9. Verizon Communications Inc. 3.6 Index.1 Conversely, financials, consumer
Wireless Telecommunication 10. Sempra Energy 3.6 discretionary and health care were the
Services 0.9 weakest performing sectors.(1)
Money Market Funds Plus
Other Assets Less Liabilities 2.7 Investor preference for utilities
stocks, based on their generally more
defensive character and tendency to pay
Total Net Assets $159.04 million dividends, increased during the year,
bolstered by evidence of a slowing economy
Total Number of Holdings* 34 and lower interest rates. During the year,
the U.S. Federal Reserve Board (the Fed)
The Fund's holdings are subject to change, lowered the federal
and there is no assurance that the
Fund will continue to hold any particular
security.
*Excluding money market fund holdings.
========================================== ==========================================
AIM V.I. Utilities Fund
funds target rate from 5.25% to 4.25%(2) in nuclear power companies. Natural gas has John S. Segner
three separate actions. Utilities stocks one-third the carbon dioxide emissions of [SEGNER Senior portfolio manager,
tend to be sensitive to interest rate coal. Nuclear power generation, although PHOTO] is lead manager of AIM V.I.
movements because they generally pay controversial, produces no greenhouse gas Utilities Fund. He has more
dividends and are particularly attractive emissions. We continued to maintain our than 20 years of experience in the energy
when interest rates are low. focus on holding what we believed were and investment industries. Before joining
favorably priced stocks of strong the Fund's advisor in 1997, he was a
An increase in merger and acquisition companies with reasonable growth prospects managing director and principal with an
activity, particularly in the diversified and attractive dividend yields. investment management company that focused
telecommunication services and independent exclusively on publicly-traded energy
power producers industries, also helped The Fund has experienced strong stocks. Prior to that, he held positions
stocks in the utilities sector. For the double-digit average annual total returns with several energy companies. Mr. Segner
year, our holdings in electric utilities, over the last five years. It would be earned a B.S. in civil engineering from
independent power producers and integrated imprudent for us to suggest such a level the University of Alabama and an M.B.A.
telecommunication services had the most of performance is sustainable over the with a concentration in finance from The
positive impact on Fund performance. long term. As always, we thank you for University of Texas at Austin.
Wireless telecommunication services your continued investment and welcome any
stocks, on the other hand, detracted from new investors to AIM V.I. Utilities Fund. Assisted by the Energy/Gold/Utilities Team
Fund performance.
Sources: (1)Lipper Inc.; (2)U.S. Federal
Top contributors to Fund performance Reserve Board
during the year included NRG ENERGY,
EXELON and ENTERGY. Each company benefited The views and opinions expressed in
in its own right from increased interest management's discussion of Fund
in nuclear power plants, as nuclear power performance are those of A I M Advisors,
produces no carbon dioxide emissions. NRG Inc. These views and opinions are subject
Energy recently announced plans to build to change at any time based on factors
more nuclear power plants in Texas and such as market and economic conditions.
Exelon is the largest domestic nuclear These views and opinions may not be relied
power generator. Entergy was the first upon as investment advice or
domestic utility to voluntarily reduce recommendations, or as an offer for a
greenhouse gas emissions and has benefited particular security. The information is
from its purchase of carbon credits. not a complete analysis of every aspect of
any market, country, industry, security or
Detractors from Fund performance were the Fund. Statements of fact are from
minimal during the year. Top detractors sources considered reliable, but A I M
included multi-utility providers CMS Advisors, Inc. makes no representation or
ENERGY and PG&E. CMS Energy experienced warranty as to their completeness or
regulatory difficulties during the year. accuracy. Although historical performance
PG&E was affected by possibly unjustified is no guarantee of future results, these
negative investor perception of the insights may help you understand our
adverse conditions in the California investment management philosophy.
housing market. We continued to own both
stocks at the close of 2007.
The reduced federal income tax rate
for qualified dividends made utilities
stocks attractive to many investors over
the last several years. We remain modestly
concerned about the possible repeal of the
dividend tax rate reduction, however.
Interest rate and inflationary trends also
present a cause for concern.
==========================================
Because carbon dioxide emissions FOR A DISCUSSION OF THE RISKS OF INVESTING
remain a popular topic with legislators, IN YOUR FUND, INDEXES USED IN THIS REPORT
we increased the Fund's exposure to AND YOUR FUND'S LONG-TERM PERFORMANCE,
natural gas and PLEASE TURN THE PAGE.
==========================================
AIM V.I. Utilities Fund
Your Fund's long-term performance
========================================== THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. UTILITIES FUND, A SERIES
AVERAGE ANNUAL TOTAL RETURNS PAST PERFORMANCE AND CANNOT GUARANTEE PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
COMPARABLE FUTURE RESULTS; CURRENT IS CURRENTLY OFFERED THROUGH INSURANCE
As of 12/31/07 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE COMPANIES ISSUING VARIABLE PRODUCTS. YOU
SERIES I SHARES CONTACT YOUR VARIABLE PRODUCT ISSUER OR CANNOT PURCHASE SHARES OF THE FUND
Inception (12/30/94) 9.62% FINANCIAL ADVISOR FOR THE MOST RECENT DIRECTLY. PERFORMANCE FIGURES GIVEN
10 Years 8.08 MONTH-END VARIABLE PRODUCT PERFORMANCE. REPRESENT THE FUND AND ARE NOT INTENDED TO
5 Years 20.75 PERFORMANCE FIGURES REFLECT FUND EXPENSES, REFLECT ACTUAL VARIABLE PRODUCT VALUES.
1 Year 20.64 REINVESTED DISTRIBUTIONS AND CHANGES IN THEY DO NOT REFLECT SALES CHARGES,
NET ASSET VALUE. INVESTMENT RETURN AND EXPENSES AND FEES ASSESSED IN CONNECTION
SERIES II SHARES PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU WITH A VARIABLE PRODUCT. SALES CHARGES,
10 Years 7.82% MAY HAVE A GAIN OR LOSS WHEN YOU SELL EXPENSES AND FEES, WHICH ARE DETERMINED BY
5 Years 20.46 SHARES. THE VARIABLE PRODUCT ISSUERS, WILL VARY
1 Year 20.32 AND WILL LOWER THE TOTAL RETURN.
========================================== THE NET ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARES' INCEPTION DATE IS APRIL PROSPECTUS AS OF THE DATE OF THIS REPORT DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
30, 2004. RETURNS SINCE THAT DATE ARE FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, IS AVAILABLE ON THIS AIM
HISTORICAL. ALL OTHER RETURNS ARE THE 0.93% AND 1.18%, RESPECTIVELY.(1) THE TOTAL AUTOMATED INFORMATION LINE, 866-702-4402.
BLENDED RETURNS OF THE HISTORICAL ANNUAL FUND OPERATING EXPENSE RATIO SET AS MENTIONED ABOVE, FOR THE MOST RECENT
PERFORMANCE OF SERIES II SHARES SINCE FORTH IN THE MOST RECENT FUND PROSPECTUS MONTH-END PERFORMANCE INCLUDING VARIABLE
THEIR INCEPTION AND THE RESTATED AS OF THE DATE OF THIS REPORT FOR SERIES I PRODUCT CHARGES, PLEASE CONTACT YOUR
HISTORICAL PERFORMANCE OF SERIES I SHARES AND SERIES II SHARES WAS 0.96% AND 1.21%, VARIABLE PRODUCT ISSUER OR FINANCIAL
(FOR PERIODS PRIOR TO INCEPTION OF SERIES RESPECTIVELY. THE EXPENSE RATIOS PRESENTED ADVISOR.
