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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: 12/31/08
Item 1. Reports to Stockholders.
[INVESCO AIM LOGO] AIM V.I. BASIC BALANCED FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. BASIC BALANCED FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY years. In addition, we use bottom-up
strategies involving credit analysis and
For the fiscal year ended December 31, 2008, AIM V.I. Basic Balanced Fund, Excluding selection of specific securities. By
variable product issuer charges, underperformed its broad market, style specific and combining perspectives from both the
peer group indexes. portfolio and the security level, we seek
to consistently add value over time while
Drivers of performance were stock specific. We attribute the Fund's minimizing portfolio risk.
underperformance versus its indexes mainly to below-market returns from select equity
investments in the financials sector. Select equity investments in the consumer MARKET CONDITIONS AND YOUR FUND
discretionary and financials sectors were among the largest positive contributors to
Fund performance during the year. The Fund's fixed income holdings also made a positive Equity markets declined sharply during the
contribution to overall performance. fiscal year as the financial crisis
intensified and the global economy
Your Fund's long-term performance appears later in this report. weakened. As painful as bear markets like
this are to live through, we believe they
FUND VS. INDEXES can actually improve long term results
because of the extraordinary investment
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. opportunities they produce.
If variable product issuer charges were included, returns would be lower.
Financials was the worst performing
Series I Shares -38.32% sector of the equity market during the
Series II Shares -38.46 fiscal year as the credit crisis
S&P 500 Index(triangle) (Broad Market Index) -36.99 intensified and a liquidity crisis
Custom Basic Balanced Index(square) (Style-Specific Index) -21.94 emerged. FANNIE MAE and AIG were among the
Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index(triangle) Fund's largest detractors during the year.
(Peer Group Index) -26.25 We understood the negative impact of
credit losses on both companies and
(triangle) Lipper Inc.; (square)Invesco Aim, Lipper Inc. believed they had adequate financial
======================================================================================= wherewithal to absorb the credit losses
that will persist for years. Ironically,
HOW WE INVEST Since our application of this strategy the credit losses remained within the
is highly disciplined and relatively range of our expectations. However, the
We seek to create wealth by maintaining a unique, it is important to understand the rapid loss of investor confidence and the
long-term investment horizon and investing benefits and limitations of our process. related liquidity crisis and public policy
in companies that are selling at a First, the investment strategy is intended response surprised us. In the end, the
significant discount to their estimated to preserve your capital while growing it valuation opportunity that was created by
intrinsic value -- a value that is based at above-market rates over the long term. the credit cycle was trumped by a
on the estimated future cash flows Second, our investments have little in liquidity crisis at AIG and the unintended
generated by the business. The Fund's common with popular stock market indexes consequences of government intervention at
philosophy is based on key elements that and most of our peers. And third, the Fannie Mae -- both events inherently
we believe have extensive empirical Fund's short-term relative performance unpredictable but lethal. We sold our
evidence: will naturally be different than the stock positions in these investments at
o Company intrinsic values can be market and peers and have little substantial losses.
reasonably estimated. Importantly, this information value since we simply don't
estimated fair business value is own the same stocks. The Fund's fixed income holdings also
independent of the company's stock declined during the year, and
price. Our fixed income portfolio investment underperformed the Barclays Capital U.S.
process is accomplished through the use of Aggregate Bond Index. The underperformance
o Market prices are more volatile than top-down strategies involving duration was mainly due to our exposure to
business values, partly because management, yield-curve position and financial companies, including WACHOVIA
investors regularly overreact to sector allocation. Duration is the measure and LEHMAN BROTHERS HOLDINGS. While our
negative news. of a debt security's sensitivity to exposure to Lehman and other financial
interest rate changes, expressed in terms bonds represented small positions, the
o Long-term investment results are a of price declines of these bond issues were
function of the level and growth of substantial. It took just days for Lehman
business value in the portfolio. Brothers to move from an A rating to
========================================== ========================================== bankruptcy. Wachovia bonds, which were
A-rated at the time, also experienced
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* declines in 2008. But our losses in
By security type Wachovia proved to be temporary as the
company was acquired by AA-rated Wells
Common Stocks & Other Equity 1. United Health Group Inc. 3.6% Fargo on December 31, 2008. We sold both
Interests 62.8% 2. ASML Holding N.V. 3.1 Wachovia and Lehman Brothers
Bond & Notes 19.2 3. Robert Half International, Inc. 2.5
U.S. Government Sponsored 4. Moody's Corp. 2.4 With such extreme volatility in 2008,
Mortgage Backed Securities 11.5 5. JPMorgan Chase & Co. 2.2 we think it is important to remind our
Preferred Stocks 4.8 6. Aetna Inc. 2.1 shareholders of our commitment to a
Asset Backed Securities 1.8 7. Omnicom Group Inc. 2.0 portfolio of high quality, investment-
Municipal Obligations 0.5 8. Pitney Bowes
U.S. Government Sponsored International Holdings Inc. 1.9
Agency Securities 0.3 9. Home Depot, Inc. (The) 1.9
U.S. Treasury Securities 0.1 10. Target Corp. 1.8
Money Market Funds Plus ==========================================
Other Assets Less Liabilities (1.0)
========================================== The Fund's holdings are subject to change,
Total Net Assets $30.4 million and there is no assurance that the Fund
Total Number of Holdings* 172 will continue to hold any particular
========================================== security.
* Excluding money market fund holdings.
AIM V.I. BASIC BALANCED FUND
grade securities. The majority of our opinion. While there is no assurance that R. CANON COLEMAN II
holdings are rated in the highest market value will ever reflect our Chartered Financial Analyst,
categories of A, AA, or AAA and all estimate of the portfolio's intrinsic [COLEMAN portfolio manager, is
fixed-income securities must be value, we believe the large gap between PHOTO] manager of AIM V.I. Basic
investment-grade at the time of purchase. price and estimated value may stack the Balanced Fund. He earned a
odds in favor of above-average capital B.S. and an M.S. in
CONTEXT FOR RESULTS appreciation once capital markets accounting from the University of Florida.
normalize. He also earned an M.B.A. from the Wharton
It's important to remember that what many School at the University of Pennsylvania.
now consider to be great historic buying IN CLOSING
opportunities were at the time quite MATTHEW SEINSHEIMER
frightening events, and in economic terms, While we are disappointed with our results Chartered Financial Analyst,
many of those episodes seemed far more in 2008, we are also excited about the [SEINSHEIMER senior portfolio manager, is
threatening than our current situation. opportunities the current crisis has PHOTO] manager of AIM V.I. Basic
History and common sense indicate this created. As we have pointed out many Balanced Fund. He earned a
crisis will pass, and we believe it will times, the distinctive nature of our B.B.A. in finance from
prove to be a historic buying opportunity strategy will naturally produce results Southern Methodist University and an
for U.S. stocks. The timing and level of that are either above or below the market M.B.A. from The University of Texas at
any market bottom is uncertain, but we in the short term. We understand it can be Austin.
believe the absolute return opportunity distressing to shareholders when results
from recent year-end levels will prove lag the market as they have this year. We MICHAEL SIMON
compelling. do not have any special insight into the Chartered Financial Analyst,
magnitude or duration of this bear market, [SIMON senior portfolio manager, is
The current bear market represents one but historically, valuation opportunities PHOTO] manager of AIM V.I. Basic
of the three greatest declines in the past of this magnitude have not lasted for very Balanced Fund. He earned a
60 years.(1) Following the 2000 to 2002 long. Ironically, part of our 2008 B.B.A. in finance from Texas
Nasdaq decline, investors learned what a underperformance was due to our efforts to Christian University and an M.B.A. from
permanent loss of capital looks and feels capitalize on this opportunity should it the University of Chicago.
like. While the Nasdaq remains about 69% have proved short lived. Regardless of
below its 2000 peak,(2) our losses during duration, our process was designed to CYNTHIA BRIEN
the 2000-2002 bear market proved temporary exploit just such a period, and we believe Chartered Financial Analyst,
as a new high was achieved in 2004. patient shareholders may reap the benefits [BRIEN portfolio manager, is
of recent investments as most of these PHOTO] manager of AIM V.I. Basic
What's the reason for the different loses may again prove temporary. Balanced Fund. She earned a
experience? Our strategy emphasizes B.B.A from The University of
fundamental business value and this value (1) The Leuthold Group LLC Texas at Austin. She joined the team on
grew from 2000 to 2002 despite a recession (2) Bloomberg L.P. Jan. 14, 2009, after the close of the
and the bear market in stock prices. Once reporting period.
the market environment improved, prices The views and opinions expressed in
reverted to fundamental value. We see a management's discussion of Fund CHUCK BURGE
similar situation unfolding in this bear performance are those of Invesco Aim Senior portfolio manager, is
market. Our estimate of portfolio Advisors, Inc. These views and opinions [BURGE manager of AIM V.I. Basic
intrinsic value is marginally higher today are subject to change at any time based on PHOTO] Balanced Fund. Mr. Burge
than in 2007, yet the market price of the factors such as market and economic earned a B.S. in economics
portfolio has declined by about 40%. conditions. These views and opinions may from Texas A&M University
not be relied upon as investment advice or and an M.B.A. in finance and accounting
PORTFOLIO ASSESSMENT recommendations, or as an offer for a from Rice University. He joined the team
particular security. The information is on Jan. 14, 2009, after the close of the
We believe the single most important not a complete analysis of every aspect of reporting period.
indicator of the way AIM V.I. Basic any market, country, industry, security or
Balanced Fund is positioned for potential the Fund. Statements of fact are from BRENDAN GAU left the team on Jan. 14,
future success is not our historical sources considered reliable, but Invesco 2009, after the close of the reporting
investment results or popular statistical Aim Advisors, Inc. makes no representation period.
measures, but rather the difference or warranty as to their completeness or
between current market prices and the accuracy. Although historical performance MARK GILLEY left the team on Jan. 14,
portfolio's estimated intrinsic value -- is no guarantee of future results, these 2009, after the close of the reporting
the aggregate business value of the insights may help you understand our period.
portfolio based on our estimate of investment management philosophy.
intrinsic value for each individual Assisted by the Basic Value Team
holding. During the year, we believe the See important Fund and index disclosures
estimated intrinsic value of the portfolio later in this report.
grew despite permanent losses in some of
our financials investments. BRET STANLEY
Chartered Financial Analyst,
At the close of the year, the [STANLEY senior portfolio manager, is
difference between the market price and PHOTO] lead manager of AIM V.I.
the estimated intrinsic value of the Basic Balanced Fund. He
portfolio was near record levels and earned a B.B.A. in finance
produced one of the most favorable capital from The University of Texas at Austin and
appreciation opportunities in the Fund's an M.S. in finance from the University of
history, in our Houston.
AIM V.I. BASIC BALANCED FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS CURRENT PERFORMANCE MAY BE LOWER OR VARIABLE PRODUCTS. YOU CANNOT PURCHASE
As of 12/31/08 HIGHER. PLEASE CONTACT YOUR VARIABLE SHARES OF THE FUND DIRECTLY. PERFORMANCE
PRODUCT ISSUER OR FINANCIAL ADVISOR FOR FIGURES GIVEN REPRESENT THE FUND AND ARE
SERIES I SHARES THE MOST RECENT MONTH-END VARIABLE PRODUCT NOT INTENDED TO REFLECT ACTUAL VARIABLE
Inception (5/1/98) -1.29% PERFORMANCE. PERFORMANCE FIGURES REFLECT PRODUCT VALUES. THEY DO NOT REFLECT SALES
10 Years -2.57 FUND EXPENSES, REINVESTED DISTRIBUTIONS CHARGES, EXPENSES AND FEES ASSESSED IN
5 Years -4.63 AND CHANGES IN NET ASSET VALUE. INVESTMENT CONNECTION WITH A VARIABLE PRODUCT. SALES
1 Year -38.32 RETURN AND PRINCIPAL VALUE WILL FLUCTUATE CHARGES, EXPENSES AND FEES, WHICH ARE
SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN DETERMINED BY THE VARIABLE PRODUCT
SERIES II SHARES YOU SELL SHARES. ISSUERS, WILL VARY AND WILL LOWER THE
10 Years -2.81 TOTAL RETURN.
5 Years -4.87 THE NET ANNUAL FUND OPERATING EXPENSE
1 Year -38.46 RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END PERFORMANCE
========================================== PROSPECTUS AS OF THE DATE OF THIS REPORT DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, IS AVAILABLE ON THE
SERIES II SHARES' INCEPTION DATE IS 0.91% AND 1.16%, RESPECTIVELY.(1, 2) THE INVESCO AIM AUTOMATED INFORMATION LINE,
JANUARY 24, 2002. RETURNS SINCE THAT DATE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO 866 702 4402. AS MENTIONED ABOVE, FOR THE
ARE HISTORICAL. ALL OTHER RETURNS ARE THE SET FORTH IN THE MOST RECENT FUND MOST RECENT MONTH-END PERFORMANCE
BLENDED RETURNS OF THE HISTORICAL PROSPECTUS AS OF THE DATE OF THIS REPORT INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
PERFORMANCE OF SERIES II SHARES SINCE FOR SERIES I AND SERIES II SHARES WAS CONTACT YOUR VARIABLE PRODUCT ISSUER OR
THEIR INCEPTION AND THE RESTATED 1.18% AND 1.43%, RESPECTIVELY. THE EXPENSE FINANCIAL ADVISOR.
HISTORICAL PERFORMANCE OF SERIES I SHARES RATIOS PRESENTED ABOVE MAY VARY FROM THE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES EXPENSE RATIOS PRESENTED IN OTHER SECTIONS HAD THE ADVISOR NOT WAIVED FEES AND/OR
II SHARES) ADJUSTED TO REFLECT THE RULE OF THIS REPORT THAT ARE BASED ON EXPENSES EXPENSES, RETURNS WOULD HAVE BEEN LOWER.
12B-1 FEES APPLICABLE TO SERIES II SHARES. INCURRED DURING THE PERIOD COVERED BY THIS
THE INCEPTION DATE OF SERIES I SHARES IS REPORT. (1) Total annual operating expenses less
MAY 1, 1998. THE PERFORMANCE OF THE FUND'S contractual advisory fee waivers by
SERIES I AND SERIES II SHARE CLASSES WILL AIM V.I. BASIC BALANCED FUND, A SERIES the advisor in effect through at least
DIFFER PRIMARILY DUE TO DIFFERENT CLASS PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS, December 31, 2009. See current
EXPENSES. IS CURRENTLY OFFERED THROUGH INSURANCE prospectus for more information.