II SHARES) ADJUSTED TO REFLECT THE RULE ABOVE MAY VARY FROM THE EXPENSE RATIOS
12B-1 FEES APPLICABLE TO SERIES II SHARES. PRESENTED IN OTHER SECTIONS OF THIS REPORT (1) Total annual operating expenses less
THE INCEPTION DATE OF SERIES I SHARES IS THAT ARE BASED ON EXPENSES INCURRED DURING any contractual fee waivers and/or
DECEMBER 30, 1994. THE PERIOD COVERED BY THIS REPORT. expense reimbursements by the advisor
in effect through at least April 30,
THE PERFORMANCE OF THE FUND'S SERIES 2009. See current prospectus for more
I AND SERIES II SHARE CLASSES WILL DIFFER information.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
Principal risks of investing in the Fund the value of its assets, general economic to be more volatile than other mutual
conditions, interest rates, investor funds, and the value of the Fund's
Since a large percentage of the Fund's perceptions and market liquidity. investments may tend to rise and fall more
assets may be invested in securities of a rapidly.
limited number of companies, each Foreign securities have additional
investment has a greater effect on the risks, including exchange rate changes, Government regulation, difficulties
Fund's overall performance, and any change political and economic upheaval, the in obtaining adequate financing and
in the value of those securities could relative lack of information, relatively investment return, environmental issues,
significantly affect the value of your low market liquidity, and the potential prices of fuel for generation of
investment in the Fund. lack of strict financial and accounting electricity, availability of natural gas,
controls and standards. risks associated with power marketing and
Investing in developing countries can trading, and risks associated with nuclear
add additional risk, such as high rates of There is no guarantee that the power facilities may adversely affect the
inflation or sharply devalued currencies invtment techniques and risk analys es market value of the Fund's holdings.
against the U.S. dollar. Transaction costs used by the Fund's portfolio managers will
are often higher, and there may be delays produce the desired results. About indexes used in this report
in settlement procedures.
The prices of securities held by the The S&P 500 --REGISTERED TRADEMARK-- INDEX
Prices of equity securities change in Fund may decline in response to market is a market capitalization-weighted index
response to many factors including the risks. covering all major areas of the U.S.
historical and prospective earnings of the economy. It is not the 500 largest
issuer, The Fund's investments are companies, but rather the most widely held
concentrated in a comparatively narrow
segment of the economy. Consequently, the
Fund may tend
Continued
AIM V.I. Utilities Fund
Past performance cannot guarantee the dollar value of an investment, is
comparable future results. constructed with each segment representing
a percent change in the value of the
This chart, which is a logarithmic investment. In this chart, each segment
chart, presents the fluctuations in the represents a doubling, or 100% change, in
value of the Fund and its indexes. We the value of the investment. In other
believe that a logarithmic chart is more words, the space between $5,000 and
effective than other types of charts in $10,000 is the same size as the space
illustrating changes in value during the between $10,000 and $20,000, and so on.
early years shown in the chart. The
vertical axis, the one that indicates
====================================================================================================================================
Continued from previous page
500 companies chosen with respect to securities of domestic and foreign principles require adjustments to be made
market size, liquidity, and their companies providing utilities. to the net assets of the Fund at period
industry. end for financial reporting purposes, and
The Fund is not managed to track the as such, the net asset values for
The Fund has elected to use the performance of any particular index, shareholder transactions and the returns
LIPPER VARIABLE UNDERLYING FUNDS (VUF) including the indexes defined here, and based on those net asset values may differ
UTILITY FUNDS CATEGORY AVERAGE as its peer consequently, the performance of the Fund from the net asset values and returns
group instead of the Lipper Utility Funds may deviate significantly from the reported in the Financial Highlights.
Index. In 2006, Lipper began publishing performance of the indexes. Additionally, the returns and net asset
VUF indexes, allowing the Fund to be values shown throughout this report are at
compared with the Lipper VUF Utility Funds A direct investment cannot be made in the Fund level only and do not include
Category Average. The unmanaged Lipper VUF an index. Unless otherwise indicated, variable product issuer charges. If such
Utility Funds Category Average represents index results include reinvested charges were included, the total returns
the average of all the variable insurance dividends, and they do not reflect sales would be lower.
underlying Utility Funds tracked by Lipper charges. Performance of an index of funds
Inc. These funds invest primarily in the reflects fund expenses; performance of a Industry classifications used in this
equity securities of domestic and foreign market index does not. report are generally according to the
companies providing utilities. Global Industry Classification Standard,
Other information which was developed by and is the
The LIPPER UTILITY FUNDS INDEX is an exclusive property and a service mark of
equally weighted representation of the The returns shown in the management's Morgan Stanley Capital International Inc.
largest funds in the Lipper Utility Funds discussion of Fund performance are based and Standard & Poor's.
category. These funds invest primarily in on net asset values calculated for
the equity shareholder transactions. Generally
accepted accounting
===================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
FUND DATA FROM 12/30/94, INDEX DATA FROM 12/31/94
AIM V.I. UTILITIES FUND- LIPPER VUF UTILITY FUNDS LIPPER UTILITY FUNDS
DATE SERIES I SHARES S&P 500 INDEX(1) CATEGORY AVERAGE(1) INDEX(1)
12/30/94 $10000
12/94 10000 $10000 $10000 $10000
1/95 10040 10259 10243 10360
2/95 10090 10659 10344 10456
3/95 10090 10973 10364 10447
4/95 10100 11295 10601 10676
5/95 10120 11746 10956 11101
6/95 10110 12019 11031 11131
7/95 10110 12417 11301 11273
8/95 10131 12448 11463 11404
9/95 10180 12973 11847 11900
10/95 10240 12927 11847 11998
11/95 10601 13493 12154 12231
12/95 10909 13753 12585 12711
1/96 10969 14221 12804 12936
2/96 10889 14353 12700 12726
3/96 11050 14491 12707 12662
4/96 11453 14705 12849 12688
5/96 11644 15083 12954 12758
6/96 11815 15141 13265 13122
7/96 11362 14472 12702 12526
8/96 11514 14778 12955 12705
9/96 11634 15609 13106 12826
10/96 11977 16039 13508 13268
11/96 12329 17251 14093 13776
12/96 12302 16909 14224 13897
1/97 12405 17965 14491 14161
2/97 12343 18106 14466 14188
3/97 11942 17363 14061 13761
4/97 12024 18399 14208 13886
5/97 12590 19524 14937 14539
6/97 13095 20392 15414 14984
7/97 13280 22014 15890 15359
8/97 12961 20782 15430 14880
9/97 13754 21919 16362 15739
10/97 13754 21188 16184 15604
11/97 14547 22168 17150 16617
12/97 15182 22548 18112 17470
1/98 15372 22798 18041 17382
2/98 16015 24441 18638 17893
3/98 17185 25691 20021 19202
4/98 16795 25955 19665 18801
5/98 16711 25509 19391 18541
6/98 17059 26544 19830 18906
7/98 17016 26264 19616 18650
8/98 15214 22469 18139 17437
9/98 16258 23910 19570 18712
10/98 17102 25852 20145 19151
11/98 17671 27418 20679 19637
12/98 19051 28997 21821 20684
1/99 19522 30209 21795 20590
2/99 19276 29270 21185 19935
3/99 19480 30441 21279 19914
4/99 20445 31620 22615 21240
5/99 20960 30874 23174 21784
6/99 21270 32583 23465 22085
7/99 21227 31570 23409 22026
8/99 20264 31414 22666 21380
9/99 20436 30554 22713 21335
10/99 21153 32486 23830 22460
11/99 21432 33147 24227 22613
12/99 22699 35096 25400 23690
1/00 23997 33333 26077 24127
2/00 25092 32703 26274 24197
3/00 25925 35900 27400 25372
4/00 24333 34820 26105 24359
5/00 23498 34106 25778 24106
6/00 23672 34946 25871 24078
===================================================================================================================================
SOURCE: (1)LIPPER INC.
===================================================================================================================================
[MOUNTAIN CHART]
7/00 23163 34400 25708 23968
8/00 24593 36536 27264 25659
9/00 25166 34608 27691 26485
10/00 24257 34461 27051 25790
11/00 22166 31746 25248 24440
12/00 23895 31902 26656 25721
1/01 23417 33033 26266 25068
2/01 22759 30023 25478 24548
3/01 21999 28122 24941 24024
4/01 23541 30306 26269 25352
5/01 22077 30509 25559 24798
6/01 19955 29767 23896 23249
7/01 18798 29473 23028 22522
8/01 17640 27630 22113 21719
9/01 15643 25399 20439 20392
10/01 15892 25884 20150 19927
11/01 16065 27869 19998 19823
12/01 16147 28113 20325 20231
1/02 14954 27703 19045 19154
2/02 14438 27169 18504 18618
3/02 15343 28191 19607 19792
4/02 14930 26482 18819 19024
5/02 14335 26288 18111 18418
6/02 13681 24416 16913 17233
7/02 12545 22513 15254 15391
8/02 12729 22661 15674 15727
9/02 11822 20200 14276 14295
10/02 12373 21976 14887 14920
11/02 12591 23268 15435 15496
12/02 12864 21902 15577 15638
1/03 12427 21330 15280 15168
2/03 12081 21009 14822 14658
3/03 12289 21212 15158 14983
4/03 12866 22959 16326 16004
5/03 13995 24167 17616 17327
6/03 14076 24476 17847 17562
7/03 13430 24908 17196 16934
8/03 13569 25393 17362 17000
9/03 13938 25124 17724 17339
10/03 14099 26544 18107 17755
11/03 14273 26778 18380 17942
12/03 15113 28181 19486 19012
1/04 15230 28698 19903 19413
2/04 15568 29097 20268 19820
3/04 15498 28658 20205 19818
4/04 15120 28209 19786 19350
5/04 15251 28595 19891 19422
6/04 15515 29151 20323 19817
7/04 15779 28186 20449 19994
8/04 16162 28299 20985 20516
9/04 16557 28606 21474 20981
10/04 17214 29043 22374 21832
11/04 18255 30217 23460 22852
12/04 18673 31245 24290 23555
1/05 18662 30484 24181 23559
2/05 19237 31125 24768 24154
3/05 19248 30574 24670 24192
4/05 19393 29995 24767 24390
5/05 19703 30948 25208 24804
6/05 20611 30993 26312 25946
7/05 21388 32145 27192 26744
8/05 22058 31852 27595 27183
9/05 23026 32109 28518 28071
10/05 21543 31574 27051 26646
11/05 21520 32767 27149 26901
12/05 21817 32779 27463 27089
1/06 22685 33647 28565 28191
2/06 22832 33738 28748 28417
3/06 22294 34157 28363 28068
4/06 22697 34616 28977 28563
5/06 22942 33621 28943 28581
6/06 23493 33665 29480 29154
7/06 24569 33873 30700 30389
8/06 25242 34678 31504 31091
9/06 24863 35571 31527 31047
10/06 26014 36729 33245 32586
11/06 26993 37426 34532 33788
12/06 27371 37952 35109 34373
1/07 27589 38525 35545 34657
2/07 28453 37774 36397 35406
===================================================================================================================================
===================================================================================================================================
[MOUNTAIN CHART]
3/07 29742 38195 37938 36847
4/07 31068 39887 39469 38320
5/07 32087 41277 41145 39726
6/07 30862 40592 39930 38208
7/07 29584 39335 38459 36832
8/07 29957 39923 38977 37132
9/07 31425 41415 40920 38824
10/07 33332 42074 43484 40953
11/07 32612 40314 42846 40141
12/07 33020 40035 43103 40287
===================================================================================================================================
AIM V.I. Utilities Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2007
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS-97.34%
ELECTRIC UTILITIES-37.20%
Duke Energy Corp. 285,000 $ 5,748,450
- -----------------------------------------------------------------------
E.ON A.G. (Germany)(b) 24,000 5,086,409
- -----------------------------------------------------------------------
Edison International 109,000 5,817,330
- -----------------------------------------------------------------------
Enel S.p.A. (Italy)(b) 189,000 2,226,659
- -----------------------------------------------------------------------
Entergy Corp. 60,000 7,171,200
- -----------------------------------------------------------------------
Exelon Corp. 94,000 7,674,160
- -----------------------------------------------------------------------
FirstEnergy Corp. 68,000 4,919,120
- -----------------------------------------------------------------------
FPL Group, Inc. 96,000 6,506,880
- -----------------------------------------------------------------------
Pepco Holdings, Inc. 135,000 3,959,550
- -----------------------------------------------------------------------
Portland General Electric Co. 89,000 2,472,420
- -----------------------------------------------------------------------
PPL Corp. 106,000 5,521,540
- -----------------------------------------------------------------------
Southern Co. 53,000 2,053,750
=======================================================================
59,157,468
=======================================================================
GAS UTILITIES-8.85%
AGL Resources Inc. 100,000 3,764,000
- -----------------------------------------------------------------------
Equitable Resources, Inc. 85,000 4,528,800
- -----------------------------------------------------------------------
Questar Corp. 107,000 5,788,700
=======================================================================
14,081,500
=======================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-6.14%
Constellation Energy Group 36,000 3,691,080
- -----------------------------------------------------------------------
NRG Energy, Inc.(c) 140,000 6,067,600
=======================================================================
9,758,680
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-12.23%
Alaska Communications Systems Group Inc. 316,622 4,749,330
- -----------------------------------------------------------------------
AT&T Inc. 215,000 8,935,400
- -----------------------------------------------------------------------
Verizon Communications Inc. 132,000 5,767,080
=======================================================================
19,451,810
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MULTI-UTILITIES-22.02%
Ameren Corp. 67,000 $ 3,632,070
- -----------------------------------------------------------------------
CMS Energy Corp. 215,000 3,736,700
- -----------------------------------------------------------------------
Dominion Resources, Inc. 98,000 4,650,100
- -----------------------------------------------------------------------
National Grid PLC (United Kingdom)(b) 215,000 3,548,032
- -----------------------------------------------------------------------
OGE Energy Corp. 29,000 1,052,410
- -----------------------------------------------------------------------
PG&E Corp. 96,000 4,136,640
- -----------------------------------------------------------------------
SCANA Corp. 27,000 1,138,050
- -----------------------------------------------------------------------
Sempra Energy 93,000 5,754,840
- -----------------------------------------------------------------------
Veolia Environnement (France)(b) 42,000 3,807,346
- -----------------------------------------------------------------------
Xcel Energy, Inc. 158,000 3,566,060
=======================================================================
35,022,248
=======================================================================
OIL & GAS STORAGE & TRANSPORTATION-9.99%
El Paso Corp. 320,000 5,516,800
- -----------------------------------------------------------------------
Spectra Energy Corp. 151,000 3,898,820
- -----------------------------------------------------------------------
Williams Cos., Inc. (The) 181,000 6,476,180
=======================================================================
15,891,800
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.91%
Sprint Nextel Corp. 110,000 1,444,300
=======================================================================
Total Common Stocks (Cost $102,003,023) 154,807,806
=======================================================================
MONEY MARKET FUNDS-2.64%
Liquid Assets Portfolio-Institutional
Class(d) 2,099,913 2,099,913
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 2,099,913 2,099,913
=======================================================================
Total Money Market Funds (Cost
$4,199,826) 4,199,826
=======================================================================
TOTAL INVESTMENTS-99.98% (Cost $106,202,849) 159,007,632
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.02% 32,983
=======================================================================
NET ASSETS-100.00% $159,040,615
_______________________________________________________________________
=======================================================================
</Table>
Notes to Schedule of Investments:
(a) 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.
(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 December 31, 2007 was $14,668,446,
which represented 9.22% of the Fund's Net Assets. See Note 1A.
(c) Non-income producing security.