COMPANIES ISSUING
THE PERFORMANCE DATA QUOTED REPRESENT (2) Total annual operating expenses less
PAST PERFORMANCE AND CANNOT GUARANTEE any contractual fee waivers and/or
COMPARABLE FUTURE RESULTS; expense reimbursements by the advisor
in effect through at least April 30,
2010. See current prospectus for more
information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/98, Fund data from 5/1/98
Lipper VUF
AIM V.I. Basic Custom Mixed-Asset Target
Balanced Fund- Basic Balanced Allocation Moderate
Date Series I Shares S&P 500 Index(2) Index(1, 2) Funds Index(2)
- ------- --------------- ---------------- -------------- -------------------
4/30/98 $10000 $10000 $10000
5/98 $ 9910 9828 9949 9888
6/98 10150 10227 10059 10051
7/98 10110 10119 9962 9919
8/98 9681 8657 9137 8980
9/98 10031 9212 9537 9306
10/98 10381 9960 9961 9728
11/98 10751 10564 10262 10090
12/98 11303 11172 10484 10363
1/99 11617 11639 10564 10500
2/99 11221 11278 10400 10237
3/99 11678 11729 10552 10467
4/99 11830 12183 11157 10828
5/99 11606 11895 11044 10658
6/99 11942 12554 11222 10950
7/99 11759 12164 11006 10748
8/99 11647 12103 10759 10647
9/99 11658 11772 10583 10559
10/99 12195 12517 10965 10934
11/99 12632 12771 10913 11027
12/99 13484 13522 10923 11421
1/00 13329 12843 10695 11117
2/00 14022 12600 10270 11071
3/00 14250 13832 11076 11712
4/00 13453 13416 10986 11484
5/00 12926 13141 11053 11329
6/00 13732 13464 10842 11527
7/00 13639 13254 10963 11481
8/00 14445 14077 11392 11951
9/00 13948 13334 11484 11636
10/00 13700 13277 11684 11617
11/00 12604 12231 11500 11116
12/00 12916 12291 11932 11321
1/01 13310 12727 12037 11581
2/01 12357 11567 11878 10978
3/01 11726 10835 11650 10562
4/01 12326 11676 11973 11073
5/01 12326 11755 12164 11137
6/01 12025 11469 12020 10940
7/01 11911 11356 12113 10894
8/01 11311 10646 11877 10513
9/01 10586 9786 11431 9980
10/01 10958 9973 11467 10217
11/01 11403 10738 11804 10636
12/01 11440 10832 11941 10717
1/02 11187 10674 11924 10616
2/02 11008 10468 11982 10510
3/02 11261 10861 12243 10722
4/02 10839 10203 12086 10418
5/02 10723 10128 12163 10406
6/02 10164 9407 11786 9896
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
7/02 9564 8674 11185 9438
8/02 9637 8731 11312 9564
9/02 9110 7783 10631 9039
10/02 9469 8467 11084 9424
11/02 9754 8965 11501 9765
12/02 9485 8439 11297 9487
1/03 9323 8218 11137 9346
2/03 9247 8095 11020 9317
3/03 9268 8173 11028 9370
4/03 9723 8846 11647 9845
5/03 10146 9311 12185 10254
6/03 10190 9430 12266 10322
7/03 10146 9597 12211 10276
8/03 10320 9784 12358 10432
9/03 10276 9680 12416 10458
10/03 10624 10227 12826 10763
11/03 10711 10317 12943 10841
12/03 11038 10858 13474 11224
1/04 11236 11057 13659 11378
2/04 11458 11211 13894 11525
3/04 11436 11042 13862 11459
4/04 11192 10868 13515 11233
5/04 11192 11017 13576 11276
6/04 11435 11231 13799 11459
7/04 11004 10860 13737 11255
8/04 11026 10903 13959 11361
9/04 11092 11021 14104 11470
10/04 11181 11190 14292 11608
11/04 11545 11642 14680 11910
12/04 11867 12038 15029 12216
1/05 11756 11745 14906 12064
2/05 11879 11992 15167 12200
3/05 11768 11780 15011 12037
4/05 11689 11557 14931 11902
5/05 11868 11924 15211 12188
6/05 11969 11941 15345 12311
7/05 12159 12385 15555 12552
8/05 12080 12272 15594 12530
9/05 12114 12371 15661 12551
10/05 11968 12165 15373 12374
11/05 12294 12625 15704 12618
12/05 12495 12629 15820 12727
1/06 12780 12964 16189 13015
2/06 12769 12999 16269 13036
3/06 12917 13160 16338 13119
4/06 12997 13337 16575 13233
5/06 12724 12954 16317 12972
6/06 12622 12971 16393 12979
7/06 12713 13051 16721 13085
8/06 12884 13361 16991 13328
9/06 13133 13705 17254 13523
10/06 13429 14151 17639 13818
11/06 13566 14420 17962 14068
12/06 13816 14622 18162 14179
1/07 13966 14843 18299 14328
2/07 13874 14554 18240 14302
3/07 13978 14716 18410 14397
4/07 14407 15368 18858 14762
5/07 14731 15904 19209 15024
6/07 14639 15640 18917 14874
7/07 14268 15155 18455 14619
8/07 14349 15382 18669 14735
9/07 14407 15957 19111 15123
10/07 14720 16211 19181 15377
11/07 14244 15533 18756 15024
12/07 14120 15425 18669 14979
1/08 13630 14500 18345 14549
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
2/08 13247 14029 17898 14339
3/08 12924 13969 17842 14215
4/08 13475 14649 18348 14677
5/08 13499 14838 18277 14808
6/08 12435 13589 17222 14114
7/08 12471 13474 17179 13903
8/08 12638 13669 17419 13972
9/08 11024 12453 16557 12842
10/08 9243 10362 14681 11270
11/08 8550 9618 14241 10694
12/08 8708 9719 14572 11046
====================================================================================================================================
AIM V.I. BASIC BALANCED FUND
AIM V.I. BASIC BALANCED FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL AND CURRENT INCOME.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND U.S. Aggregate Index. The Russell OTHER INFORMATION
1000--REGISTERED TRADEMARK-- Value Index
The values of convertible securities in measures the performance of those Russell The Chartered Financial
which the Fund invests may be affected by 1000 companies with lower price-to-book Analyst--REGISTERED TRADEMARK--
market interest rates, the risk that the ratios and lower forecasted growth values. (CFA--REGISTERED TRADEMARK--) designation
issuer may default on interest or The Russell 1000 --REGISTERED TRADEMARK-- is a globally recognized standard for
principal payments, and the value of the Value Index is a trademark/service mark of measuring the competence and integrity of
underlying common stock into which these the Frank Russell Company. investment professionals.
securities may be converted. Russell--REGISTERED TRADEMARK-- is a
trademark of the Frank Russell Company. The returns shown in management's
Prices of equity securities change in The Barclays Capital U.S. Aggregate Index discussion of Fund performance are based
response to many factors, including the covers U.S. investment-grade fixed-rate on net asset values calculated for
historical and prospective earnings of the bonds with components for government and shareholder transactions. Generally
issuer, the value of its assets, general corporate securities, mortgage accepted accounting principles require
economic conditions, interest rates, pass-throughs, and asset-backed adjustments to be made to the net assets
investor perceptions and market liquidity. securities. of the Fund at period end for financial
reporting purposes, and as such, the net
Foreign securities have additional The NATIONAL ASSOCIATION OF SECURITIES asset values for shareholder transactions
risks, including exchange rate changes, DEALERS AUTOMATED QUOTATION SYSTEM and the returns based on those net asset
political and economic upheaval, relative COMPOSITE INDEX (the Nasdaq) is a values may differ from the net asset
lack of information, relatively low market price-only, market-value-weighted index values and returns reported in the
liquidity, and the potential lack of comprising all domestic and non-U.S.-based Financial Highlights. Additionally, the
strict financial and accounting controls common stocks listed on the Nasdaq system. returns and net asset values shown
and standards. throughout this report are at the Fund
The BARCLAYS CAPITAL U.S. AGGREGATE level only and do not include variable
The Fund may use enhanced investment INDEX covers U.S. investment-grade product issuer charges. If such charges
techniques such as leveraging and fixed-rate bonds with components for were included, the total returns would be
derivatives. Leveraging entails risks such government and corporate securities, lower.
as magnifying changes in the value of the mortgage pass-throughs, and asset-backed
portfolio's securities. Derivatives are securities. Industry classifications used in this
subject to counterparty risk-the risk report are generally according to the
that the other party will not complete the LIPPER VUF MIXED-ASSET TARGET Global Industry Classification Standard,
transaction with the Fund. ALLOCATION MODERATE FUNDS INDEX is an which was developed by and is the
equally weighted representation of the exclusive property and a service mark of
There is no guarantee that the largest variable insurance underlying MSCI Inc. and Standard & Poor's.
investment techniques and risk analysis funds in the Lipper Mixed-Asset Target
used by the Fund's portfolio managers will Allocation Moderate Funds category. These
produce the desired results. funds, by portfolio practice, maintain a
mix of between 40%-60% equity securities,
The prices of securities held by the with the remainder invested in bonds,
Fund may decline in response to market cash, and cash equivalents.
risks.
The Fund is not managed to track the
ABOUT INDEXES USED IN THIS REPORT performance of any particular index,
including the indexes defined here, and
The S&P 500-REGISTERED TRADEMARK-- INDEX consequently, the performance of the Fund
is a market capitalization-weighted index may deviate significantly from the
covering all major areas of the U.S. performance of the indexes.
economy. It is not the 500 largest
companies, but rather the most widely held A direct investment cannot be made in
500 companies chosen with respect to an index. Unless otherwise indicated,
market size, liquidity, and their index results include reinvested
industry. dividends, and they do not reflect sales
charges or fund expenses.
The CUSTOM BASIC BALANCED INDEX is an
index created by Invesco Aim Advisors,
Inc. to benchmark the fund. The index
consists of the following indexes: 60%
Russell 1000--REGISTERED TRADEMARK--
Value Index and 40% Barclays Capital
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-62.76%
ADVERTISING-3.14%
Interpublic Group of Cos., Inc. (The)(b) 83,884 $ 332,181
- ------------------------------------------------------------------------------
Omnicom Group Inc. 23,120 622,390
==============================================================================
954,571
==============================================================================
AEROSPACE & DEFENSE-0.26%
Honeywell International Inc. 2,404 78,923
==============================================================================
APPAREL RETAIL-0.75%
Gap, Inc. (The) 17,124 229,290
==============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.11%
State Street Corp. 8,556 336,507
==============================================================================
BREWERS-1.80%
Molson Coors Brewing Co.-Class B 11,178 546,828
==============================================================================
COMMUNICATIONS EQUIPMENT-1.05%
Nokia Oyj-ADR (Finland) 20,512 319,987
==============================================================================
COMPUTER HARDWARE-1.77%
Dell Inc.(b) 52,406 536,637
==============================================================================
CONSTRUCTION MATERIALS-1.14%
Cemex S.A.B. de C.V.-ADR (Mexico)(b) 37,769 345,209
==============================================================================
CONSUMER FINANCE-2.86%
American Express Co. 23,897 443,289
- ------------------------------------------------------------------------------
SLM Corp.(b) 48,030 427,467
==============================================================================
870,756
==============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.98%
Western Union Co. 20,873 299,319
==============================================================================
DEPARTMENT STORES-1.60%
Kohl's Corp.(b) 13,430 486,166
==============================================================================
DIVERSIFIED CAPITAL MARKETS-1.24%
UBS AG (Switzerland)(b) 26,402 377,549
==============================================================================
EDUCATION SERVICES-1.00%
Apollo Group Inc.-Class A(b) 3,980 304,948
==============================================================================
ELECTRONIC MANUFACTURING SERVICES-0.45%
Tyco Electronics Ltd. 8,489 137,607
==============================================================================
GENERAL MERCHANDISE STORES-1.81%
Target Corp. 15,966 551,306
==============================================================================
HEALTH CARE DISTRIBUTORS-0.82%
Cardinal Health, Inc. 7,205 248,356
==============================================================================
HEALTH CARE EQUIPMENT-1.11%
Baxter International Inc. 6,306 337,939
==============================================================================
HOME IMPROVEMENT RETAIL-1.87%
Home Depot, Inc. (The) 24,689 568,341
==============================================================================
HOUSEHOLD APPLIANCES-1.07%
Whirlpool Corp. 7,900 326,665
==============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-2.49%
Robert Half International, Inc. 36,370 757,223
==============================================================================
INDUSTRIAL CONGLOMERATES-1.69%
General Electric Co. 13,561 219,688
- ------------------------------------------------------------------------------
Tyco International Ltd. 13,655 294,948
==============================================================================
514,636
==============================================================================
INDUSTRIAL MACHINERY-1.80%
Illinois Tool Works Inc. 15,641 548,217
==============================================================================
INVESTMENT BANKING & BROKERAGE-2.06%
Merrill Lynch & Co., Inc. 17,913 208,507
- ------------------------------------------------------------------------------
Morgan Stanley 26,075 418,243
==============================================================================
626,750
==============================================================================
MANAGED HEALTH CARE-5.74%
Aetna Inc. 22,853 651,310
- ------------------------------------------------------------------------------
UnitedHealth Group Inc. 41,158 1,094,803
==============================================================================
1,746,113
==============================================================================
MOVIES & ENTERTAINMENT-0.76%
Walt Disney Co. (The) 10,132 229,895
==============================================================================
OIL & GAS DRILLING-0.29%
Transocean Ltd. (Switzerland)(b) 1,892 89,397
==============================================================================
OIL & GAS EQUIPMENT & SERVICES-1.90%
Halliburton Co. 15,791 287,080
- ------------------------------------------------------------------------------
Schlumberger Ltd. 6,850 289,961
==============================================================================
577,041
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.98%
Bank of America Corp. 11,166 157,217
- ------------------------------------------------------------------------------
Citigroup Inc. 58,199 390,516
- ------------------------------------------------------------------------------
JPMorgan Chase & Co. 21,059 663,990
==============================================================================
1,211,723
==============================================================================
PACKAGED FOODS & MEATS-0.90%
Unilever N.V. (Netherlands) 11,289 274,862
==============================================================================
PHARMACEUTICALS-1.58%
Sanofi-Aventis (France) 7,523 480,136
==============================================================================
PROPERTY & CASUALTY INSURANCE-0.69%
XL Capital Ltd.-Class A 56,628 209,524
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. BASIC BALANCED FUND
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
PUBLISHING-1.39%
McGraw-Hill Cos., Inc. (The) 18,262 $ 423,496
==============================================================================
REGIONAL BANKS-0.64%
Fifth Third Bancorp 23,678 195,580
==============================================================================
SEMICONDUCTOR EQUIPMENT-4.68%
ASML Holding N.V. (Netherlands) 52,216 936,325
- ------------------------------------------------------------------------------
KLA-Tencor Corp. 22,364 487,312
==============================================================================
1,423,637
==============================================================================
SEMICONDUCTORS-1.31%
Maxim Integrated Products, Inc.(b) 34,777 397,153
==============================================================================
SPECIALIZED FINANCE-2.41%
Moody's Corp. 36,542 734,129
==============================================================================
SYSTEMS SOFTWARE-2.62%
CA Inc. 22,795 422,391
- ------------------------------------------------------------------------------
Microsoft Corp. 19,286 374,920
==============================================================================
797,311
==============================================================================
Total Common Stocks & Other Equity Interests
(Cost $28,181,158) 19,093,727
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-19.17%
AEROSPACE & DEFENSE-0.42%
Systems 2001 Asset Trust LLC (United
Kingdom)-Series 2001, Class G, Jr. Sec. Gtd.
Notes, (INS-MBIA Insurance Corp.) 6.66%,
09/15/13(c)(d) $ 128,421 127,137
==============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.06%
Bank of New York Institutional Capital
Trust-Series A, Jr. Sub. Trust Pfd. Capital
Securities, 7.78%, 12/01/26(d) 350,000 323,622
==============================================================================
BROADCASTING-1.05%
Cox Enterprises, Inc., Sr. Unsec. Notes, 7.88%,
09/15/10(d) 35,000 33,914
- ------------------------------------------------------------------------------
Time Warner Entertainment Co. L.P., Sr. Unsec.
Gtd. Notes, 10.15%, 05/01/12 280,000 286,476
==============================================================================
320,390
==============================================================================
CABLE & SATELLITE-0.45%
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12 130,000 135,885
==============================================================================
CONSUMER FINANCE-0.19%
American Express Credit Corp.-Series C, Sr. Unsec.
Floating Rate Medium-Term Notes, 1.87%,
05/27/10(e) 40,000 37,121
- ------------------------------------------------------------------------------
Capital One Capital III, Jr. Unsec. Gtd. Sub.