(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. Utilities Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
<Table>
ASSETS:
Investments, at value (Cost $102,003,023) $154,807,806
- -------------------------------------------------------------
Investments in affiliated money market funds
(Cost $4,199,826) 4,199,826
=============================================================
Total investments (Cost $106,202,849) 159,007,632
=============================================================
Foreign currencies, at value (Cost $11,639) 11,722
- -------------------------------------------------------------
Receivables for:
Fund shares sold 45,593
- -------------------------------------------------------------
Dividends 455,366
- -------------------------------------------------------------
Fund expenses absorbed 5,322
- -------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 47,785
=============================================================
Total assets 159,573,420
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 345,648
- -------------------------------------------------------------
Trustee deferred compensation and retirement
plans 56,592
- -------------------------------------------------------------
Accrued administrative services fees 89,090
- -------------------------------------------------------------
Accrued distribution fees -- Series II 2,251
- -------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 438
- -------------------------------------------------------------
Accrued transfer agent fees 1,574
- -------------------------------------------------------------
Accrued operating expenses 37,212
=============================================================
Total liabilities 532,805
=============================================================
Net assets applicable to shares outstanding $159,040,615
_____________________________________________________________
=============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 93,998,840
- -------------------------------------------------------------
Undistributed net investment income 3,000,396
- -------------------------------------------------------------
Undistributed net realized gain 9,230,425
- -------------------------------------------------------------
Unrealized appreciation 52,810,954
=============================================================
$159,040,615
_____________________________________________________________
=============================================================
NET ASSETS:
Series I $155,747,991
_____________________________________________________________
=============================================================
Series II $ 3,292,624
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,497,179
_____________________________________________________________
=============================================================
Series II 138,369
_____________________________________________________________
=============================================================
Series I:
Net asset value per share $ 23.97
_____________________________________________________________
=============================================================
Series II:
Net asset value per share $ 23.80
_____________________________________________________________
=============================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2007
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$48,496) $ 4,257,481
- ------------------------------------------------------------
Dividends from affiliated money market funds
(includes securities lending income of
$28,208) 245,174
============================================================
Total investment income 4,502,655
============================================================
EXPENSES:
Advisory fees 931,382
- ------------------------------------------------------------
Administrative services fees 404,040
- ------------------------------------------------------------
Custodian fees 13,280
- ------------------------------------------------------------
Distribution fees -- Series II 7,721
- ------------------------------------------------------------
Transfer agent fees 18,146
- ------------------------------------------------------------
Trustees' and officer's fees and benefits 20,858
- ------------------------------------------------------------
Other 61,683
============================================================
Total expenses 1,457,110
============================================================
Less: Fees waived and expense offset
arrangement(s) (8,342)
============================================================
Net expenses 1,448,768
============================================================
Net investment income 3,053,887
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 12,122,415
- ------------------------------------------------------------
Foreign currencies (1,791)
============================================================
12,120,624
============================================================
Change in net unrealized appreciation of:
Investment securities 12,993,470
- ------------------------------------------------------------
Foreign currencies 3,469
============================================================
12,996,939
============================================================
Net realized and unrealized gain 25,117,563
============================================================
Net increase in net assets resulting from
operations $28,171,450
____________________________________________________________
============================================================
</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 years ended December 31, 2007 and 2006
<Table>
<Caption>
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,053,887 $ 2,903,361
- ------------------------------------------------------------------------------------------
Net realized gain 12,120,624 8,810,025
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation 12,996,939 16,338,522
==========================================================================================
Net increase in net assets resulting from operations 28,171,450 28,051,908
==========================================================================================
Distributions to shareholders from net investment income:
Series I (2,819,765) (4,313,053)
- ------------------------------------------------------------------------------------------
Series II (60,178) (75,912)
==========================================================================================
Total distributions from net investment income (2,879,943) (4,388,965)
==========================================================================================
Distributions to shareholders from net realized gains:
Series I (7,308,544) (2,662,863)
- ------------------------------------------------------------------------------------------
Series II (167,024) (47,944)
==========================================================================================
Total distributions from net realized gains (7,475,568) (2,710,807)
==========================================================================================
Decrease in net assets resulting from distributions (10,355,511) (7,099,772)
==========================================================================================
Share transactions-net:
Series I (820,698) 4,313,312
- ------------------------------------------------------------------------------------------
Series II 504,038 1,371,296
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (316,660) 5,684,608
==========================================================================================
Net increase in net assets 17,499,279 26,636,744
==========================================================================================
NET ASSETS:
Beginning of year 141,541,336 114,904,592
==========================================================================================
End of year (including undistributed net investment income
of $3,000,396 and $2,828,242, respectively) $159,040,615 $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
December 31, 2007
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 objectives 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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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.
The Fund files tax returns in the U.S. federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for tax periods after 2003.
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 -- 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
AIM V.I. Utilities Fund
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 0.60% 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 Ltd. ("Invesco")
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 (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 year ended December 31, 2007, AIM waived advisory fees of $8,164.
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 year ended December 31, 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 year ended December 31, 2007, AIM was paid
$50,000 for accounting and fund administrative services and reimbursed $354,040
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 year ended December 31, 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 A I M
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 year ended December 31, 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 year ended
December 31, 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 12/31/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $3,563,271 $31,808,212 $(33,271,570) $2,099,913 $108,597
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 3,563,271 31,808,212 (33,271,570) 2,099,913 108,369
=================================================================================================
Subtotal $7,126,542 $63,616,424 $(66,543,140) $4,199,826 $216,966
_________________________________________________________________________________________________
=================================================================================================
</Table>
AIM V.I. Utilities Fund
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 12/31/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $ 5,367,752 $ (5,367,752) $ -- $ 28,208
=================================================================================================
Total
Investments
in
Affiliates $7,126,542 $68,984,176 $(71,910,892) $4,199,826 $245,174
_________________________________________________________________________________________________
=================================================================================================
</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 year ended
December 31, 2007, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $178.
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 year ended December 31, 2007, the Fund paid legal fees of $3,975
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 SEC, 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 is a party to 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 year ended December 31, 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--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 by the
securities lending provider. 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 December 31, 2007, there were no securities out on loan. For the year
ended December 31, 2007, the Fund received dividends on cash collateral
investments of $28,208 for securities lending transactions during the period,
which are net of compensation to counterparties.
AIM V.I. Utilities Fund
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2007
and 2006 was as follows:
<Table>
<Caption>
2007 2006
- ---------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 3,761,176 $4,388,965
- ---------------------------------------------------------------------------------------
Long-term capital gain 6,594,335 2,710,807
=======================================================================================
Total distributions $10,355,511 $7,099,772
_______________________________________________________________________________________
=======================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2007, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2007
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 3,096,064
- ----------------------------------------------------------------------------
Undistributed long-term gain 11,180,432
- ----------------------------------------------------------------------------
Net unrealized appreciation -- investments 52,652,128
- ----------------------------------------------------------------------------
Temporary book/tax differences (47,435)
- ----------------------------------------------------------------------------
Capital loss carryforward (1,839,286)
- ----------------------------------------------------------------------------
Post-October currency loss deferral (128)
- ----------------------------------------------------------------------------
Shares of beneficial interest 93,998,840
============================================================================
Total net assets $159,040,615
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation difference is attributable primarily to losses on wash sales. The
tax-basis net unrealized appreciation on investments amount includes
appreciation on foreign currencies of $6,171.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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, 2007 to utilizing $919,643 of capital loss carryforward in the fiscal year
ended December 31, 2008.
The Fund utilized $919,643 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of December 31, 2007 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2009 $1,839,286
_____________________________________________________________________________
=============================================================================
</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 year ended December 31, 2007 was $43,961,629 and
$48,636,473, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $53,252,966
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (607,009)
===============================================================================
Net unrealized appreciation of investment securities $52,645,957
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $106,361,675.
</Table>
AIM V.I. Utilities Fund
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions on December 31, 2007, undistributed net investment income was
decreased by $1,790 and undistributed net realized gain was increased by $1,790.
This reclassification had no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2007(A) 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,496,664 $ 59,127,619 2,859,050 $ 55,911,823
- ----------------------------------------------------------------------------------------------------------------------
Series II 47,500 1,114,914 71,923 1,371,458
======================================================================================================================
Issued as reinvestment of dividends:
Series I 416,289 10,128,309 329,053 6,975,916
- ----------------------------------------------------------------------------------------------------------------------
Series II 9,404 227,202 5,876 123,856
======================================================================================================================
Reacquired:
Series I (2,965,731) (70,076,626) (3,038,761) (58,574,427)
- ----------------------------------------------------------------------------------------------------------------------
Series II (35,116) (838,078) (6,299) (124,018)
======================================================================================================================
(30,990) $ (316,660) 220,842 $ 5,684,608
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 57% 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--SIGNIFICANT EVENT
At a meeting held on December 13, 2007, the Board of Trustees of Trust
approved certain proposals to be presented for shareholder approval at a special
meeting of the shareholders of the Trust intended to be held on February 29,
2008 (the "Special Meeting"). At the Special Meeting, shareholders of record as
of the close of business on November 30, 2007, are entitled to vote their
respective shares on several proposals that including, among others the
following proposal.
New proposed sub-advisory agreement between A I M Advisors, Inc. ("AIM") and
each of AIM Funds Management Inc., Invesco Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco
Hong Kong Limited, Invesco Institutional (N.A.), Inc. and Invesco Senior Secured
Management, Inc. (collectively, the "Affiliated Sub-Advisers"). This proposal is
intended to benefit the Fund and its shareholders by permitting AIM to utilize
the additional resources and talent of these affiliated sub-advisers in managing
the Fund. Because AIM would pay all of the sub-advisory fees of the
sub-advisers, the new sub-advisory agreement would not affect the fees the Fund
pays to AIM pursuant to the advisory agreement. If approved by shareholders, the
New Sub-advisory Arrangements are expected to become effective on or about May
1, 2008.