Notes, 7.69%, 08/15/36 50,000 21,250
==============================================================================
58,371
==============================================================================
DEPARTMENT STORES-0.69%
Macys Retail Holdings Inc., Sr. Unsec. Gtd. Notes,
6.30%, 04/01/09 215,000 211,184
==============================================================================
DIVERSIFIED BANKS-1.65%
Bangkok Bank PCL (Hong Kong), Unsec. Sub. Notes,
9.03%, 03/15/29 (Acquired 04/22/05; Cost
$75,121)(d) 60,000 49,512
- ------------------------------------------------------------------------------
BankAmerica Institutional-Series A, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities, 8.07%,
12/31/26(d) 100,000 78,898
- ------------------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Jr. Unsec. Gtd. Sub. Notes, 5.92%(f) 140,000 56,549
- ------------------------------------------------------------------------------
Centura Capital Trust I, Jr. Gtd. Sub. Trust Pfd.
Capital Securities, 8.85%, 06/01/27(d) 50,000 52,211
- ------------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series 1,
Unsec. Sub. Floating Rate Euro Notes,
2.13%(e)(f) 130,000 69,659
- ------------------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Jr. Unsec. Gtd. Sub. Second Tier Euro
Bonds, 8.38%(f) 30,000 28,708
- ------------------------------------------------------------------------------
National Bank of Canada (Canada), Unsec. Sub.
Floating Rate Euro Deb., 3.31%, 08/29/87(e) 60,000 31,500
- ------------------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)-Series B, Sr. Unsec. Sub. Floating Rate
Euro Notes, 3.31%(e)(f) 100,000 51,161
- ------------------------------------------------------------------------------
RBS Capital Trust III, Unsec. Gtd. Sub. Trust Pfd.
Global Notes, 5.51%(f) 60,000 25,931
- ------------------------------------------------------------------------------
Sovereign Bancorp Inc., Sr. Unsec. Floating Rate
Global Notes, 2.46%, 03/01/09(e) 60,000 58,297
==============================================================================
502,426
==============================================================================
DIVERSIFIED METALS & MINING-0.10%
Reynolds Metals Co., Sr. Unsec. Unsub. Medium-Term
Notes, 7.00%, 05/15/09 29,000 29,472
==============================================================================
HOMEBUILDING-0.54%
D.R. Horton Inc., Sr. Unsec. Gtd. Unsub. Notes,
5.00%, 01/15/09 165,000 164,629
==============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.39%
Southwestern Bell Telephone L.P., Sr. Unsec. Gtd.
Unsub. Notes, 7.20%, 10/15/26 110,000 103,040
- ------------------------------------------------------------------------------
Verizon New York Inc., Sr. Unsec. Bonds, 7.00%,
12/01/33 90,000 70,349
- ------------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Sr. Unsec. Global
Bonds, 4.63%, 03/15/13 170,000 154,177
- ------------------------------------------------------------------------------
Windstream Georgia Communications Corp., Sr.
Unsec. Deb., 6.50%, 11/15/13 98,000 95,067
==============================================================================
422,633
==============================================================================
INTERNET RETAIL-0.14%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13 60,000 43,800
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-1.96%
Bear Stearns Cos. Inc. (The), Sr. Unsec. Unsub.
Floating Rate Notes, 4.90%, 07/19/10(e) $ 180,000 $ 170,744
- ------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Sr. Unsec. Global
Notes, 6.15%, 04/01/18 30,000 28,362
- ------------------------------------------------------------------------------
Jefferies Group, Inc.,
Sr. Unsec. Notes, 5.88%, 06/08/14 230,000 189,553
- ------------------------------------------------------------------------------
6.45%, 06/08/27 50,000 31,111
- ------------------------------------------------------------------------------
Merrill Lynch & Co. Inc., Sr. Unsec. Medium-Term
Notes, 6.88%, 04/25/18 85,000 89,766
- ------------------------------------------------------------------------------
Morgan Stanley-Series F, Sr. Unsec. Medium-Term
Global Notes, 5.95%, 12/28/17 100,000 85,430
==============================================================================
594,966
==============================================================================
LIFE & HEALTH INSURANCE-0.71%
Prudential Financial, Inc., Jr. Unsec. Sub. Global
Notes, 8.88%, 06/15/38 70,000 45,284
- ------------------------------------------------------------------------------
Prudential Holdings, LLC-Series B, Sr. Sec. Bonds,
(INS-Financial Security Assurance Inc.) 7.25%,
12/18/23(c)(d) 190,000 169,506
==============================================================================
214,790
==============================================================================
MORTGAGE BACKED SECURITIES-0.50%
U.S. Bank N.A., Sr. Unsec. Medium-Term Global
Notes, 5.92%, 05/25/12 142,782 150,435
==============================================================================
MOVIES & ENTERTAINMENT-0.10%
Time Warner Cable, Inc., Sr. Unsec. Gtd. Global
Notes, 6.75%, 07/01/18 30,000 28,943
==============================================================================
MULTI-LINE INSURANCE-0.07%
Liberty Mutual Group, Inc., Jr. Gtd. Sub. Notes,
10.75%, 06/15/58(d) 45,000 22,330
==============================================================================
MULTI-SECTOR HOLDINGS-0.28%
Capmark Financial Group, Inc., Sr. Unsec. Gtd.
Floating Rate Global Notes, 3.04%, 05/10/10(e) 170,000 86,063
==============================================================================
MULTI-UTILITIES-0.43%
Dominion Resources Capital Trust I, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities, 7.83%,
12/01/27 140,000 129,838
==============================================================================
OFFICE ELECTRONICS-0.13%
Xerox Corp., Sr. Unsec. Notes, 5.65%, 05/15/13 50,000 39,582
==============================================================================
OIL & GAS REFINING & MARKETING-0.13%
Western Power Distribution Holdings Ltd. (United
Kingdom), Sr. Unsec. Unsub. Notes, 7.38%,
12/15/28(d) 50,000 39,816
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.27%
BankAmerica Capital III, Jr. Unsec. Gtd. Sub.
Floating Rate Trust Pfd. Capital Securities,
5.32%, 01/15/27(e) 137,000 73,781
- ------------------------------------------------------------------------------
JPMorgan Chase & Co., Sr. Unsec. Notes, 4.75%,
05/01/13 65,000 65,440
- ------------------------------------------------------------------------------
Lazard Group LLC, Sr. Unsec. Global Notes, 6.85%,
06/15/17 70,000 44,492
- ------------------------------------------------------------------------------
Old Mutual Capital Funding L.P. (United Kingdom),
Unsec. Gtd. Sub. Euro Bonds, 8.00%(f) 130,000 53,462
- ------------------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2, Class
A1, Sr. Unsec. Global Bonds, 9.69%, 08/15/09 84,000 84,624
- ------------------------------------------------------------------------------
Regional Diversified Funding, Sr. Notes, 9.25%,
03/15/30 (Acquired 09/22/04; Cost $169,578)(d) 143,333 60,200
- ------------------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate Pass
Through Ctfs., 2.83% (Acquired 12/07/04; Cost
$90,000)(d)(e)(f) 90,000 1,013
- ------------------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda), Floating
Rate Pass Through Ctfs., 3.23% (Acquired
11/10/06; Cost $100,118)(d)(e)(f) 100,000 2,125
==============================================================================
385,137
==============================================================================
PACKAGED FOODS & MEATS-0.25%
Kraft Foods Inc., Sr. Unsec. Notes, 6.88%,
01/26/39 75,000 77,051
==============================================================================
PAPER PRODUCTS-0.08%
International Paper Co., Sr. Unsec. Unsub. Notes,
5.13%, 11/15/12 30,000 25,352
==============================================================================
PROPERTY & CASUALTY INSURANCE-2.20%
Chubb Corp. (The), Sr. Notes, 5.75%, 05/15/18 30,000 29,627
- ------------------------------------------------------------------------------
First American Capital Trust I, Jr. Gtd. Sub.
Trust Pfd. Capital Securities, 8.50%, 04/15/12 285,000 292,597
- ------------------------------------------------------------------------------
North Front Pass-Through Trust, Sec. Pass Through
Ctfs., 5.81%, 12/15/24(d) 100,000 49,560
- ------------------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec. Gtd.
Bonds, 8.00%, 09/15/34(d) 200,000 146,381
- ------------------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56%(d)(f) 360,000 137,265
- ------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Australia), Sr. Unsec.
Unsub. Bonds, 9.75%, 03/14/14(d) 14,000 13,981
==============================================================================
669,411
==============================================================================
REGIONAL BANKS-0.89%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd. Sub.
Floating Rate Notes, 3.75%, 03/01/34(e) 200,000 74,500
- ------------------------------------------------------------------------------
PNC Capital Trust C, Jr. Unsec. Gtd. Sub. Floating
Rate Trust Pfd. Capital Securities, 2.77%,
06/01/28(e) 100,000 49,901
- ------------------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes, 6.05%,
06/01/17 110,000 88,933
- ------------------------------------------------------------------------------
TCF National Bank, Sub. Notes, 5.00%, 06/15/14 60,000 57,135
==============================================================================
270,469
==============================================================================
REINSURANCE-0.08%
Stingray Pass-Through Trust, Pass Through Ctfs.,
5.90%, 01/12/15 (Acquired 01/07/05-11/03/05;
Cost $196,920)(d) 200,000 24,500
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
RESEARCH & CONSULTING SERVICES-0.57%
ERAC USA Finance Co.,
Sr. Unsec. Gtd. Notes, 7.00%, 10/15/37(d) $ 140,000 $ 70,937
- ------------------------------------------------------------------------------
Unsec. Gtd. Notes, 5.80%, 10/15/12(d) 130,000 103,588
==============================================================================
174,525
==============================================================================
SPECIALIZED REIT'S-0.35%
HCP, Inc., Sr. Unsec. Medium-Term Notes, 6.70%,
01/30/18 100,000 45,838
- ------------------------------------------------------------------------------
Health Care REIT Inc., Sr. Unsec. Notes, 5.88%,
05/15/15 100,000 61,188
==============================================================================
107,026
==============================================================================
SPECIALTY CHEMICALS-0.16%
Valspar Corp.,
Sr. Unsec. Unsub. Notes, 5.63%, 05/01/12 25,000 23,716
- ------------------------------------------------------------------------------
6.05%, 05/01/17 30,000 26,210
==============================================================================
49,926
==============================================================================
STEEL-0.21%
United States Steel Corp., Sr. Unsec. Notes,
5.65%, 06/01/13 90,000 64,311
==============================================================================
TOBACCO-0.33%
Philip Morris International Inc., Sr. Unsec.
Unsub. Global Notes, 5.65%, 05/16/18 100,000 99,886
==============================================================================
TRUCKING-0.44%
Stagecoach Transport Holdings PLC (The) (United
Kingdom), Unsec. Unsub. Yankee Notes, 8.63%,
11/15/09 130,000 134,402
==============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.35%
Nextel Communications, Inc.-Series D, Sr. Unsec.
Gtd. Notes, 7.38%, 08/01/15 250,000 104,991
==============================================================================
Total Bonds & Notes
(Cost $8,104,691) 5,833,299
==============================================================================
U.S. GOVERNMENT SPONSORED MORTGAGE-BACKED SECURITIES-11.51%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-5.90%
Pass Through Ctfs., 7.00%, 06/01/15 to 06/01/32 95,578 100,616
- ------------------------------------------------------------------------------
7.50%, 11/01/30 to 05/01/31 15,086 16,017
- ------------------------------------------------------------------------------
6.50%, 08/01/32 4,827 5,037
- ------------------------------------------------------------------------------
5.50%, 02/01/37 1,418 1,453
- ------------------------------------------------------------------------------
Pass Through Ctfs., TBA, 5.00%, 01/01/38(g)(h) 303,000 309,675
- ------------------------------------------------------------------------------
5.50%, 01/01/39(g)(h) 1,229,000 1,257,997
- ------------------------------------------------------------------------------
6.00%, 01/01/39(g)(h) 100,000 103,016
==============================================================================
1,793,811
==============================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-4.11%
Pass Through Ctfs., 7.50%, 11/01/15 to 03/01/31 83,514 89,138
- ------------------------------------------------------------------------------
7.00%, 02/01/16 to 09/01/32 26,355 27,702
- ------------------------------------------------------------------------------
6.50%, 07/01/16 to 10/01/35 80,504 84,271
- ------------------------------------------------------------------------------
6.00%, 01/01/17 to 03/01/37 5,369 5,580
- ------------------------------------------------------------------------------
5.50%, 03/01/21 1,305 1,346
- ------------------------------------------------------------------------------
8.00%, 08/01/21 to 12/01/23 14,632 15,478
- ------------------------------------------------------------------------------
Pass Through Ctfs., TBA, 5.00%, 01/01/39(g)(h) 400,000 408,438
- ------------------------------------------------------------------------------
5.50%, 01/01/39(g) 150,000 153,773
- ------------------------------------------------------------------------------
6.00%, 01/01/39(g)(h) 100,000 102,953
- ------------------------------------------------------------------------------
7.00%, 01/01/39(g)(h) 151,000 158,125
- ------------------------------------------------------------------------------
5.00%, 02/01/39(g) 200,000 203,594
==============================================================================
1,250,398
==============================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)-1.50%
Pass Through Ctfs., 7.50%, 06/15/23 to 10/15/31 30,215 32,082
- ------------------------------------------------------------------------------
8.50%, 11/15/24 45,357 48,524
- ------------------------------------------------------------------------------
8.00%, 08/15/25 8,738 9,296
- ------------------------------------------------------------------------------
6.50%, 03/15/29 to 01/15/37 244,596 255,915
- ------------------------------------------------------------------------------
7.00%, 06/15/37 106,884 111,181
==============================================================================
456,998
==============================================================================
Total U.S. Government Sponsored Mortgage-
Backed Securities (Cost $3,447,358) 3,501,207
==============================================================================
<Caption>
SHARES
PREFERRED STOCKS-4.82%
OFFICE SERVICES & SUPPLIES-1.93%
Pitney Bowes International Holdings Inc.,-Series
D, 4.85% Pfd.(e) 6 587,485
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.89%
Auction Pass Through Trust,
Series 2007-T2, Class A,, 7.96% Pfd. (Acquired
12/14/07; Cost $600,000)(d)(e) 8 480,004
- ------------------------------------------------------------------------------
Series 2007-T3, Class A, 8.12% Pfd. (Acquired
10/22/07; Cost $600,000)(d)(e) 8 400,004
==============================================================================
880,008
==============================================================================
Total Preferred Stocks
(Cost $1,778,455) 1,467,493
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
ASSET-BACKED SECURITIES-1.82%
COLLATERALIZED MORTGAGE OBLIGATIONS-0.17%
Morgan Stanley Capital I-Series 2008-T29, Class
A1, Pass Through Ctfs., 6.23%, 01/11/43 $ 56,006 51,849
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
HOME EQUITY LOANS-0.64%
Countrywide Asset-Backed Ctfs.-Series 2007-4,
Class A1B, Pass Through Ctfs., 5.81%, 09/25/37 $ 83,330 $ 78,143
- ------------------------------------------------------------------------------
Option One Mortgage Securities Corp.-Series 2007-
4A, Floating Rate Notes, 0.57%, 04/25/12
(Acquired 05/11/07; Cost $47,228)(d)(e) 47,228 28,336
- ------------------------------------------------------------------------------
Structured Asset Securities Corp.,-Series 2007-
OSI, Class A2, Floating Rate Pass Through Ctfs.,
0.56%, 06/25/37(e) 110,718 88,473
==============================================================================
194,952
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.01%
Citicorp Lease Pass-Through Trust-Series 1999-1,
Class A2, Pass Through Ctfs., 8.04%, 12/15/19(d) 325,000 306,650
==============================================================================
Total Asset-Backed Securities
(Cost $653,218) 553,451
==============================================================================
MUNICIPAL OBLIGATIONS-0.51%
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO,
(INS-Ambac Assurance Corp.) 4.96%, 04/01/20(c) 65,000 47,618
- ------------------------------------------------------------------------------
Industry (City of), California Urban Development
Agency (Project No. 3); Series 2003, Taxable
Allocation RB, (INS-MBIA Insurance Corp.) 6.10%,
05/01/24(c) 125,000 106,574
==============================================================================
Total Municipal Obligations
(Cost $192,730) 154,192
==============================================================================
STUDENT LOAN MARKETING ASSOCIATION-0.33%
Series A, Sr. Unsec. Unsub. Medium-Term Notes,
4.00%, 01/15/09
(Cost $99,853) 100,000 99,853
==============================================================================
U.S. TREASURY NOTES-0.10%
4.88%, 08/15/09(i)
(Cost $30,831) 30,000 30,832
==============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-7.94%
Liquid Assets Portfolio-Institutional Class(j) 1,208,041 1,208,041
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(j) 1,208,041 1,208,041
==============================================================================
Total Money Market Funds
(Cost $2,416,082) 2,416,082
==============================================================================
TOTAL INVESTMENTS-108.96%
(Cost $44,904,376) 33,150,136
==============================================================================
OTHER ASSETS LESS LIABILITIES-(8.96)% (2,724,964)
==============================================================================
NET ASSETS-100.00% $30,425,172
______________________________________________________________________________
==============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
Pfd. - Preferred
RB - Revenue Bonds
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) Principal and/or interest payments are secured by the bond insurance
company listed.