AIM V.I. Utilities 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
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.23 $ 17.83 $ 15.61 $ 12.95 $ 11.16
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.47 0.47 0.42 0.42 0.33
- ------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.94 4.06 2.21 2.57 1.60
========================================================================================================================
Total from investment operations 4.41 4.53 2.63 2.99 1.93
========================================================================================================================
Less distributions:
Dividends from net investment income (0.47) (0.70) (0.41) (0.33) (0.14)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.20) (0.43) -- -- --
========================================================================================================================
Total distributions (1.67) (1.13) (0.41) (0.33) (0.14)
========================================================================================================================
Net asset value, end of period $ 23.97 $ 21.23 $ 17.83 $ 15.61 $ 12.95
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 20.64% 25.46% 16.83% 23.65% 17.38%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $155,748 $139,080 $114,104 $159,554 $62,510
________________________________________________________________________________________________________________________
========================================================================================================================
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%
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.94%(c) 0.96% 0.96% 1.01% 1.08%
========================================================================================================================
Ratio of net investment income to average net assets 1.97%(c) 2.40% 2.49% 3.09% 2.84%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 30% 38% 49% 52% 58%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 based on average daily net assets of $152,141,734.
<Table>
<Caption>
SERIES II
-------------------------------------------------------
APRIL 30, 2004
YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
----------------------------- TO 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) 0.41 0.42 0.38 0.26
- ---------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.91 4.06 2.20 2.68
=====================================================================================================================
Total from investment operations 4.32 4.48 2.58 2.94
=====================================================================================================================
Less distributions:
Dividends from net investment income (0.44) (0.69) (0.39) --
- ---------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.20) (0.43) -- --
=====================================================================================================================
Total distributions (1.64) (1.12) (0.39) --
=====================================================================================================================
Net asset value, end of period $23.80 $21.12 $17.76 $ 15.57
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 20.32% 25.25% 16.55% 23.28%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,293 $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 1.19%(c) 1.21% 1.21% 1.28%(d)
=====================================================================================================================
Ratio of net investment income to average net assets 1.72%(c) 2.15% 2.24% 2.82%(d)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate(e) 30% 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 based on average daily net assets of $3,088,553.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM V.I. Utilities 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 A I M 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; and
- that certain AIM Funds inadequately employed fair value pricing.
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.
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 Ltd. ("Invesco") 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds
and Shareholders of AIM V. I. Utilities Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM V.I. Utilities Fund (one of the
funds constituting AIM Variable Insurance Funds, hereafter referred to as the
"Fund") at December 31, 2007, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2007 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 12, 2008
Houston, Texas
AIM V.I. Utilities Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and/or service fees (12b-1); and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire period July 1, 2007,
through December 31, 2007.
The actual and hypothetical expenses in the examples below do not represent
the effect of any fees or other expenses assessed in connection with a variable
product; if they did, the expenses shown would be higher while the ending
account values shown would be lower.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on 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.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs. Therefore, the hypothetical information is useful in comparing
ongoing costs, and will not help you determine the relative total costs of
owning different funds.
<Table>
<Caption>
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (07/01/07) (12/31/07)(1) PERIOD(2) (12/31/07) PERIOD(2) RATIO
Series I $1,000.00 $1,069.90 $4.85 $1,020.52 $4.74 0.93%
Series II 1,000.00 1,069.10 6.15 1,019.26 6.01 1.18
</Table>
(1) The actual ending account value is based on the actual total return of
the Fund for the period July 1, 2007, through December 31, 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 184/365 to reflect the most recent fiscal half year.
AIM V.I. Utilities Fund
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to
be different, the maximum amount allowable for its fiscal year ended December
31, 2007:
FEDERAL AND STATE INCOME TAX
<Table>
Long-Term Capital Gain Dividends $6,594,335
Corporate Dividends Received Deduction* 87.48%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
AIM V.I. Utilities Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Variable Insurance Funds (the
"Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each
trustee oversees 104 portfolios in the AIM Funds complex. The trustees serve for
the life of the Trust, subject to their earlier death, incapacitation,
resignation, retirement or removal as more specifically provided in the Trust's
organizational documents. Each officer serves for a one year term or until their
successors are elected and qualified. Column two below includes length of time
served with predecessor entities, if any.
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY
TRUST SINCE DURING PAST 5 YEARS TRUSTEE/ DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------
Martin L. Flanagan(1) -- 1960 2007 Director, Chief Executive Officer and None
Trustee President, Invesco Ltd. (ultimate parent
of AIM and a global investment
management firm) and, Invesco Holding
Company (parent of AIM and a global
investment management firm); Chairman,
A I M Advisors, Inc. (registered
investment advisor); Director, Chairman,
Chief Executive Officer and President,
IVZ Inc. (holding company); and INVESCO
North American Holdings, Inc. (holding
company); Chairman and President,
INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds(R); Vice Chairman, Investment
Company Institute; and Member of
Executive Board, SMU Cox School of
Business
Formerly: Chairman, Investment Company
Institute; President, Co-Chief Executive
Officer, Co-President, Chief Operating
Officer and Chief Financial Officer,
Franklin Resources, Inc. (global
investment management organization)
- -------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, AIM Mutual Fund Dealer Inc.
Principal (registered broker dealer), A I M
Executive Officer Advisors, Inc., AIM Funds Management
Inc. d/b/a INVESCO Enterprise Services
(registered investment advisor and
registered transfer agent), AIM Trimark
Corporate Class Inc. (formerly AIM
Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund
company), and 1371 Preferred Inc.
(holding company); Director, Chairman,
Chief Executive Officer and President,
A I M Management Group Inc. (financial
services holding company) and A I M
Capital Management, Inc. (registered
investment advisor); Director and
President, INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM
Investment Services, Inc. (registered
transfer agent) and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, IVZ Callco Inc. (holding
company), INVESCO Inc. (holding company)
and AIM Canada Holdings Inc. (holding
company); Trustee, President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series
Trust, Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
PowerShares Capital Management LLC
Formerly: Director and Chairman, Fund
Management Company (registered broker
dealer); President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM
Trimark Global Fund Inc. and AIM Trimark
Canada Fund Inc.; and Director, Trimark
Trust (federally regulated Canadian
Trust Company)
- -------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1993 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired None
Trustee
Formerly: Partner, law firm of Baker &
McKenzie and Director, Badgley Funds,
Inc. (registered investment company) (2
portfolios)
- -------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm)
Formerly: Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Reich & Tang Funds
(Chairman) (registered investment
company) (7 portfolios), Daily Income
Fund (4 portfolios), California Daily
Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Fund, Inc.,
Annuity and Life Re (Holdings), Ltd.
(insurance company), and Homeowners of
America Holding Corporation (property
casualty company)
Formerly: Director, CompuDyne
Corporation (provider of product and
services to the public security market);
Director, President and Chief Executive
Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo;
Director of various affiliated Volvo
companies; and Director, Magellan
Insurance Company
- -------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P.
(cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company), and Discovery Global Education
Fund (non-profit)
- -------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Director, Reich & Tang Funds) (15
Trustee Naftalis and Frankel LLP portfolios)
- -------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2004 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche;
and Director, Mainstay VP Series Funds,
Inc. (25 portfolios)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan was appointed as Trustee of the Trust on February 24, 2007. Mr.
Flanagan is considered an interested person of the Trust because he is an
officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
TRUSTEES AND OFFICERS--(CONTINUED)
AIM V.I. Utilities Fund
<Table>
<Caption>
OTHER
TRUSTEE TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND AND/OR DIRECTORSHIP(S)
POSITION(S) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(S) HELD BY TRUSTEE/
TRUST SINCE DURING PAST 5 YEARS DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- -------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc., A I M Advisors,
Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary,
AIM Investment Services, Inc. and
INVESCO Distributors, Inc.; Director,
Senior Vice President and Secretary,
A I M Distributors, Inc.; Director and
Vice President, INVESCO Funds Group
Inc.; Senior Vice President, Chief Legal
Officer and Secretary of The AIM Family
of Funds--Registered Trademark--; and
Manager, PowerShares Capital Management
LLC
Formerly: Director, Vice President and
Secretary, Fund Management Company; Vice
President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior
Vice President, General Counsel and
Secretary, Liberty Ridge Capital, Inc.
(an investment adviser); Vice President
and Secretary, PBHG Funds (an investment
company); Vice President and Secretary,
PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- -------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco N/A
Vice President Ltd.; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- -------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior
Vice President Managing Director, Invesco Ltd.;
Director and Secretary, Invesco Holding
Company Limited, IVZ, Inc. and INVESCO
Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO
North American Holdings, Inc.; and Vice
President of The AIM Family of
Funds--Registered Trademark--
Formerly: Senior Managing Director, N/A
Invesco Holding Company Limited;
Director, Senior Vice President,
Secretary and General Counsel, A I M
Management Group Inc. and A I M
Advisors, Inc.; Senior Vice President,
A I M Distributors, Inc.; Director,
General Counsel and Vice President, Fund
Management Company; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Director
and Vice President, INVESCO
Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds
Group, Inc.; and Senior Vice President
and General Counsel, Liberty Financial
Companies, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President, A I M Advisors, Inc. and N/A
Vice President, Principal A I M Capital Management, Inc.; and Vice
Financial Officer and President, Treasurer and Principal
Treasurer Financial Officer of The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President,
AIM Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed N/A
Vice President Income and Cash Management Group;
Director of Cash Management and Senior
Vice President, A I M Advisors, Inc. and
A I M Capital Management, Inc; Executive
Vice President, A I M Distributors,
Inc.; Senior Vice President, A I M
Management Group Inc.; Vice President,
The AIM Family of Funds--Registered
Trademark-- (other than AIM Treasurer's
Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust);
and President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
Formerly: Director and President, Fund
Management Company; Chief Cash
Management Officer and Managing
Director, A I M Capital Management,
Inc.; Vice President, A I M Advisors,
Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- -------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering
Compliance Officer, Fund Management
Company; and Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc. and A I M Capital
Management, Inc.; Chief Compliance
Officer of The AIM Family of
Funds--Registered Trademark--, Invesco
Global Asset Management (N.A.), Inc.,
(registered investment advisor), Invesco
Institutional (N.A.), Inc., (registered
investment advisor), INVESCO Private
Capital Investments, Inc. (holding
company), Invesco Private Capital, Inc.
(registered investment advisor) and
Invesco Senior Secured Management, Inc.
(registered investment advisor); and
Vice President, A I M Distributors, Inc.
and AIM Investment Services, Inc.
Formerly: Vice President, A I M Capital
Management, Inc. and Fund Management
Company; Global Head of Product
Development, AIG-Global Investment
Group, Inc.; and Chief Compliance
Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management
- -------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.410.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 Company
Floor 1177 Avenue of the Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103-7599 Americas Boston, MA 02110-2801
New York, NY 10036-2714
</Table>
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the Registrant had
adopted a code of ethics (the "Code") that applies to the Registrant's
principal executive officer ("PEO") and principal financial officer
("PFO"). There were no amendments to the Code 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.
The Board of Trustees has determined that the Registrant has at least
one audit committee financial expert serving on its Audit Committee.
The Audit Committee financial expert is Raymond Stickel, Jr. Mr.
Stickel is "independent" within the meaning of that term as used in
Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
FEES BILLED BY PWC TO THE REGISTRANT
PWC billed the Registrant aggregate fees for services rendered to the
Registrant for the last two fiscal years as follows:
Percentage of Fees Percentage of Fees
Billed Applicable to Billed Applicable to
Non-Audit Services Non-Audit Services
Fees Billed by PWC for Provided for fiscal Provided for fiscal
Services Rendered to year end 2007 Pursuant Fees Billed by PWC for year end 2006 Pursuant
the Registrant for to Waiver of Services Rendered to the to Waiver of
fiscal Pre-Approval Registrant for fiscal Pre-Approval
year end 2007 Requirement(1) year end 2006 Requirement(1)
---------------------- ---------------------- ------------------------ ----------------------
Audit Fees $537,483 N/A $545,011 N/A
Audit-Related Fees(2) $ 20,167 0% $ 0 0%
Tax Fees(3) $ 84,855 0% $108,107 0%
All Other Fees $ 0 0% $ 0 0%
-------- --------
Total Fees $642,505 0% $653,118 0%
PWC billed the Registrant aggregate non-audit fees of $105,022 for the fiscal
year ended 2007, and $108,107 for the fiscal year ended 2006, for non-audit
services rendered to the Registrant.
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at the
time of engagement, (ii) the aggregate amount of all such services provided
is no more than 5% of the aggregate audit and non-audit fees paid by the
Registrant during a fiscal year; and (iii) such services are promptly
brought to the attention of the Registrant's Audit Committee and approved
by the Registrant's Audit Committee prior to the completion of the audit.
(2) Audit-Related Fees for the fiscal year ended December 31, 2007 includes
fees billed for completing agreed-upon procedures related to reorganization
transactions.
(3) Tax fees for the fiscal year end December 31, 2007 includes fees billed for
reviewing tax returns and consultation services. Tax fees for fiscal year
end December 31, 2006 includes fees billed for reviewing tax returns and
consultation services.
FEES BILLED BY PWC RELATED TO AIM AND AIM AFFILIATES
PWC billed A I M Advisors, Inc. ("AIM"), the Registrant's adviser, and any
entity controlling, controlled by or under common control with AIM that provides
ongoing services to the Registrant ("AIM Affiliates") aggregate fees for
pre-approved non-audit services rendered to AIM and AIM Affiliates for the last
two fiscal years as follows:
Fees Billed by PWC for Fees Billed by PWC for
Non-Audit Services Non-Audit Services
Rendered to AIM and AIM Percentage of Fees Billed Rendered to AIM and AIM Percentage of Fees Billed
Affiliates for fiscal Applicable to Non-Audit Affiliates for fiscal Applicable to Non-Audit
year end 2007 That Were Services Provided for year end 2006 That Were Services Provided for
Required fiscal year end 2007 Required fiscal year end 2006
to be Pre-Approved Pursuant to Waiver of to be Pre-Approved Pursuant to Waiver of
by the Registrant's Pre-Approval by the Registrant's Pre-Approval
Audit Committee Requirement(1) Audit Committee Requirement(1)
----------------------- ------------------------- ----------------------- -------------------------
Audit-Related Fees $0 0% $0 0%
Tax Fees $0 0% $0 0%
All Other Fees $0 0% $0 0%
--- ---
Total Fees(2) $0 0% $0 0%
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at the
time of engagement, (ii) the aggregate amount of all such services provided
is no more than 5% of the aggregate audit and non-audit fees paid by the
Registrant, AIM and AIM Affiliates during a fiscal year; and (iii) such
services are promptly brought to the attention of the Registrant's Audit
Committee and approved by the Registrant's Audit Committee prior to the
completion of the audit.
(2) Including the fees for services not required to be pre-approved by the
registrant's audit committee, PWC billed AIM and AIM Affiliates aggregate
non-audit fees of $0 for the fiscal year ended 2007, and PWC billed AIM and
AIM Affiliates aggregate non-audit fees of $0 for the fiscal year ended
2006, for non-audit services rendered to AIM and AIM Affiliates.
The Audit Committee also has considered whether the provision of non-audit
services that were rendered to AIM and AIM Affiliates that were not
required to be pre-approved pursuant to SEC regulations, if any, is
compatible with maintaining the principal accountant's independence.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds (the "Funds")
Last Amended September 18, 2006
STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and
Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the
"Audit Committee") Board of Trustees (the "Board") are responsible for the
appointment, compensation and oversight of the work of independent accountants
(an "Auditor"). As part of this responsibility and to assure that the Auditor's
independence is not impaired, the Audit Committees pre-approve the audit and
non-audit services provided to the Funds by each Auditor, as well as all
non-audit services provided by the Auditor to the Funds' investment adviser and
to affiliates of the adviser that provide ongoing services to the Funds
("Service Affiliates") if the services directly impact the Funds' operations or
financial reporting. The SEC Rules also specify the types of services that an
Auditor may not provide to its audit client. The following policies and
procedures comply with the requirements for pre-approval and provide a mechanism
by which management of the Funds may request and secure pre-approval of audit
and non-audit services in an orderly manner with minimal disruption to normal
business operations.
Proposed services either may be pre-approved without consideration of specific
case-by-case services by the Audit Committees ("general pre-approval") or
require the specific pre-approval of the Audit Committees ("specific
pre-approval"). As set forth in these policies and procedures, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committees. Additionally, any fees exceeding 110% of estimated
pre-approved fee levels provided at the time the service was pre-approved will
also require specific approval by the Audit Committees before payment is made.
The Audit Committees will also consider the impact of additional fees on the
Auditor's independence when determining whether to approve any additional fees
for previously pre-approved services.
The Audit Committees will annually review and generally pre-approve the services
that may be provided by each Auditor without obtaining specific pre-approval
from the Audit Committee. The term of any general pre-approval runs from the
date of such pre-approval through September 30th of the following year, unless
the Audit Committees consider a different period and state otherwise. The Audit
Committees will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to
assist the Audit Committees in fulfilling their responsibilities.
DELEGATION
The Audit Committees may from time to time delegate pre-approval authority to
one or more of its members who are Independent Trustees. All decisions to
pre-approve a service by a delegated member shall be reported to the Audit
Committee at its next quarterly meeting.