(d) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at December 31, 2008 was $2,721,490, which represented 8.94% of the Fund's
Net Assets.
(e) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2008.
(f) Perpetual bond with no specified maturity date.
(g) Security purchased on forward commitment basis.
(h) This security is subject to dollar roll transactions. See Note 1I.
(i) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1L and Note 8.
(j) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$42,488,294) $ 30,734,054
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 2,416,082
======================================================
Total investments (Cost
$44,904,376) 33,150,136
======================================================
Cash 13,267
- ------------------------------------------------------
Foreign currencies, at value (Cost $29) 29
- ------------------------------------------------------
Receivables for:
Fund shares sold 33
- ------------------------------------------------------
Dividends and Interest 149,233
- ------------------------------------------------------
Fund expenses absorbed 4,681
- ------------------------------------------------------
Principal paydowns 47
- ------------------------------------------------------
Premiums paid on swap agreements 85,226
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 21,727
- ------------------------------------------------------
Other assets 812
======================================================
Total assets 33,425,191
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 2,677,515
- ------------------------------------------------------
Credit default swap contracts close-
out 144,757
- ------------------------------------------------------
Fund shares reacquired 10,760
- ------------------------------------------------------
Dividends 1,250
- ------------------------------------------------------
Variation margin 4,250
- ------------------------------------------------------
Accrued fees to affiliates 18,783
- ------------------------------------------------------
Accrued other operating expenses 52,438
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 29,901
- ------------------------------------------------------
Unrealized depreciation on swap
agreements 60,365
======================================================
Total liabilities 3,000,019
======================================================
Net assets applicable to shares
outstanding $ 30,425,172
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 55,919,936
- ------------------------------------------------------
Undistributed net investment income 1,524,533
- ------------------------------------------------------
Undistributed net realized gain (loss) (15,221,776)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (11,797,521)
======================================================
$ 30,425,172
______________________________________________________
======================================================
NET ASSETS:
Series I $ 27,595,742
______________________________________________________
======================================================
Series II $ 2,829,430
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 4,049,819
______________________________________________________
======================================================
Series II 417,156
______________________________________________________
======================================================
Series I:
Net asset value per share $ 6.81
______________________________________________________
======================================================
Series II:
Net asset value per share $ 6.78
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Interest $ 1,173,225
- ------------------------------------------------------
Dividends (net of foreign withholding
taxes of $7,093) 743,564
- ------------------------------------------------------
Dividends from affiliated money market
funds 17,111
======================================================
Total investment income 1,933,900
======================================================
EXPENSES:
Advisory fees 360,519
- ------------------------------------------------------
Administrative services fees 148,275
- ------------------------------------------------------
Custodian fees 30,451
- ------------------------------------------------------
Distribution fees -- Series II 10,656
- ------------------------------------------------------
Transfer agent fees 9,080
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 17,127
- ------------------------------------------------------
Professional services fees 52,560
- ------------------------------------------------------
Other 32,678
======================================================
Total expenses 661,346
======================================================
Less: Fees waived and expense offset
arrangement(s) (213,901)
======================================================
Net expenses 447,445
======================================================
Net investment income 1,486,455
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of $(71,268)) (4,081,162)
- ------------------------------------------------------
Foreign currencies 5,991
- ------------------------------------------------------
Futures contracts 98,456
- ------------------------------------------------------
Swap agreements (446,118)
======================================================
(4,422,833)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (18,315,954)
- ------------------------------------------------------
Foreign currencies 159
- ------------------------------------------------------
Futures contracts 11,608
- ------------------------------------------------------
Swap agreements 120,623
======================================================
(18,183,564)
======================================================
Net realized and unrealized gain (loss) (22,606,397)
======================================================
Net increase (decrease) in net assets
resulting from operations $(21,119,942)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,486,455 $ 1,896,485
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (4,422,833) 6,821,284
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (18,183,564) (6,118,608)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (21,119,942) 2,599,161
========================================================================================================
Distributions to shareholders from net investment income:
Series I (1,806,595) (1,869,328)
- --------------------------------------------------------------------------------------------------------
Series II (174,919) (151,655)
========================================================================================================
Total distributions from net investment income (1,981,514) (2,020,983)
========================================================================================================
Share transactions-net:
Series I (10,390,808) (25,823,599)
- --------------------------------------------------------------------------------------------------------
Series II (377,217) (549,210)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (10,768,025) (26,372,809)
========================================================================================================
Net increase (decrease) in net assets (33,869,481) (25,794,631)
________________________________________________________________________________________________________
========================================================================================================
NET ASSETS:
Beginning of year 64,294,653 90,089,284
========================================================================================================
End of year (includes undistributed net investment income of $1,524,533
and $1,940,359, respectively) $ 30,425,172 $ 64,294,653
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital and current
income.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. BASIC BALANCED FUND
Paydown gains and losses on mortgage and asset-backed securities are
recorded as adjustments to interest income. Dividend income is recorded on
the ex-dividend date. Bond premiums and discounts are amortized and/or
accreted for financial reporting purposes.
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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/to 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.
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
recalculating the value of the contracts on a daily basis. 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 a fixed payment over the life of the agreement and in some
situations an upfront payment 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 eligible bonds issued by the 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 a fixed payment over the life of the
agreement and an upfront payment, if applicable. 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 "par value" or the full notional
value of the referenced obligation, and the Fund would receive the
eligible bonds issued by the reference entity. In turn, these bonds may be
sold in order to realize a recovery value. Alternatively, the seller of
the CDS and its counterparty may agree to net the notional amount and the
market value of the bonds and make a cash payment equal to the difference
to the buyer of protection. 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. In connection with these agreements, cash
and securities may be identified as collateral in accordance with the
terms of the respective swap agreements to provide assets of value and
recourse in the event of default under the swap agreement or
bankruptcy/insolvency of a party to the swap agreement. Implied credit
spreads represent the current level at which protection could be bought or
sold given the terms of the existing CDS contract and serve as an
indicator of the current status of the payment/performance risk of the
CDS. An implied spread that has widened or increased since entry into the
initial contract may indicate a deteriorating credit profile and increased
risk of default for
AIM V.I. BASIC BALANCED FUND
the reference entity. A declining or narrowing spread may indicate an
improving credit profile or decreased risk of default for the reference
entity. Alternatively, credit spreads may increase or decrease reflecting
the general tolerance for risk in the credit markets.
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 accrues for the fixed payment
stream and amortizes upfront payments, if any, 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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, the Advisor 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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
Also, the Advisor 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, 2010. 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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash in such affiliated money
market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$213,048.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $98,275 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
AIM V.I. BASIC BALANCED FUND
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Price are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- -------------------------------------------------------
Level 1 $19,818,487 $ 17,084
- -------------------------------------------------------
Level 2 13,271,449 (60,365)
- -------------------------------------------------------
Level 3 60,200 --
=======================================================
$33,150,136 $(43,281)
_______________________________________________________
=======================================================
</Table>
* Other investments include futures and swap contracts, which are included at
unrealized appreciation/(depreciation).
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, 2008, the Fund
engaged in securities purchases of $545,271 and securities sales of $606,903,
which resulted in net realized gains (losses) of $(71,268).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $853.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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.
AIM V.I. BASIC BALANCED FUND
During the year ended December 31, 2008, the Fund paid legal fees of $3,234
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--FUTURES CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT VALUE APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 8 March-2009/Long $952,437 $17,084
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- ----------------------------------------------------------------------------------------------------------------------------
NOTIONAL
BUY/SELL (PAY)/RECEIVE EXPIRATION IMPLIED AMOUNT
REFERENCE ENTITY COUNTERPARTY PROTECTION FIXED RATE DATE CREDIT SPREAD(A) (000)
- ----------------------------------------------------------------------------------------------------------------------------
Assured Guaranty Corp. Merrill Lynch Sell 5.00% 03/20/09 34.67% $ 130
International
- ----------------------------------------------------------------------------------------------------------------------------
iStar Financial Inc. UBS AG Sell 5.00%(b) 03/20/09 132.46% 120
============================================================================================================================
Subtotal $ 250
============================================================================================================================
CDX North America
Investment Grade
Index -- Series 11 UBS AG Buy (1.50)%(c) 12/20/13 1.95% 3,000
============================================================================================================================
Total Credit Default Swap Agreements
____________________________________________________________________________________________________________________________
============================================================================================================================
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- -----------------------------------------
MARKET VALUE
UNREALIZED
APPRECIATION
REFERENCE ENTITY (DEPRECIATION)
- -----------------------------------------
Assured Guaranty Corp. $ (7,957)
- -----------------------------------------
iStar Financial Inc. (24,998)
=========================================
Subtotal $(32,955)
=========================================
CDX North America
Investment Grade
Index -- Series 11 (27,410)
=========================================
Total Credit $(60,365)
Default Swap
Agreements
_________________________________________
=========================================
</Table>
(a) Implied credit spreads represent the current level at which protection
could be bought or sold given the terms of the existing credit default swap
contract and serve as an indicator of the current status of the
payment/performance risk of the credit default swap contract. An implied
credit spread that has widened or increased since entry into the initial
contract may indicate a deteriorating credit profile and increased risk of
default for the reference entity. A declining or narrowing spread may
indicate an improving credit profile or decreased risk of default for the
reference entity. Alternatively, credit spreads may increase or decrease
reflecting the general tolerance for risk in the credit markets generally.
(b) Unamortized premium at period-end of $2,099.
(c) Unamortized discount at period-end of $87,325.
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $1,981,514 $2,020,983
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 1,565,912
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (12,486,968)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (60,365)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (39,792)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (192,885)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (14,280,666)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 55,919,936
================================================================================================
Total net assets $ 30,425,172
________________________________________________________________________________________________
================================================================================================
</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 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.
AIM V.I. BASIC BALANCED FUND
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2010 $10,514,572
- -----------------------------------------------------------------------------------------------
December 31, 2016 3,776,094
===============================================================================================
Total capital loss carryforward $14,280,666
_______________________________________________________________________________________________
===============================================================================================
</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, 2008 was $23,705,456 and
$36,746,404, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 948,418
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (13,435,386)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(12,486,968)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $45,637,104
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of paydowns on mortgage-
backed securities and swap agreements, on December 31, 2008, undistributed net
investment income was increased by $79,233 and undistributed net realized gain
(loss) was decreased by $79,233. This reclassification had no effect on the net
assets of the Fund.
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(A) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 213,379 $ 1,989,301 982,742 $ 11,912,341
- ------------------------------------------------------------------------------------------------------------------------
Series II 39,073 381,508 39,272 478,310
========================================================================================================================
Issued as reinvestment of dividends:
Series I 265,676 1,806,595 155,131 1,869,328
- ------------------------------------------------------------------------------------------------------------------------
Series II 25,837 174,919 12,669 151,655
========================================================================================================================
Reacquired:
Series I (1,426,183) (14,186,704) (3,206,335) (39,605,268)
- ------------------------------------------------------------------------------------------------------------------------
Series II (99,172) (933,644) (96,959) (1,179,175)
========================================================================================================================
Net decrease in share activity (981,390) $(10,768,025) (2,113,480) $(26,372,809)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 81% of the
outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with these
entities whereby these entities sell units of interest in separate accounts
funding variable products that are invested in the Fund. The Fund, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco 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--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal
AIM V.I. BASIC BALANCED FUND
years beginning after November 15, 2008. Management is currently in the process
of determining the impact of the standard on the Fund's disclosures in the
financial statements.
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET ON SECURITIES DIVIDENDS
VALUE, NET (BOTH TOTAL FROM FROM NET NET ASSET NET ASSETS,
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT VALUE, END TOTAL END OF PERIOD
OF PERIOD INCOME(a) UNREALIZED) OPERATIONS INCOME OF PERIOD RETURN(b) (000S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $11.81 $0.31 $(4.84) $(4.53) $(0.47) $ 6.81 (38.32)% $27,596
Year ended 12/31/07 11.92 0.28 (0.01) 0.27 (0.38) 11.81 2.20 59,000
Year ended 12/31/06 10.99 0.25 0.91 1.16 (0.23) 11.92 10.55 84,212
Year ended 12/31/05 10.59 0.18 0.38 0.56 (0.16) 10.99 5.29 90,633
Year ended 12/31/04 9.99 0.13 0.62 0.75 (0.15) 10.59 7.52 99,070
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 11.73 0.28 (4.79) (4.51) (0.44) 6.78 (38.46) 2,829
Year ended 12/31/07 11.84 0.25 (0.01) 0.24 (0.35) 11.73 1.94 5,295
Year ended 12/31/06 10.91 0.22 0.91 1.13 (0.20) 11.84 10.36 5,878
Year ended 12/31/05 10.53 0.15 0.37 0.52 (0.14) 10.91 4.91 5,870
Year ended 12/31/04 9.95 0.10 0.62 0.72 (0.14) 10.53 7.24 5,642
___________________________________________________________________________________________________________________________________
===================================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
WITH FEE WAIVERS FEE WAIVERS INCOME
AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
ABSORBED ABSORBED NET ASSETS TURNOVER
- ------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 0.91%(c) 1.35%(c) 3.11%(c) 50%
Year ended 12/31/07 0.91 1.18 2.31 47
Year ended 12/31/06 0.91 1.15 2.16 44
Year ended 12/31/05 0.95 1.15 1.68 44
Year ended 12/31/04 1.12 1.12 1.24 51
- ------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 1.16(c) 1.60(c) 2.86(c) 50
Year ended 12/31/07 1.16 1.43 2.06 47
Year ended 12/31/06 1.16 1.40 1.91 44
Year ended 12/31/05 1.20 1.40 1.43 44
Year ended 12/31/04 1.37 1.37 0.99 51
__________________________________________________________________________________________
==========================================================================================
</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 (000's omitted) of $43,807 and
$4,263 for Series I and Series II shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $700.40 $3.89 $1,020.56 $4.62 0.91%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 700.20 4.96 1,019.30 5.89 1.16
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Corporate Dividends Received Deduction* 35.95%
</Table>
* The above percentages are 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Van Gilder Insurance
Trustee firm) Company; Board of
Governors, Western
Golf Association
Evans Scholars
Foundation and
Executive Committee,
United States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. BASIC BALANCED FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. BASIC BALANCED FUND
[INVESCO AIM LOGO] AIM V.I. BASIC VALUE FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. BASIC VALUE FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY because of the extraordinary investment
opportunities they produce.
For the fiscal year ended December 31, 2008, AIM V.I. Basic Value Fund, excluding
variable product issuer charges, underperformed the Russell 1000 Value Index, the S&P Financials was the worst performing
500 Index and the Lipper VUF Large-Cap Value Funds Index.(triangle) sector of the equity market during the
fiscal year as the credit crisis
Drivers of performance were stock specific. We attribute the Fund's underperformance intensified and a liquidity crisis
versus its indexes mainly to below-market returns from several of our investments in emerged. FANNIE MAE and AIG were among the
the financials sector. Select investments in consumer discretionary and financials were Fund's largest detractors during the year.
among the largest positive contributors to Fund performance during the year. We understood the negative impact of
credit losses on both companies and
Your Fund's long-term performance appears later in this report. believed they had adequate financial
wherewithal to absorb the credit losses
FUND VS. INDEXES that will persist for years. Ironically,
the credit losses remained within the
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. range of our expectations. However, the
If variable product issuer charges were included, returns would be lower. rapid loss of investor confidence and the
related liquidity crisis and public policy
Series I Shares -51.77% response surprised us. In the end, the
Series II Shares -51.90 valuation opportunity that was created by
S&P 500 Index(triangle) (Broad Market Index) -36.99 the credit cycle was trumped by a
Russell 1000 Value Index (triangle) (Style-Specific Index) -36.85 liquidity crisis at AIG and the unintended
Lipper VUF Large-Cap Value Funds Index (triangle) (Peer Group Index) -36.51 consequences of government intervention at
Fannie Mae -- both events inherently
(triangle) Lipper Inc. unpredictable but lethal. We sold our
======================================================================================= positions in these investments at
substantial losses.
HOW WE INVEST
CONTEXT FOR RESULTS
We seek to create wealth by maintaining a Since our application of this strategy
long-term investment horizon and investing is highly disciplined and relatively It's important to remember that what
in companies that are selling at a unique, it is important to understand the many now consider to be great historic
significant discount to their estimated benefits and limitations of our process. buying opportunities were at the time
intrinsic value -- a value that is based First, the investment strategy is intended quite frightening events, and in economic
on the estimated future cash flows to preserve your capital while growing it terms, many of those episodes seemed far
generated by the business. The Fund's at above-market rates over the long term. more threatening than our current
philosophy is based on key elements that Second, our investments have little in situation. History and common sense
we believe have extensive empirical common with popular stock market indexes indicate this crisis will pass, and we
evidence: and most of our peers. And third, the believe it will prove to be a historic
Fund's short-term relative performance buying opportunity for U.S. stocks. The
o Company intrinsic values can be will naturally be different than the stock timing and level of any market bottom is
reasonably estimated. Importantly, market and peers and have little uncertain, but we believe the absolute
this estimated fair business value is information value since we simply don't return opportunity from recent year-end
independent of the company's stock own the same stocks. levels will prove compelling.
price.
MARKET CONDITIONS AND YOUR FUND The current bear market represents one
o Market prices are more volatile than of the three greatest declines in the past
business values, partly because Equity markets declined sharply during the 60 years.(1) Following the 2000 to 2002
investors regularly overreact to fiscal year as the financial crisis Nasdaq decline, investors learned
negative news. intensified and the global economy
weakened. As painful as bear markets like
o Long-term investment results are a this are to live through, we believe they
function of the level and growth of can actually improve long term results
business value in the portfolio.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Financials 22.7% 1. Managed Health Care 9.0% 1. UnitedHealth Group Inc. 5.7%
Consumer Discretionary 20.6 2. Semiconductor Equipment 7.1 2. ASML Holding N.V. 4.7
Information Technology 19.7 3. Other Diversified 3. Robert Half International, Inc. 3.9
Health Care 14.4 Financial Services 6.1 4. Moody's Corp. 3.7
Industrials 9.4 4. Advertising 4.9 5. Aetna Inc. 3.3
Consumer Staples 4.3 5. Consumer Finance 4.4 6. JP Morgan Chase & Co. 3.3
Energy 3.2 ========================================== 7. Omnicom Group Inc. 3.1
Materials 1.7 ========================================== 8. Illinois Tool Works Inc. 2.9
Money Market Funds Total Net Assets $284.6 million 9. Home Depot, Inc. (The) 2.9
Plus Other Assets Less Liabilities 4.0 Total Number of Holdings* 46 10. Molson Coors Brewing Co.-Class B 2.8
========================================== ========================================== ==========================================
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. BASIC VALUE FUND
what a permanent loss of capital looks and 2008 underperformance was due to our BRET STANLEY
feels like. While the Nasdaq remains about efforts to capitalize on this opportunity Chartered Financial
69% below its 2000 peak,(2) our losses should it have proved short lived. Analyst, senior portfolio
during the 2000-2002 bear market proved Regardless of duration, our process was [STANLEY manager, is lead manager of
temporary as a new high was achieved in designed to exploit just such a period, PHOTO] AIM V.I. Basic Value Fund.
2004. and we believe patient shareholders may He began his investment
reap the benefits of recent investments as career in 1988. Mr. Stanley earned a
What's the reason for the different most of these loses may again prove B.B.A. in finance from The University of
experience? Our strategy emphasizes temporary. Texas at Austin and an M.S. in finance
fundamental business value and this value from the University of Houston.
grew from 2000 to 2002 despite a recession We thank you for your investment in AIM
and the bear market in stock prices. Once V.I. Basic Value Fund and for sharing our R. CANON COLEMAN II
the market environment improved, prices long-term investment horizon. Chartered Financial
reverted to fundamental value. We see a [COLEMAN Analyst, portfolio manager,
similar situation unfolding in this bear (1) The Leuthold Group, LLC PHOTO] is manager of AIM V.I.
market. Our estimate of portfolio Basic Value Fund. He began
intrinsic value is marginally higher today (2) Bloomberg L.P. his investment career in 1996 and joined
than in 2007, yet the market price of the Invesco Aim in 2000. Mr. Coleman earned a
portfolio has declined by about 50%. The views and opinions expressed in B.S. and an M.S. in accounting from the
management's discussion of Fund University of Florida. He also earned an
PORTFOLIO ASSESSMENT performance are those of Invesco Aim M.B.A. from the Wharton School at the
Advisors, Inc. These views and opinions University of Pennsylvania.
We believe the single most important are subject to change at any time based on
indicator of the way AIM V.I. Basic Value factors such as market and economic MATTHEW SEINSHEIMER
Fund is positioned for potential future conditions. These views and opinions may Chartered Financial Analyst,
success is not our historical investment not be relied upon as investment advice or [SEINSHEIMER senior portfolio manager,
results or popular statistical measures, recommendations, or as an offer for a PHOTO] is manager of AIM V.I.
but rather the difference between current particular security. The information is Basic Value Fund. He began
market prices and the portfolio's not a complete analysis of every aspect of his investment career in 1992 and joined
estimated intrinsic value -- the aggregate any market, country, industry, security or Invesco Aim in 1998. He earned a B.B.A. in
business value of the portfolio based on the Fund. Statements of fact are from finance from Southern Methodist University
our estimate of intrinsic value for each sources considered reliable, but Invesco and an M.B.A. from The University of Texas
individual holding. During the year, we Aim Advisors, Inc. makes no representation at Austin.
believe the estimated intrinsic value of or warranty as to their completeness or
the portfolio grew despite permanent accuracy. Although historical performance MICHAEL SIMON
losses in some of our financials is no guarantee of future results, these Chartered Financial
investments. insights may help you understand our Analyst, senior portfolio
investment management philosophy. [SIMON manager, is manager of
At the close of the year, the PHOTO] AIM V.I. Basic Value Fund.
difference between the market price and See important Fund and index disclosures He began his investment
the estimated intrinsic value of the later in this report. career in 1989 and joined Invesco Aim in
portfolio was at record levels and 2001. Mr. Simon earned a B.B.A. in finance
produced the most favorable capital from Texas Christian University and an
appreciation opportunity in the Fund's M.B.A. from the University of Chicago.
history, in our opinion. While there is no
assurance that market value will ever Assisted by the Basic Value Team
reflect our estimate of the portfolio's
intrinsic value, we believe the large gap
between price and estimated value may
stack the odds in favor of above-average
capital appreciation once capital markets
normalize.
IN CLOSING
While we are disappointed with our results
in 2008, we are also excited about the
opportunities the current crisis has
created. As we have pointed out many
times, the distinctive nature of our
strategy will naturally produce results
that are either above or below the market
in the short term. We understand it can be
distressing to shareholders when results
lag the market as they have this year. We
do not have any special insight into the
magnitude or duration of this bear market,
but historically, valuation opportunities
of this magnitude have not lasted for very
long. Ironically, part of our
AIM V.I. BASIC VALUE FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS FIGURES REFLECT FUND EXPENSES, REINVESTED ARE NOT INTENDED TO REFLECT ACTUAL
As of 12/31/08 DISTRIBUTIONS AND CHANGES IN NET ASSET VARIABLE PRODUCT VALUES. THEY DO NOT
VALUE. INVESTMENT RETURN AND PRINCIPAL REFLECT SALES CHARGES, EXPENSES AND FEES
SERIES I SHARES VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE ASSESSED IN CONNECTION WITH A VARIABLE
Inception (9/10/01) -4.85% A GAIN OR LOSS WHEN YOU SELL SHARES. PRODUCT. SALES CHARGES, EXPENSES AND FEES,
5 Years -8.22 WHICH ARE DETERMINED BY THE VARIABLE
1 Year - 51.77 THE TOTAL ANNUAL FUND OPERATING EXPENSE PRODUCT ISSUERS, WILL VARY AND WILL LOWER
RATIO SET FORTH IN THE MOST RECENT FUND THE TOTAL RETURN.
SERIES II SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT
Inception (9/10/01) -5.08% FOR SERIES I AND SERIES II SHARES WAS THE MOST RECENT MONTH-END PERFORMANCE
5 Years -8.44 0.96% AND 1.21%, RESPECTIVELY. THE EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
1 Year -51.90 RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, IS AVAILABLE ON THE
========================================== EXPENSE RATIOS PRESENTED IN OTHER SECTIONS INVESCO AIM AUTOMATED INFORMATION LINE,
OF THIS REPORT THAT ARE BASED ON EXPENSES 866 702 4402. AS MENTIONED ABOVE, FOR THE
THE PERFORMANCE OF THE FUND'S SERIES I AND INCURRED DURING THE PERIOD COVERED BY THIS MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARE CLASSES WILL DIFFER REPORT. INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. CONTACT YOUR VARIABLE PRODUCT ISSUER OR
AIM V.I. BASIC VALUE FUND, A SERIES FINANCIAL ADVISOR.
THE PERFORMANCE DATA QUOTED REPRESENT PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
PAST PERFORMANCE AND CANNOT GUARANTEE IS CURRENTLY OFFERED THROUGH INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT COMPANIES ISSUING VARIABLE PRODUCTS. YOU
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CANNOT PURCHASE SHARES OF THE FUND
CONTACT YOUR VARIABLE PRODUCT ISSUER OR DIRECTLY. PERFORMANCE FIGURES GIVEN
FINANCIAL ADVISOR FOR THE MOST RECENT REPRESENT THE FUND AND
MONTH-END VARIABLE PRODUCT PERFORMANCE.
PERFORMANCE
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 8/31/01, Fund data from 09/10/01
AIM V.I. Basic AIM V.I. Basic Lipper VUF
Value Fund- Value Fund- Russell 1000 Large-Cap Value
Date Series I Shares Series II Shares S&P 500 Index(1) Value Index(1) Funds Index(1)
- ------- --------------- ---------------- ---------------- -------------- ---------------
8/31/01 $10000 $10000 $10000
9/01 $ 9210 $ 9210 9193 9296 9151
10/01 9270 9270 9368 9216 9269
11/01 9950 9950 10086 9752 9870
12/01 10263 10258 10175 9982 10054
1/02 10183 10178 10026 9905 9868
2/02 9992 9987 9833 9921 9771
3/02 10723 10717 10203 10390 10255
4/02 10342 10337 9585 10034 9784
5/02 10292 10287 9514 10084 9779
6/02 9281 9267 8837 9505 9066
7/02 8289 8276 8148 8621 8289
8/02 8430 8426 8201 8687 8331
9/02 7418 7406 7311 7721 7368
10/02 7888 7876 7954 8293 7921
11/02 8509 8497 8421 8815 8447
12/02 7988 7966 7927 8432 8044
1/03 7808 7786 7720 8228 7847
2/03 7528 7506 7604 8009 7643
3/03 7497 7476 7677 8022 7668
4/03 8168 8147 8309 8728 8308
5/03 9008 8978 8747 9292 8887
6/03 9038 9007 8858 9408 9005
7/03 9308 9277 9015 9548 9158
8/03 9628 9597 9190 9697 9296
9/03 9428 9397 9093 9602 9217
10/03 9898 9857 9607 10190 9698
11/03 10089 10048 9691 10328 9793
12/03 10673 10618 10199 10964 10389
1/04 10833 10779 10387 11157 10596
2/04 11053 10998 10531 11396 10830
3/04 11013 10959 10372 11297 10669
4/04 10863 10799 10209 11021 10473
5/04 10963 10899 10349 11133 10517
6/04 11234 11170 10550 11396 10767
7/04 10623 10559 10201 11235 10502
8/04 10553 10489 10242 11395 10581
9/04 10682 10610 10353 11572 10728
10/04 10873 10799 10511 11764 10871
11/04 11443 11370 10936 12359 11355
12/04 11854 11770 11308 12773 11724
1/05 11644 11559 11033 12546 11473
2/05 11895 11800 11265 12962 11790
3/05 11675 11579 11066 12784 11583
4/05 11404 11309 10856 12555 11367
5/05 11624 11530 11201 12857 11640
6/05 11834 11740 11217 12998 11695
7/05 12225 12120 11634 13374 12047
8/05 12034 11930 11528 13316 11980
9/05 12145 12039 11621 13503 12071
10/05 11834 11719 11427 13160 11927
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
11/05 12294 12180 11859 13593 12310
12/05 12534 12409 11863 13674 12363
1/06 12980 12854 12177 14205 12692
2/06 12919 12794 12210 14292 12732
3/06 13162 13027 12362 14485 12871
4/06 13244 13107 12528 14853 13162
5/06 12788 12651 12168 14478 12852
6/06 12656 12520 12184 14571 12883
7/06 12616 12480 12259 14925 13090
8/06 12829 12692 12551 15175 13320
9/06 13164 13015 12874 15477 13627
10/06 13589 13431 13293 15984 14034
11/06 13792 13633 13546 16349 14239
12/06 14190 14015 13736 16716 14572
1/07 14392 14217 13943 16929 14793
2/07 14115 13941 13671 16665 14524
3/07 14254 14079 13824 16923 14705
4/07 14902 14704 14436 17549 15325
5/07 15422 15223 14939 18181 15890
6/07 15285 15076 14691 17757 15627
7/07 14562 14378 14236 16936 14975
8/07 14700 14504 14449 17125 15143
9/07 14806 14600 14989 17713 15592
10/07 15295 15088 15227 17715 15715
11/07 14562 14347 14591 16850 15054
12/07 14409 14210 14490 16687 14820
1/08 13572 13378 13621 16018 14141
2/08 13085 12893 13179 15347 13621
3/08 12620 12432 13122 15232 13413
4/08 13390 13186 13760 15974 14054
5/08 13492 13288 13939 15949 14101
6/08 11930 11745 12765 14422 12773
7/08 11828 11644 12657 14370 12729
8/08 12044 11859 12840 14614 12893
9/08 10006 9854 11698 13541 11923
10/08 7764 7636 9733 11197 9974
11/08 6825 6713 9035 10394 9201
12/08 6952 6832 9130 10538 9409
====================================================================================================================================
AIM V.I. BASIC VALUE FUND
AIM V.I. BASIC VALUE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Prices of equity securities change in The S&P 500--REGISTERED TRADEMARK-- INDEX The Chartered Financial Analyst--
response to many factors, including the is a market capitalization-weighted index REGISTERED TRADEMARK-- (CFA--REGISTERED
historical and prospective earnings of the covering all major areas of the U.S. TRADEMARK--) designation is a globally
issuer, the value of its assets, general economy. It is not the 500 largest recognized standard for measuring the
economic conditions, interest rates, companies, but rather the most widely held competence and integrity of investment
investor perceptions and market liquidity. 500 companies chosen with respect to professionals.