AUDIT SERVICES
The annual audit services engagement terms will be subject to specific
pre-approval of the Audit Committees. Audit services include the annual
financial statement audit and other procedures such as tax provision work that
is required to be performed by the independent auditor to be able to form an
opinion on the Funds' financial statements. The Audit Committee will obtain,
review and consider sufficient information concerning the proposed Auditor to
make a reasonable evaluation of the Auditor's qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committees may
grant either general or specific pre-approval of other audit services, which are
those services that only the independent auditor reasonably can provide. Other
Audit services may include services such as issuing consents for the inclusion
of audited financial statements with SEC registration statements, periodic
reports and other documents filed with the SEC or other documents issued in
connection with securities offerings.
NON-AUDIT SERVICES
The Audit Committees may provide either general or specific pre-approval of any
non-audit services to the Funds and its Service Affiliates if the Audit
Committees believe that the provision of the service will not impair the
independence of the Auditor, is consistent with the SEC's Rules on auditor
independence, and otherwise conforms to the Audit Committee's general principles
and policies as set forth herein.
AUDIT-RELATED SERVICES
"Audit-related services" are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements or that are traditionally performed by the independent auditor.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; and agreed-upon
procedures related to mergers, compliance with ratings agency requirements and
interfund lending activities.
TAX SERVICES
"Tax services" include, but are not limited to, the review and signing of the
Funds' federal tax returns, the review of required distributions by the Funds
and consultations regarding tax matters such as the tax treatment of new
investments or the impact of new regulations. The Audit Committee will
scrutinize carefully the retention of the Auditor in connection with a
transaction initially recommended by the Auditor, the major business purpose of
which may be tax avoidance or the tax treatment of which may not be supported in
the Internal Revenue Code and related regulations. The Audit Committee will
consult with the Funds' Treasurer (or his or her designee) and may consult with
outside counsel or advisors as necessary to ensure the consistency of Tax
services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Affiliate before a tax court,
district court or federal court of claims.
Under rules adopted by the Public Company Accounting Oversight Board and
approved by the SEC, in connection with seeking Audit Committee pre-approval of
permissible Tax services, the Auditor shall:
1. Describe in writing to the Audit Committees, which writing may be in
the form of the proposed engagement letter:
a. The scope of the service, the fee structure for the
engagement, and any side letter or amendment to the
engagement letter, or any other agreement between the
Auditor and the Fund, relating to the service; and
b. Any compensation arrangement or other agreement, such as a
referral agreement, a referral fee or fee-sharing
arrangement, between the Auditor and any person (other than
the Fund) with respect to the promoting, marketing, or
recommending of a transaction covered by the service;
2. Discuss with the Audit Committees the potential effects of the
services on the independence of the Auditor; and
3. Document the substance of its discussion with the Audit Committees.
ALL OTHER AUDITOR SERVICES
The Audit Committees may pre-approve non-audit services classified as "All other
services" that are not categorically prohibited by the SEC, as listed in Exhibit
1 to this policy.
PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS
Pre-approval of estimated fees or established amounts for services to be
provided by the Auditor under general or specific pre-approval policies will be
set periodically by the Audit Committees. Any proposed fees exceeding 110% of
the maximum estimated pre-approved fees or established amounts for pre-approved
audit and non-audit services will be reported to the Audit Committees at the
quarterly Audit Committees meeting and will require specific approval by the
Audit Committees before payment is made. The Audit Committee will always factor
in the overall relationship of fees for audit and non-audit services in
determining whether to pre-approve any such services and in determining whether
to approve any additional fees exceeding 110% of the maximum pre-approved fees
or established amounts for previously pre-approved services.
PROCEDURES
On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit
Committees for general pre-approval, a list of non-audit services that the Funds
or Service Affiliates of the Funds may request from the Auditor. The list will
describe the non-audit services in reasonable detail and will include an
estimated range of fees and such other information as the Audit Committee may
request.
Each request for services to be provided by the Auditor under the general
pre-approval of the Audit Committees will be submitted to the Funds' Treasurer
(or his or her designee) and must include a detailed description of the services
to be rendered. The Treasurer or his or her designee will ensure that such
services are included within the list of services that have received the general
pre-approval of the Audit Committees. The Audit Committees will be informed at
the next quarterly scheduled Audit Committees meeting of any such services for
which the Auditor rendered an invoice and whether such services and fees had
been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit
Committees shall be submitted to the Audit Committees jointly by the Fund's
Treasurer or his or her designee and the Auditor, and must include a joint
statement that, in their view, such request is consistent with the policies and
procedures and the SEC Rules.
Each request to provide tax services under either the general or specific
pre-approval of the Audit Committees will describe in writing: (i) the scope of
the service, the fee structure for the engagement, and any side letter or
amendment to the engagement letter, or any other agreement between the Auditor
and the audit client, relating to the service; and (ii) any compensation
arrangement or other agreement between the Auditor and any person (other than
the audit client) with respect to the promoting, marketing, or recommending of a
transaction covered by the service. The Auditor will discuss with the Audit
Committees the potential effects of the services on the Auditor's independence
and will document the substance of the discussion.
Non-audit services pursuant to the de minimis exception provided by the SEC
Rules will be promptly brought to the attention of the Audit Committees for
approval, including documentation that each of the conditions for this
exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the
services provided to any entity in the investment company complex as defined in
section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of
the engagement and the fees associated with those services.
The Audit Committees have designated the Funds' Treasurer to monitor the
performance of all services provided by the Auditor and to ensure such services
are in compliance with these policies and procedures. The Funds' Treasurer will
report to the Audit Committee on a periodic basis as to the results of such
monitoring. Both the Funds' Treasurer and management of AIM will immediately
report to the chairman of the Audit Committee any breach of these policies and
procedures that comes to the attention of the Funds' Treasurer or senior
management of AIM.
EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND
PROCEDURES
CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN
REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO
AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL
STATEMENTS)
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
CATEGORICALLY PROHIBITED NON-AUDIT SERVICES
- Management functions
- Human resources
- Broker-dealer, investment adviser, or investment banking services
- Legal services
- Expert services unrelated to the audit
- Any service or product provided for a contingent fee or a commission
- Services related to marketing, planning, or opining in favor of the
tax treatment of confidential transactions or aggressive tax position
transactions, a significant purpose of which is tax avoidance
- Tax services for persons in financial reporting oversight roles at the
Fund
- Any other service that the Public Company Oversight Board determines
by regulation is impermissible.
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 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 December 17, 2007, an evaluation was performed under the supervision
and with the participation of the officers of the Registrant, including the
PEO and 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 December 17,
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 this
report that have materially affected, or are reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
12(a)(1) Code of Ethics.
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: March 3, 2008
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: March 3, 2008
By: /s/ SIDNEY M. DILGREN
----------------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: March 3, 2008
EXHIBIT INDEX
12(a)(1) Code of Ethics.
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.
EXHIBIT - CODE OF ETHICS
DISCLOSURE CONTROLS PROCEDURES
THE AIM FAMILY OF FUNDS CODE OF ETHICS FOR SENIOR OFFICERS
I. INTRODUCTION
The Boards of Directors/Trustees ("Board") of The AIM Family of Funds (the
"Companies") have adopted this code of ethics (this "Code") applicable to the
Principal Executive Officer and Principal Financial and Accounting Officer (the
"Covered Officers") of each Company to promote:
- honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
- full, fair, accurate, timely and understandable disclosure in
documents filed with the Securities and Exchange Commission ("SEC")
and in other public communications;
- compliance with applicable governmental laws, rules and regulations;
- the prompt internal reporting to an appropriate person or persons
identified in the Code of violations of the Code; and
- accountability for adherence to the Code.
II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY
Each Covered Officer owes a duty to the Companies to act with integrity.
Integrity requires, among other things, being honest and candid. Deceit and
subordination of principle are inconsistent with integrity.
Each Covered Officer must:
- act with integrity, including being honest and candid while still
maintaining the confidentiality of information where required by law
or the Companies' policies;
- observe both the form and spirit of laws and governmental rules and
regulations, accounting standards and policies of the Companies;
- adhere to a high standard of business ethics; and
- place the interests of the Companies before the Covered Officer's own
personal interests.
Business practices Covered Officers should be guided by and adhere to these
fiduciary standards.
III. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF
INTEREST
GUIDING PRINCIPLES. A "conflict of interest" occurs when an
individual's private interest interferes with the interests of the Companies. A
conflict of interest can arise when a Covered Officer takes actions or has
interests that may make it difficult to perform his or her work for the
Companies objectively and effectively. For example, a conflict of interest would
arise if a Covered Officer, or a member or his family, receives improper
personal benefits as a result of his or her position in any of the Companies. In
addition, investment companies should be sensitive to situations that create
apparent, but not actual, conflicts of interest. Service to the Companies should
never be subordinated to personal gain and advantage.