market size, liquidity, and their
Since a large percentage of the Fund's industry. The returns shown in management's
assets may be invested in securities of a discussion of Fund performance are based
limited number of companies, each The RUSSELL 1000--REGISTERED on net asset values calculated for
investment has a greater effect on the TRADEMARK-- VALUE INDEX measures the shareholder transactions. Generally
Fund's overall performance, and any change performance of those Russell 1000 accepted accounting principles require
in the value of those securities could companies with lower price-to-book ratios adjustments to be made to the net assets
significantly affect the value of your and lower forecasted growth values. The of the Fund at period end for financial
investment in the Fund. Russell 1000 Value Index is a reporting purposes, and as such, the net
trademark/service mark of the Frank asset values for shareholder transactions
Foreign securities have additional Russell Company. Russell--REGISTERED and the returns based on those net asset
risks, including exchange rate changes, TRADEMARK-- is a trademark of the Frank values may differ from the net asset
political and economic upheaval, relative Russell Company. values and returns reported in the
lack of information, relatively low market Financial Highlights. Additionally, the
liquidity, and the potential lack of The LIPPER VUF LARGE-CAP VALUE FUNDS returns and net asset values shown
strict financial and accounting controls INDEX is an equally weighted throughout this report are at the Fund
and standards. representation of the largest variable level only and do not include variable
insurance underlying funds in the Lipper product issuer charges. If such charges
The Fund may use enhanced investment Large-Cap Value Funds category, These were included, the total returns would be
techniques such as leveraging and funds typically have a below-average lower.
derivatives. Leveraging entails risks price-to-earnings ratio, price-to-book
such as magnifying changes in the value of ratio, and three-year sales-per-share Industry classifications used in this
the portfolio's securities. Derivatives growth value, compared to the S&P report are generally according to the
are subject to counterparty risk-the risk 500--REGISTERED TRADEMARK-- Index. Global Industry Classification Standard,
that the other party will not complete the which was developed by and is the
transaction with the Fund. The NATIONAL ASSOCIATION OF SECURITIES exclusive property and a service mark of
DEALERS AUTOMATED QUOTATION SYSTEM MSCI Inc. and Standard & Poor's.
There is no guarantee that the COMPOSITE INDEX (the Nasdaq) is a
investment techniques and risk analysis price-only, market-value-weighted index
used by the Fund's portfolio managers will comprising all domestic and non-U.S.-based
produce the desired results. common stocks listed on the Nasdaq system.
The prices of securities held by the The Fund is not managed to track the
fund may decline in response to market performance of any particular index,
risks. including the indexes defined here, and
consequently, the performance of the Fund
The Fund invests in "value" stocks, may deviate significantly from the
which can continue to be inexpensive for performance of the indexes.
long periods of time and may never realize
their full value. A direct investment cannot be made in
an index. Unless otherwise indicated,
index results include reinvested
dividends, and they do not reflect sales
charges or fund expenses.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.96%
ADVERTISING-4.94%
Interpublic Group of Cos., Inc. (The)(b)(c) 1,328,006 $ 5,258,904
- -------------------------------------------------------------------------------
Omnicom Group Inc. 327,361 8,812,558
===============================================================================
14,071,462
===============================================================================
APPAREL RETAIL-1.19%
Gap, Inc. (The) 252,070 3,375,217
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.62%
State Street Corp. 117,000 4,601,610
===============================================================================
BREWERS-2.78%
Molson Coors Brewing Co.-Class B 161,990 7,924,551
===============================================================================
COMMUNICATIONS EQUIPMENT-1.62%
Nokia-ADR (Finland) 295,852 4,615,291
===============================================================================
COMPUTER HARDWARE-2.61%
Dell Inc.(c) 724,759 7,421,532
===============================================================================
CONSTRUCTION MATERIALS-1.74%
Cemex S.A.B. de C.V.-ADR (Mexico)(b)(c) 540,318 4,938,507
===============================================================================
CONSUMER FINANCE-4.41%
American Express Co. 340,900 6,323,695
- -------------------------------------------------------------------------------
SLM Corp.(c) 700,367 6,233,266
===============================================================================
12,556,961
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.46%
Western Union Co. 290,580 4,166,917
===============================================================================
DEPARTMENT STORES-2.46%
Kohl's Corp.(c) 193,712 7,012,374
===============================================================================
DIVERSIFIED CAPITAL MARKETS-1.90%
UBS AG-(Switzerland)(b)(c) 377,800 5,402,540
===============================================================================
EDUCATION SERVICES-1.53%
Apollo Group Inc.-Class A(c) 56,885 4,358,529
===============================================================================
ELECTRONIC MANUFACTURING SERVICES-0.68%
Tyco Electronics Ltd. 118,901 1,927,385
===============================================================================
GENERAL MERCHANDISE STORES-2.66%
Target Corp.(b) 219,420 7,576,573
===============================================================================
HEALTH CARE DISTRIBUTORS-1.28%
Cardinal Health, Inc. 105,396 3,633,000
===============================================================================
HOME IMPROVEMENT RETAIL-2.88%
Home Depot, Inc. (The) 356,113 8,197,721
===============================================================================
HOUSEHOLD APPLIANCES-1.62%
Whirlpool Corp.(b) 111,700 4,618,795
===============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-3.88%
Robert Half International, Inc.(b) 530,938 11,054,129
===============================================================================
INDUSTRIAL CONGLOMERATES-2.63%
General Electric Co. 200,074 3,241,199
- -------------------------------------------------------------------------------
Tyco International Ltd. 196,569 4,245,890
===============================================================================
7,487,089
===============================================================================
INDUSTRIAL MACHINERY-2.88%
Illinois Tool Works Inc.(b) 234,147 8,206,852
===============================================================================
INVESTMENT BANKING & BROKERAGE-3.05%
Merrill Lynch & Co., Inc. 236,132 2,748,577
- -------------------------------------------------------------------------------
Morgan Stanley 369,883 5,932,923
===============================================================================
8,681,500
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-1.72%
Waters Corp.(c) 133,323 4,886,288
===============================================================================
MANAGED HEALTH CARE-9.00%
Aetna Inc. 329,000 9,376,500
- -------------------------------------------------------------------------------
UnitedHealth Group Inc. 610,428 16,237,385
===============================================================================
25,613,885
===============================================================================
MOVIES & ENTERTAINMENT-1.19%
Walt Disney Co. (The) 149,486 3,391,837
===============================================================================
OIL & GAS DRILLING-0.49%
Transocean Ltd. (Switzerland)(c) 29,272 1,383,102
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.69%
Halliburton Co. 236,076 4,291,862
- -------------------------------------------------------------------------------
Weatherford International Ltd.(c) 309,586 3,349,720
===============================================================================
7,641,582
===============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-6.08%
Bank of America Corp. 158,700 2,234,496
- -------------------------------------------------------------------------------
Citigroup Inc. 834,097 5,596,791
- -------------------------------------------------------------------------------
JPMorgan Chase & Co. 300,185 9,464,833
===============================================================================
17,296,120
===============================================================================
PACKAGED FOODS & MEATS-1.47%
Unilever N.V. (Netherlands) 171,396 4,173,114
===============================================================================
PHARMACEUTICALS-2.44%
Sanofi-Aventis (France) 108,986 6,955,743
===============================================================================
PROPERTY & CASUALTY INSURANCE-1.06%
XL Capital Ltd.-Class A 812,851 3,007,549
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. BASIC VALUE FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
PUBLISHING-2.11%
McGraw-Hill Cos., Inc. (The) 259,300 $ 6,013,167
===============================================================================
REGIONAL BANKS-0.89%
Fifth Third Bancorp(b) 308,100 2,544,906
===============================================================================
SEMICONDUCTOR EQUIPMENT-7.13%
ASML Holding N.V. (Netherlands) 748,974 13,430,424
- -------------------------------------------------------------------------------
KLA-Tencor Corp.(b) 314,321 6,849,055
===============================================================================
20,279,479
===============================================================================
SEMICONDUCTORS-2.10%
Maxim Integrated Products, Inc. 522,423 5,966,071
===============================================================================
SPECIALIZED FINANCE-3.71%
Moody's Corp. 525,092 10,549,098
===============================================================================
SYSTEMS SOFTWARE-4.06%
CA Inc. 332,506 6,161,336
- -------------------------------------------------------------------------------
Microsoft Corp. 277,218 5,389,118
===============================================================================
11,550,454
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $400,286,795) 273,080,930
===============================================================================
MONEY MARKET FUNDS-4.02%
Liquid Assets Portfolio-Institutional Class(d) 5,723,205 5,723,205
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 5,723,205 5,723,205
===============================================================================
Total Money Market Funds (Cost $11,446,410) 11,446,410
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.98% (Cost $411,733,205) 284,527,340
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-11.40%
Liquid Assets Portfolio-Institutional Class (Cost
$32,429,472)(d)(e) 32,429,472 32,429,472
===============================================================================
TOTAL INVESTMENTS-111.38% (Cost $444,162,677) 316,956,812
===============================================================================
OTHER ASSETS LESS LIABILITIES-(11.38)% (32,389,531)
===============================================================================
NET ASSETS-100.00% $284,567,281
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1I.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost $400,286,795)* $ 273,080,930
- ---------------------------------------------------------------------------------
Investments in affiliated money market funds, at value and cost 43,875,882
=================================================================================
Total investments (Cost $444,162,677) 316,956,812
=================================================================================
Receivables for:
Fund shares sold 250,990
- ---------------------------------------------------------------------------------
Dividends 350,891
- ---------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans 17,550
=================================================================================
Total assets 317,576,243
_________________________________________________________________________________
=================================================================================
LIABILITIES:
Payables for:
Fund shares reacquired 163,824
- ---------------------------------------------------------------------------------
Collateral upon return of securities loaned 32,429,472
- ---------------------------------------------------------------------------------
Accrued fees to affiliates 269,688
- ---------------------------------------------------------------------------------
Accrued other operating expenses 73,321
- ---------------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 72,657
=================================================================================
Total liabilities 33,008,962
=================================================================================
Net assets applicable to shares outstanding $ 284,567,281
_________________________________________________________________________________
=================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 459,507,404
- ---------------------------------------------------------------------------------
Undistributed net investment income 4,480,578
- ---------------------------------------------------------------------------------
Undistributed net realized gain (loss) (52,214,836)
- ---------------------------------------------------------------------------------
Unrealized appreciation (depreciation) (127,205,865)
=================================================================================
$ 284,567,281
_________________________________________________________________________________
=================================================================================
NET ASSETS:
Series I $ 157,693,279
_________________________________________________________________________________
=================================================================================
Series II $ 126,874,002
_________________________________________________________________________________
=================================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 38,489,526
_________________________________________________________________________________
=================================================================================
Series II 31,199,553
_________________________________________________________________________________
=================================================================================
Series I:
Net asset value per share $ 4.10
_________________________________________________________________________________
=================================================================================
Series II:
Net asset value per share $ 4.07
_________________________________________________________________________________
=================================================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $32,539,078 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $115,581) $ 9,603,602
- ---------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities
lending income of $265,770) 466,018
=================================================================================
Total investment income 10,069,620
=================================================================================
EXPENSES:
Advisory fees 3,404,887
- ---------------------------------------------------------------------------------
Administrative services fees 1,338,849
- ---------------------------------------------------------------------------------
Custodian fees 47,422
- ---------------------------------------------------------------------------------
Distribution fees -- Series II 545,866
- ---------------------------------------------------------------------------------
Transfer agent fees 44,786
- ---------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 30,464
- ---------------------------------------------------------------------------------
Other 268,068
=================================================================================
Total expenses 5,680,342
=================================================================================
Less: Fees waived and expense offset arrangement(s) (15,792)
=================================================================================
Net expenses 5,664,550
=================================================================================
Net investment income 4,405,070
=================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains (losses) from
securities sold to affiliates of $(52,550)) (49,351,911)
- ---------------------------------------------------------------------------------
Foreign currencies 99,052
=================================================================================
(49,252,859)
=================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (280,398,583)
- ---------------------------------------------------------------------------------
Foreign currencies 7
=================================================================================
(280,398,576)
=================================================================================
Net realized and unrealized gain (loss) (329,651,435)
=================================================================================
Net increase (decrease) in net assets resulting from operations $(325,246,365)
_________________________________________________________________________________
=================================================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,405,070 $ 3,355,188
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (49,252,859) 90,845,412
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (280,398,576) (79,569,597)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (325,246,365) 14,631,003
=========================================================================================================
Distributions to shareholders from net investment income:
Series I (2,317,576) (2,486,739)
- ---------------------------------------------------------------------------------------------------------
Series II (1,044,721) (1,064,477)
=========================================================================================================
Total distributions from net investment income (3,362,297) (3,551,216)
=========================================================================================================
Distributions to shareholders from net realized gains:
Series I (50,134,173) (23,181,770)
- ---------------------------------------------------------------------------------------------------------
Series II (40,634,468) (17,896,086)
=========================================================================================================
Total distributions from net realized gains (90,768,641) (41,077,856)
=========================================================================================================
Share transactions-net:
Series I (7,248,339) (72,884,455)
- ---------------------------------------------------------------------------------------------------------
Series II 7,590,709 (22,324,644)
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions 342,370 (95,209,099)
=========================================================================================================
Net increase (decrease) in net assets (419,034,933) (125,207,168)
=========================================================================================================
NET ASSETS:
Beginning of year 703,602,214 828,809,382
=========================================================================================================
End of year (includes undistributed net investment income of
$4,480,578 and $3,285,259, respectively) $ 284,567,281 $ 703,602,214
_________________________________________________________________________________________________________
=========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. BASIC VALUE FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. BASIC VALUE FUND
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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The
Advisor did not waive fees and/or reimburse expenses during the period under
this expense limitation.
Also, the Advisor has contractually agreed, through at least April 30, 2010,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$9,954.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $124,739 for accounting and fund administrative
services and reimbursed $1,214,110 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
AIM V.I. BASIC VALUE FUND
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------------------------------------------------------------
Level 1 $292,397,531
- --------------------------------------------------------------------------------------------
Level 2 24,559,281
- --------------------------------------------------------------------------------------------
Level 3 --
============================================================================================
$316,956,812
____________________________________________________________________________________________
============================================================================================
</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, 2008, the Fund
engaged in securities purchases of $860,991 and securities sales of $1,045,324,
which resulted in net realized gains (losses) of $(52,550).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $5,838.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $4,608
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
AIM V.I. BASIC VALUE FUND
NOTE 7--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $12,265,002 $ 3,968,116
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 81,865,936 40,660,956
========================================================================================================
Total distributions $94,130,938 $44,629,072
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 4,561,876
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (137,867,426)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (80,645)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (40,544,208)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (1,009,720)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 459,507,404
================================================================================================
Total net assets $ 284,567,281
________________________________________________________________________________________________
================================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- ---------------------------------------------------------------------------------
December 31, 2016 $40,544,208
_________________________________________________________________________________
=================================================================================
</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, 2008 was $286,140,414 and
$375,483,628, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 16,212,834
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (154,080,260)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(137,867,426)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $454,824,238.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and proxy costs, on December 31, 2008, undistributed net investment
income was increased by $152,546, undistributed net realized gain (loss) was
decreased by $94,091 and shares of beneficial interest decreased by $58,455.