Certain conflicts of interest covered by this Code arise out of the
relationships between Covered Officers and the Companies that already are
subject to conflict of interest provisions in the Investment
1
Company Act of 1940, as amended and the Investment Advisers Act of 1940, as
amended. Therefore, as to the existing statutory and regulatory prohibitions on
individual behavior, they will be deemed to be incorporated in this Code and
therefore any material violation will also be deemed a violation of this Code.
Covered Officers must in all cases comply with applicable statutes and
regulations.
As to conflicts arising from, or as a result of the contractual
relationship between, the Companies and the investment adviser of which the
Covered Officers are also officers or employees, it is recognized by the Board
that, subject to the adviser's fiduciary duties to the Companies, the Covered
Officers will in the normal course of their duties (whether formally for the
Companies or for the adviser, or for both) be involved in establishing policies
and implementing decisions which will have different effects on the adviser and
the Companies. The Board recognizes that the participation of the Covered
Officers in such activities is inherent in the contractual relationship between
the Companies and the adviser and is consistent with the expectation of the
Board of the performance by the Covered Officers of their duties as officers of
the Companies. In addition, it is recognized by the Board that the Covered
Officers may also be officers or employees of other investment companies advised
by the same adviser and the codes which apply to senior officers of those
investment companies will apply to the Covered Officers acting in those distinct
capacities.
Each Covered Officer must:
- avoid conflicts of interest wherever possible;
- handle any actual or apparent conflict of interest ethically;
- not use his or her personal influence or personal relationships to
influence investment decisions or financial reporting by an investment
company whereby the Covered Officer would benefit personally to the
detriment of any of the Companies;
- not cause an investment company to take action, or fail to take
action, for the personal benefit of the Covered Officer rather than
the benefit of such company;
- not use knowledge of portfolio transactions made or contemplated for
an investment company to profit or cause others to profit, by the
market effect of such transactions; and
- as described in more detail below, discuss any material transaction or
relationship that could reasonably be expected to give rise to a
conflict of interest with the Chief Legal Officer of the AIM Funds
(the "Chief Legal Officer").
Some conflict of interest situations that should always be discussed with the
Chief Legal Officer, if material, include the following:
- any outside business activity that detracts from an individual's
ability to devote appropriate time and attention to his or her
responsibilities with the Companies;
- being in the position of supervising, reviewing or having any
influence on the job evaluation, pay or benefit of any immediate
family member;
- any direct ownership interest in, or any consulting or employment
relationship with, any of the Companies' service providers, other than
its investment adviser, distributor or other AMVESCAP affiliated
entities and other than a de minimis ownership interest (for purposes
of this section of the Code an ownership interest of 1% or less shall
constitute a de minimis ownership interest, and an ownership interest
of more than 1% creates a rebuttable presumption that there may be a
material conflict of interest); and
- a direct or indirect financial interest in commissions, transaction
charges or spreads paid by the Companies for effecting portfolio
transactions or for selling or redeeming shares, other than an
interest arising from the Covered Officer's employment with AIM, its
subsidiaries, its parent organizations and any affiliates or
subsidiaries thereof, such as compensation or equity ownership, and
other than an interest arising from a de minimis ownership interest in
a company
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with which the Companies execute portfolios transactions or a company
that receives commissions or other fees related to its sales and
redemptions of shares of the Companies (for purposes of this section
of the Code an ownership interest of 1% or less shall constitute a de
minimis ownership interest, and an ownership interest of more than 1%
creates a rebuttable presumption that there may be a material conflict
of interest).
IV. DISCLOSURE
Each Covered Officer is required to be familiar, and comply, with the Companies'
disclosure controls and procedures so that the Companies' subject reports and
documents filed with the SEC comply in all material respects with the applicable
federal securities laws and SEC rules. In addition, each Covered Officer having
direct or supervisory authority regarding these SEC filings or the Companies'
other public communications should, to the extent appropriate within his area of
responsibility, consult with other officers and employees of the Companies and
take other appropriate steps regarding these disclosures with the goal of making
full, fair, accurate, timely and understandable disclosure.
Each Covered Officer must:
- familiarize himself/herself with the disclosure requirements
applicable to the Companies as well as the business and financial
operations of the Companies; and
- not knowingly misrepresent, or cause others to misrepresent, facts
about the Companies to others, whether within or outside the
Companies, including representations to the Companies' internal
auditors, independent Directors/Trustees, independent auditors, and to
governmental regulators and self-regulatory organizations.
V. COMPLIANCE
It is the Companies' policy to comply in all material respects with all
applicable governmental laws, rules and regulations. It is the personal
responsibility of each Covered Officer to adhere to the standards and
restrictions imposed by those laws, rules and regulations, including those
relating to affiliated transactions, accounting and auditing matters.
VI. REPORTING AND ACCOUNTABILITY
Each Covered Officer must:
- upon receipt of the Code, sign and submit to the Chief Compliance
Officer of the Companies an acknowledgement stating that he or she has
received, read, and understands the Code.
- annually thereafter submit a form to the Chief Compliance Officer of
the Companies confirming that he or she has received, read and
understands the Code and has complied with the requirements of the
Code.
- not retaliate against any employee or other Covered Officer for
reports of potential violations that are made in good faith.
- notify the Chief Legal Officer promptly if he becomes aware of any
existing or potential violation of this Code. Failure to do so is
itself a violation of this Code.
Except as described otherwise below, the Chief Legal Officer is responsible for
applying this Code to specific situations in which questions are presented to
him or her and has the authority to interpret this Code in any particular
situation. The Chief Legal Officer shall take all action he or she considers
appropriate to investigate any actual or potential violations reported to him or
her.
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The Chief Legal Officer is authorized to consult, as appropriate, with the
Chairman of the Audit Committees of the Board, counsel to the Companies and
counsel to the independent Directors/Trustees, and is encouraged to do so.
The Chief Legal Officer is responsible for granting waivers and determining
sanctions, as appropriate. In addition, approvals, interpretations, or waivers
sought by the Covered Officers may also be considered by the Chairman of the AIM
Funds Audit Committees.
The Companies will follow these procedures in investigating and enforcing this
Code, and in reporting on the Code:
- the Chief Legal Officer will take all appropriate action to
investigate any violations reported to him or her;
- violations and potential violations will be reported to the Chairman
of the Audit Committees of the Board after such investigation;
- if the Chairman of the Audit Committees determines that a violation
has occurred, he or she will inform the Board, which will take all
appropriate disciplinary or preventive action;
- appropriate disciplinary or preventive action may include a letter of
censure, suspension, dismissal or, in the event of criminal or other
serious violations of law, notification to the SEC or other
appropriate law enforcement authorities;
- the Chief Legal Officer will be responsible for granting waivers, as
appropriate; and
- any changes to or waivers of this Code will, to the extent required,
be disclosed on Form N-CSR as provided by SEC rules.
VII. OTHER POLICIES AND PROCEDURES
The Companies' and the Advisers' and Principal Underwriters' codes of ethics
under Rule 17j-1 under the Investment Company Act and the Advisers' more
detailed policies and procedures set forth in its Compliance and Supervisory
Procedures Manual are separate requirements applying to Covered Officers and
others, and are not part of this Code.
VIII. AMENDMENTS
This Code may not be amended except in written form, which is specifically
approved by a majority vote of the Companies' Board, including a majority of
independent Directors/Trustees.
IX. CONFIDENTIALITY
All reports and records prepared or maintained pursuant to this Code shall be
considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be
disclosed to anyone other than the members of the Companies' Board, counsel to
the Companies, and counsel to the independent Directors/Trustees.
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THE AIM FAMILY OF FUNDS
CODE OF ETHICS--ACKNOWLEDGEMENT
I hereby acknowledge that I am a Principal Officer of the Companies
and I am aware of and subject to the Companies' Code of Ethics. Accordingly, I
have read and understood the requirements of the Code of Ethics and I am
committed to fully comply with the Code of Ethics.
I recognize my obligation to promote:
1. Honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and
professional relationships;
2. Full, fair, accurate, timely, and understandable disclosure in
reports and documents that the Companies file with, or submit to, the
Commission and in other public communications made by the Companies;
and
3. Compliance with applicable governmental laws, rules, and
regulations.
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