This reclassification had no effect on the net assets of the Fund.
AIM V.I. BASIC VALUE FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2008(a) 2007
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,778,569 $ 13,914,876 1,186,578 $ 16,337,122
- -------------------------------------------------------------------------------------------------------------------
Series II 2,620,573 20,597,994 3,442,657 47,498,968
===================================================================================================================
Issued as reinvestment of dividends:
Series I 12,700,181 52,451,749 1,956,442 25,668,509
- -------------------------------------------------------------------------------------------------------------------
Series II 10,165,656 41,679,189 1,458,505 18,960,563
===================================================================================================================
Reacquired:
Series I (7,399,923) (73,614,964) (8,375,086) (114,890,086)
- -------------------------------------------------------------------------------------------------------------------
Series II (5,649,845) (54,686,474) (6,480,533) (88,784,175)
===================================================================================================================
Net increase (decrease) in share activity 14,215,211 $ 342,370 (6,811,437) $ (95,209,099)
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco 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--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN(B)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended
12/31/08 $12.73 $ 0.10(a) $(6.68) $(6.58) $(0.09) $(1.96) $(2.05) $ 4.10 (51.77)%
Year ended
12/31/07 13.35 0.07(a) 0.17 0.24 (0.08) (0.78) (0.86) 12.73 1.62
Year ended
12/31/06 12.37 0.07(a) 1.54 1.61 (0.05) (0.58) (0.63) 13.35 13.12
Year ended
12/31/05 11.84 0.05 0.63 0.68 (0.01) (0.14) (0.15) 12.37 5.74
Year ended
12/31/04 10.66 0.02 1.16 1.18 -- -- -- 11.84 11.07
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended
12/31/08 12.62 0.07(a) (6.61) (6.54) (0.05) (1.96) (2.01) 4.07 (51.90)
Year ended
12/31/07 13.24 0.04(a) 0.16 0.20 (0.04) (0.78) (0.82) 12.62 1.36
Year ended
12/31/06 12.26 0.04(a) 1.54 1.58 (0.02) (0.58) (0.60) 13.24 12.94
Year ended
12/31/05 11.76 0.02 0.62 0.64 -- (0.14) (0.14) 12.26 5.43
Year ended
12/31/04 10.61 (0.01) 1.16 1.15 -- -- -- 11.76 10.84
___________________________________________________________________________________________________________________________________
===================================================================================================================================
<Caption>
RATIO OF
RATIO OF EXPENSES TO
EXPENSES AVERAGE NET
TO AVERAGE ASSETS WITHOUT RATIO OF NET
NET ASSETS FEE WAIVERS INVESTMENT
NET ASSETS, WITH FEE WAIVERS AND/OR INCOME (LOSS)
END OF PERIOD AND/OR EXPENSES EXPENSES TO AVERAGE NET PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED ASSETS TURNOVER
- ----------------------------------------------------------------------------------------------
SERIES I
Year ended
12/31/08 $157,693 1.03%(c) 1.03%(c) 0.99%(c) 58%
Year ended
12/31/07 399,974 0.96 0.99 0.52 25
Year ended
12/31/06 489,352 0.97 1.02 0.54 15
Year ended
12/31/05 487,332 0.97 1.02 0.38 16
Year ended
12/31/04 496,837 1.02 1.02 0.17 14
- ----------------------------------------------------------------------------------------------
SERIES II
Year ended
12/31/08 126,874 1.28(c) 1.28(c) 0.74(c) 58
Year ended
12/31/07 303,628 1.21 1.24 0.27 25
Year ended
12/31/06 339,457 1.22 1.27 0.29 15
Year ended
12/31/05 363,393 1.22 1.27 0.13 16
Year ended
12/31/04 353,605 1.27 1.27 (0.08) 14
______________________________________________________________________________________________
==============================================================================================
</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 (000's omitted) of $280,517
and $218,346 for Series I and Series II shares, respectively.
AIM V.I. BASIC VALUE 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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
AIM V.I. BASIC VALUE FUND
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 by correspondence with the
custodian and broker, 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $582.60 $4.14 $1,019.91 $5.28 1.04%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 582.00 5.13 1,018.65 6.55 1.29
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $81,865,936
Corporate Dividends Received Deduction* 73.53%
</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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. BASIC VALUE FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. BASIC VALUE FUND
[INVESCO AIM LOGO] AIM V.I. CAPITAL APPRECIATION FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. CAPITAL APPRECIATION FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY capitalizations. Additionally, we avoid
building concentrated position sizes and
A new management team led by Senior Portfolio Manager Rob Lloyd and Portfolio Manager expect to hold numerous stocks in the
Ryan Amerman took over management responsibilities for the Fund on February 4, 2008. A portfolio. Our target holding period is
detailed explanation of the team's investment strategy is included in this report. two to three years for each stock.
For the year ended December 31, 2008, Series I shares of AIM V.I. Capital We consider selling a stock when it no
Appreciation Fund, excluding variable product issuer charges, had negative returns and longer meets our investment criteria,
underperformed the Fund's style-specific index, the Russell 1000 Growth based on:
Index.(triangle) This underperformance was due to both stock selection and sector
allocation. The Fund's Series I shares, excluding variable product issuer charges, also o Deteriorating fundamental business
underperformed the broad market, represented by the S&P 500 Index. (triangle) prospects
Underperformance versus the S&P 500 Index was also due to stock selection and sector
allocation. o Declining quantitative rank
Your Fund's long-term performance appears later in this report. o Negative changes to the investment
thesis
FUND VS. INDEXES
o Finding a more attractive opportunity
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. If
variable product issuer charges were included, returns would be lower. MARKET CONDITIONS AND YOUR FUND
Series I Shares -42.49% Many factors contributed to the negative
Series II Shares -42.63 performance of most major market indexes
S&P 500 Index(triangle) (Broad Market Index) -36.99 for the year ended December 31, 2008.(1)
Russell 1000 Growth Index(triangle) (Style-Specific Index) -38.44 The chief catalyst was the ongoing
Lipper VUF Multi-Cap Growth Funds Category Average(triangle) (Peer Group) -42.50 subprime loan crisis and its far-reaching
effects on credit availability.
(triangle)Lipper Inc. Additionally, record high crude oil
======================================================================================= prices(2), falling home values and the
weak U.S. dollar placed significant
HOW WE INVEST in all areas of the market, including many pressure on the purchasing power of
sectors that are not traditionally consumers. Later in the year, consumer
We believe a growth investment strategy is identified as growth sectors. confidence fell and market volatility
an essential component of a diversified increased dramatically due to growing
portfolio. Our fundamental analysis focuses on fears of a global recession.
identifying industries and companies with
Our investment process seeks to strong fundamental drivers of high-quality To ensure the orderly functioning of
identify companies that generate growth in revenues, earnings and cash the credit markets and prevent a more
sustainable revenue, earnings and cash flow. Our valuation analysis focuses on severe economic downturn, in early October
flow growth that is not fully reflected in identifying attractively valued stocks Congress enacted a $700 billion rescue
investor expectations or equity based on their growth potential over a plan -- the Troubled Assets Relief
valuations. two- to three-year time horizon. Our Program. In addition, the U.S. Federal
timeliness analysis employs moving average Reserve, in concert with other central
We begin with a quantitative model that analysis and other selected factors to banks, dramatically lowered short-term
ranks companies based on a set of growth, identify the timeliness of a stock interest rates.
quality and timeliness factors. This transaction.
proprietary model provides an objective In this environment, the Fund's Series
approach to identifying new investment We carefully construct the portfolio I shares, excluding variable product
opportunities. with a goal to minimize unnecessary risk. issuer charges, underperformed the Russell
We seek to accomplish this goal by 1000 Growth Index for the year.(1)
Our stock selection process is based on diversifying portfolio holdings across Underperformance versus the index was
a rigorous three-step process that countries, sectors, industries and market driven mainly by stock selection in the
includes fundamental, valuation and industrials, consumer discretionary and
timeliness analysis. Importantly, we information technology (IT) sectors, as
search for compelling growth companies
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Consumer Staples 23.3% 1. Health Care Equipment 10.9% 1. Colgate-Palmolive Co. 4.6%
Health Care 23.0 2. Aerospace & Defense 10.0 2. Johnson & Johnson 4.5
Information Technology 14.2 3. Household Products 8.9 3. Procter & Gamble Co. 4.3
Industrials 14.1 4. Pharmaceuticals 7.3 4. Coca-Cola Co. (The) 4.1
Energy 6.1 5. Soft Drinks 7.2 5. Baxter International Inc. 4.0
Financials 5.3 ========================================== 6. Microsoft Corp. 3.3
Telecommunication Services 3.2 7. Kellogg Co. 3.1
Consumer Discretionary 1.3 ========================================== 8. Raytheon Co. 3.1
Materials 1.3 Total Net Assets $668.9 million 9. PepsiCo, Inc. 3.1
Money Market Funds Plus 10. Accenture Ltd. - Class A 2.9
Other Assets Less Liabilities 8.2 Total Number of Holdings* 74
========================================== ========================================== ==========================================
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
well as overweight positions in the leading contributors to Fund performance ROBERT LLOYD
materials and energy sectors. Some of this was tobacco holding UST. Chartered Financial
underperformance was offset by [LLOYD Analyst, senior
outperformance in the financials and Prior to the close of the year, we sold PHOTO] portfolio manager, is
consumer staples sectors. our holdings in both T. Rowe Price and lead manager of AIM V.I.
UST. Capital Appreciation
The Fund underperformed the Russell Fund. He joined Invesco Aim in 2000 and
1000 Growth Index by the widest margin in The Fund's cash position also helped was named a portfolio manager in 2001. Mr.
the industrials and materials sectors. the Fund's performance versus the Russell Lloyd earned a B.B.A. from the University
While underperformance in the industrials 1000 Growth Index given the weak market. of Notre Dame and an M.B.A. from the
sector was driven by both stock selection University of Chicago.
and an overweight position, During the year, our investment process
underperformance in the materials sector led us to reduce our exposure to the more RYAN AMERMAN
was driven primarily by an overweight economically sensitive IT and consumer Chartered Financial
position. Many holdings in these two discretionary sectors, as well as the [AMERMAN Analyst, portfolio
sectors were hurt by fears that the industrials, materials, energy and PHOTO] manager, is manager of
slowdown in the U.S. economy would lead to financials sectors. Proceeds from these AIM V.I. Capital
a global recession. Examples of holdings sales were primarily invested in the more Appreciation Fund. He
in these two sectors that detracted from defensive consumer staples and health care joined Invesco Aim in 1996. Mr. Amerman
Fund performance included materials sectors. earned a B.B.A. from Stephen F. Austin
holdings XSTRATA PLC and THE MOSAIC State University and an M.B.A. with an
COMPANY, as well as industrials holding We thank you for your commitment to AIM emphasis in finance from the University of
MCDERMOTT INTERNATIONAL. V.I. Capital Appreciation Fund. St. Thomas.
Underperformance in the IT and consumer (1) Lipper Inc. Assisted by the Large/Multi-Cap Growth
discretionary sectors was driven primarily (2) Bloomberg L.P. Team
by stock selection. The Fund also
underperformed in the energy sector, The views and opinions expressed in
largely due to an overweight position. management's discussion of Fund
After reaching record highs in July performance are those of Invesco Aim
2008(2), the price of oil fell sharply due Advisors, Inc. These views and opinions
to weakening demand caused by the global are subject to change at any time based on
economic slowdown. One of the leading factors such as market and economic
detractors from performance in the energy conditions. These views and opinions may
sector was NATIONAL OILWELL Varco. not be relied upon as investment advice or
recommendations, or as an offer for a
The Fund outperformed the Russell 1000 particular security. The information is
Growth Index by the widest margin in the not a complete analysis of every aspect of
financials sector. The financials sector any market, country, industry, security or
was the weakest performing sector in the the Fund. Statements of fact are from
index for the year, as the credit crisis sources considered reliable, but Invesco
intensified and a liquidity crunch Aim Advisors, Inc. makes no representation
emerged. Outperformance versus the index or warranty as to their completeness or
was driven by stock selection and an accuracy. Although historical performance
underweight position in the financials is no guarantee of future results, these
sector. insights may help you understand our
investment management philosophy.
One contributor to Fund performance was
financial services holding T. ROWE PRICE. See important Fund and index disclosures
The Fund's underweight positions in the later in this report.
capital markets, consumer finance,
diversi-fied financials and real estate
industries were also key drivers of
outperformance versus the index, as many
companies in those industries had steep
declines in their stock prices when
investor confidence faltered.
The Fund also outperformed the Russell
1000 Growth Index in the consumer staples
sector, due to both an overweight position
and stock selection. While the consumer
staples sector had negative returns, its
more defensive nature made it a refuge in
the volatile market, and it held up better
than all other sectors in the index. One
of the
AIM V.I. CAPITAL APPRECIATION FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. AIM V.I. CAPITAL APPRECIATION FUND, A
As of 12/31/08 SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
THE PERFORMANCE DATA QUOTED REPRESENT FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES PAST PERFORMANCE AND CANNOT GUARANTEE INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/5/93) 4.65% COMPARABLE FUTURE RESULTS; CURRENT PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years -2.59 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years -4.49 CONTACT YOUR VARIABLE PRODUCT ISSUER OR GIVEN REPRESENT THE FUND AND ARE NOT
1 Year -42.49 FINANCIAL ADVISOR FOR THE MOST RECENT INTENDED TO REFLECT ACTUAL VARIABLE
MONTH-END VARIABLE PRODUCT PERFORMANCE. PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES PERFORMANCE FIGURES REFLECT FUND EXPENSES, CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years -2.82% REINVESTED DISTRIBUTIONS AND CHANGES IN CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years -4.73 NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year -42.63 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU DETERMINED BY THE VARIABLE PRODUCT
========================================== MAY HAVE A GAIN OR LOSS WHEN YOU SELL ISSUERS, WILL VARY AND WILL LOWER THE
SHARES. TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS AUGUST
21, 2001. RETURNS SINCE THAT DATE ARE THE TOTAL ANNUAL FUND OPERATING EXPENSE THE MOST RECENT MONTH-END PERFORMANCE
HISTORICAL. ALL OTHER RETURNS ARE THE RATIO SET FORTH IN THE MOST RECENT FUND DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
BLENDED RETURNS OF THE HISTORICAL PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, IS AVAILABLE ON THIS
PERFORMANCE OF SERIES II SHARES SINCE FOR SERIES I AND SERIES II SHARES WAS INVESCO AIM AUTOMATED INFORMATION LINE,
THEIR INCEPTION AND THE RESTATED 0.88% AND 1.13%, RESPECTIVELY. THE EXPENSE 866 702 4402. AS MENTIONED ABOVE, FOR THE
HISTORICAL PERFORMANCE OF SERIES I SHARES RATIOS PRESENTED ABOVE MAY VARY FROM THE MOST RECENT MONTH-END PERFORMANCE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES EXPENSE RATIOS PRESENTED IN OTHER SECTIONS INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
II SHARES) ADJUSTED TO REFLECT THE RULE OF THIS REPORT THAT ARE BASED ON EXPENSES CONTACT YOUR VARIABLE PRODUCT ISSUER OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. INCURRED DURING THE PERIOD COVERED BY THIS FINANCIAL ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS REPORT.
MAY 5, 1993.
THE PERFORMANCE OF THE FUND'S SERIES I
AND SERIES II SHARE CLASSES WILL DIFFER
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/93, Fund data from 5/5/93
Lipper VUF
AIM V.I. Capital Multi-Cap Growth
Appreciation Fund- S&P 500 Russell 1000 Funds Category
Date Series I Shares Index(1) Growth Index(1) Average(1)
4/30/93 $ 10000 $ 10000 $10000
5/93 $10320 10267 10350 10492
6/93 10200 10297 10256 10576
7/93 10390 10255 10072 10533
8/93 10990 10644 10486 11083
9/93 11370 10562 10409 11411
10/93 11440 10780 10698 11536
11/93 11261 10678 10626 11216
12/93 11950 10807 10809 11564
1/94 12590 11174 11060 11921
2/94 12831 10871 10857 11811
3/94 11820 10398 10332 11141
4/94 11940 10531 10380 11092
5/94 11770 10703 10537 11044
6/94 11099 10441 10225 10581
7/94 11378 10784 10575 10843
8/94 12209 11225 11163 11533
9/94 12239 10950 11012 11413
10/94 12620 11196 11271 11670
11/94 12070 10789 10910 11266
12/94 12249 10949 11092 11439
1/95 12098 11232 11330 11440
2/95 12750 11670 11804 11912
3/95 13343 12013 12149 12306
4/95 13624 12367 12414 12498
5/95 13996 12860 12846 12805
6/95 15101 13159 13342 13674
7/95 16537 13595 13897 14692
8/95 16677 13629 13912 14946
9/95 17259 14204 14553 15429
10/95 16888 14153 14563 15222
11/95 17089 14773 15129 15773
12/95 16621 15058 15216 15754
1/96 16772 15570 15725 16071
2/96 17666 15715 16013 16622
3/96 17647 15866 16033 16820
4/96 18732 16100 16455 17590
5/96 19324 16514 17030 18074
6/96 18601 16577 17053 17696
7/96 17005 15845 16054 16328
8/96 17980 16180 16468 17061
9/96 19346 17090 17667 18189
10/96 19035 17561 17774 18095
11/96 19979 18887 19108 18999
12/96 19547 18513 18734 18640
1/97 20403 19669 20048 19645
2/97 19559 19824 19913 19003
3/97 18362 19011 18835 17980
4/97 18694 20144 20086 18428
5/97 20535 21376 21535 19968
6/97 21180 22326 22397 20681
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
7/97 23353 24102 24378 22584
8/97 23082 22753 22951 22071
9/97 24190 23998 24080 23468
10/97 22649 23198 23190 22549
11/97 22398 24271 24175 22621
12/97 22192 24687 24446 22768
1/98 21764 24960 25177 22868
2/98 23814 26759 27071 24819
3/98 24609 28129 28150 26037
4/98 25222 28417 28540 26373
5/98 24069 27929 27730 25434
6/98 25039 29063 29428 26739
7/98 24163 28755 29234 26068
8/98 19683 24601 24846 21425
9/98 21346 26178 26755 23028
10/98 22388 28304 28905 24317
11/98 23736 30019 31104 26083
12/98 26480 31748 33909 29030
1/99 26954 33075 35900 30821
2/99 25250 32047 34260 29166
3/99 26386 33329 36064 30709
4/99 27228 34620 36110 31553
5/99 27114 33803 35000 31064
6/99 29006 35674 37452 33111
7/99 28156 34565 36262 32350
8/99 28018 34394 36854 32046
9/99 28206 33452 36080 32062
10/99 30257 35568 38805 34146
11/99 32853 36291 40898 36932
12/99 38300 38425 45152 42727
1/00 37645 36495 43035 41172
2/00 42576 35805 45139 46022
3/00 43619 39305 48369 47218
4/00 40283 38123 46068 43573
5/00 37874 37342 43748 40845
6/00 41456 38261 47064 44223
7/00 41046 37664 45102 43051
8/00 46439 40002 49185 47438
9/00 43834 37891 44533 44839
10/00 40854 37730 42425 42242
11/00 33124 34757 36172 35775
12/00 34124 34928 35027 36244
1/01 35783 36166 37447 37338
2/01 30229 32871 31090 31525
3/01 26910 30790 27706 27994
4/01 29588 33180 31211 31493
5/01 29289 33403 30751 31355
6/01 28759 32590 30039 30872
7/01 27675 32269 29288 29239
8/01 25306 30251 26893 26803
9/01 22120 27809 24208 23268
10/01 23391 28339 25478 24822
11/01 25738 30512 27926 27272
12/01 26180 30780 27873 27760
1/02 25722 30331 27381 27052
2/02 24624 29746 26245 25683
3/02 26119 30865 27152 27055
4/02 24611 28994 24936 25524
5/02 24154 28781 24333 24908
6/02 22465 26732 22082 22726
7/02 20417 24649 20868 20702
8/02 20368 24810 20931 20637
9/02 18789 22116 18759 19019
10/02 20465 24061 20480 20412
11/02 21296 25476 21593 21604
12/02 19801 23980 20101 20104
1/03 19270 23353 19613 19843
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
2/03 19185 23002 19523 19662
3/03 19450 23225 19887 19991
4/03 20751 25137 21357 21512
5/03 21777 26460 22423 23031
6/03 22053 26798 22732 23328
7/03 22874 27271 23297 23995
8/03 23740 27801 23877 24890
9/03 22945 27507 23621 24370
10/03 24583 29062 24948 26103
11/03 25102 29318 25209 26526
12/03 25644 30854 26081 27141
1/04 26114 31420 26614 27809
2/04 26320 31857 26783 28053
3/04 25875 31376 26286 27851
4/04 25068 30885 25980 27010
5/04 25587 31308 26465 27642
6/04 26178 31916 26795 28220
7/04 24563 30860 25281 26326
8/04 24140 30984 25156 25942
9/04 24852 31319 25395 26894
10/04 25466 31798 25791 27416
11/04 26622 33084 26678 28877
12/04 27346 34209 27724 29995
1/05 26575 33376 26800 29029
2/05 27093 34077 27085 29421
3/05 26430 33475 26591 28873
4/05 25489 32840 26085 27921
5/05 26669 33884 27347 29560
6/05 26730 33933 27246 29879
7/05 28118 35194 28578 31436
8/05 28092 34873 28210 31319
9/05 28876 35155 28340 31921
10/05 28382 34569 28064 31429
11/05 29540 35875 29275 32947
12/05 29762 35888 29183 33217
1/06 31208 36838.26 29695.7 34911
2/06 30812 36938 29649 34269
3/06 31536 37398 30086 34975
4/06 31728 37899 30045 35213
5/06 29859 36810 29027 33262
6/06 29653 36859 28912 33162
7/06 28666 37086 28362 32204
8/06 29294 37967 29247 32999
9/06 30211 38945 30050 33656
10/06 30851 40213 31107 34931
11/06 31564 40977 31724 36053
12/06 31643 41552 31831 35952
1/07 32136 42179 32650 36775
2/07 31532 41357 32036 36176
3/07 32112 41819 32210 36501
4/07 33512 43670 33726 38085
5/07 35191 45193 34939 39670
6/07 34699 44442 34418 39396
7/07 33866 43066 33884 38750
8/07 34492 43711 34424 39343
9/07 36183 45344 35866 41522
10/07 37547 46065 37087 43407
11/07 35771 44138 35721 41172
12/07 35445 43833 35592 41139
1/08 31631 41204 32816 37589
2/08 30787 39867 32165 36664
3/08 30208 39694 31969 36037
4/08 31993 41627 33647 38210
5/08 33513 42166 34880 39654
6/08 31462 38615 32368 36768
7/08 30109 38290 31753 35856
8/08 29712 38844 32095 35888
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
9/08 26066 35387 28378 31058
10/08 21551 29444 23382 25247
11/08 19911 27331 21522 22813
12/08 20362 27619 21911 23436
====================================================================================================================================
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CAPITAL APPRECIATION FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND The prices of initial public offering A direct investment cannot be made in
(IPO) securities may go up and down more an index. Unless otherwise indicated,
The Fund may engage in active and frequent than prices of equity securities of index results include reinvested
trading of portfolio securities to achieve companies with longer trading histories. dividends, and they do not reflect sales
its investment objective. If a fund does In addition, companies offering securities charges. Performance of an index of funds
trade in this way, it may incur increased in IPOs may have less experienced reflects fund expenses; performance of a
costs, which can lower the actual return management or limited operating histories. market index does not.
of the fund. Active trading may also There can be no assurance that the Fund
increase short term gains and losses, will have favorable IPO investment OTHER INFORMATION
which may affect taxes that must be paid. opportunities.
The Chartered Financial
Since a large percentage of the Fund's ABOUT INDEXES USED IN THIS REPORT Analyst--REGISTERED TRADEMARK--
assets may be invested in securities of a (CFA--REGISTERED TRADEMARK--) designation
limited number of companies, each The S&P 500--REGISTERED TRADEMARK-- INDEX is a globally recognized standard for
investment has a greater effect on the is a market capitalization-weighted index measuring the competence and integrity of
Fund's overall performance, and any change covering all major areas of the U.S. investment professionals.
in the value of those securities could economy. It is not the 500 largest
significantly affect the value of your companies, but rather the most widely held The returns shown in management's
investment in the Fund. 500 companies chosen with respect to discussion of Fund performance are based
market size, liquidity, and their on net asset values calculated for
Prices of equity securities change in industry. shareholder transactions. Generally
response to many factors, including the accepted accounting principles require
historical and prospective earnings of the The RUSSELL 1000--REGISTERED adjustments to be made to the net assets
issuer, the value of its assets, general TRADEMARK-- GROWTH INDEX measures the of the Fund at period end for financial
economic conditions, interest rates, performance of those Russell 1000 reporting purposes, and as such, the net
investor perceptions and market liquidity. companies with higher price-to-book ratios asset values for shareholder transactions
and higher forecasted growth values. The and the returns based on those net asset
Foreign securities have additional Russell 1000 Growth Index is a values may differ from the net asset
risks, including exchange rate changes, trademark/service mark of the Frank values and returns reported in the
political and economic upheaval, relative Russell Company. Russell--REGISTERED Financial Highlights. Additionally, the
lack of information, relatively low market TRADEMARK-- is a trademark of the Frank returns and net asset values shown
liquidity, and the potential lack of Russell Company. throughout this report are at the Fund
strict financial and accounting controls level only and do not include variable
and standards. The LIPPER VUF MULTI-CAP GROWTH FUNDS product issuer charges. If such charges
CATEGORY AVERAGE represents an average of were included, the total returns would be
There is no guarantee that the all of the variable insurance underlying lower.
investment techniques and risk analysis funds in the Lipper Multi-Cap Growth Funds
used by the Fund's portfolio managers will category. These funds typically have an Industry classifications used in this
produce the desired results. above-average price-to-earnings ratio, report are generally according to the
price-to-book ratio, and three-year Global Industry Classification Standard,
The prices of securities held by the sales-per-share growth value, compared to which was developed by and is the
Fund may decline in response to market the S&P Composite 1500 Index. exclusive property and a service mark of
risks. MSCI Inc. and Standard & Poor's.
The Fund is not managed to track the
Investing in a fund that invests in performance of any particular index,
smaller companies involves risks not including the indexes defined here, and
associated with investing in more consequently, the performance of the Fund
established companies, such as business may deviate significantly from the
risk, stock price fluctuations and performance of the indexes.
illiquidity.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.82%
AEROSPACE & DEFENSE-10.05%
General Dynamics Corp. 117,598 $ 6,772,469
- -------------------------------------------------------------------------------
Honeywell International Inc. 252,347 8,284,552
- -------------------------------------------------------------------------------
Lockheed Martin Corp. 123,988 10,424,911
- -------------------------------------------------------------------------------
Raytheon Co. 405,980 20,721,219
- -------------------------------------------------------------------------------
Rockwell Collins, Inc. 75,697 2,958,996
- -------------------------------------------------------------------------------
Spirit AeroSystems Holdings Inc.-Class A(b) 223,020 2,268,113
- -------------------------------------------------------------------------------
United Technologies Corp. 294,301 15,774,534
===============================================================================
67,204,794
===============================================================================
APPLICATION SOFTWARE-1.95%
Adobe Systems Inc.(b) 366,446 7,801,635
- -------------------------------------------------------------------------------
Amdocs Ltd.(b) 139,898 2,558,735
- -------------------------------------------------------------------------------
Autodesk, Inc.(b) 138,145 2,714,549
===============================================================================
13,074,919
===============================================================================
BIOTECHNOLOGY-3.67%
Genentech, Inc.(b) 63,895 5,297,534
- -------------------------------------------------------------------------------
Gilead Sciences, Inc.(b) 377,092 19,284,485
===============================================================================
24,582,019
===============================================================================
COAL & CONSUMABLE FUELS-0.81%
CONSOL Energy Inc. 107,402 3,069,549
- -------------------------------------------------------------------------------
Peabody Energy Corp. 102,422 2,330,101
===============================================================================
5,399,650
===============================================================================
COMMUNICATIONS EQUIPMENT-2.95%
Cisco Systems, Inc.(b) 309,038 5,037,319
- -------------------------------------------------------------------------------
Nokia-ADR (Finland) 490,404 7,650,303
- -------------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(b) 173,045 7,022,166
===============================================================================
19,709,788
===============================================================================
COMPUTER HARDWARE-0.92%
Apple Inc.(b) 33,261 2,838,826
- -------------------------------------------------------------------------------
International Business Machines Corp. 39,725 3,343,256
===============================================================================
6,182,082
===============================================================================
CONSTRUCTION & ENGINEERING-0.72%
Fluor Corp. 75,619 3,393,025
- -------------------------------------------------------------------------------
Foster Wheeler Ltd.(b) 60,221 1,407,967
===============================================================================
4,800,992
===============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.23%
Joy Global Inc. 67,578 1,546,860
===============================================================================
DIVERSIFIED METALS & MINING-0.43%
BHP Billiton Ltd. (Australia) 94,155 2,022,209
- -------------------------------------------------------------------------------
Xstrata PLC (United Kingdom) 91,438 864,982
===============================================================================
2,887,191
===============================================================================
EDUCATION SERVICES-0.40%
Apollo Group Inc.-Class A(b) 34,492 2,642,777
===============================================================================
ELECTRONIC MANUFACTURING SERVICES-0.34%
Trimble Navigation Ltd.(b) 106,090 2,292,605
===============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.88%
Waste Management, Inc. 379,627 12,580,839
===============================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.91%
Monsanto Co. 15,653 1,101,189
- -------------------------------------------------------------------------------
Mosaic Co. (The) 78,519 2,716,757
- -------------------------------------------------------------------------------
Potash Corp. of Saskatchewan Inc. (Canada) 31,222 2,286,075
===============================================================================
6,104,021
===============================================================================
FOOD RETAIL-2.17%
Kroger Co. (The) 548,394 14,483,086
===============================================================================
HEALTH CARE EQUIPMENT-10.90%
Baxter International Inc. 501,590 26,880,208
- -------------------------------------------------------------------------------
Becton, Dickinson and Co. 270,095 18,471,797
- -------------------------------------------------------------------------------
Medtronic, Inc. 340,450 10,696,939
- -------------------------------------------------------------------------------
St. Jude Medical, Inc.(b) 511,386 16,855,283
===============================================================================
72,904,227
===============================================================================
HEALTH CARE SERVICES-1.18%
Express Scripts, Inc.(b) 61,618 3,387,757
- -------------------------------------------------------------------------------
Quest Diagnostics Inc. 86,269 4,478,224
===============================================================================
7,865,981
===============================================================================
HEAVY ELECTRICAL EQUIPMENT-0.18%
ABB Ltd. (Switzerland) 82,244 1,237,294
===============================================================================
HOUSEHOLD PRODUCTS-8.87%
Colgate-Palmolive Co. 449,384 30,800,779
- -------------------------------------------------------------------------------
Procter & Gamble Co. (The) 461,235 28,513,548
===============================================================================
59,314,327
===============================================================================
INDUSTRIAL CONGLOMERATES-0.32%
McDermott International, Inc.(b) 216,707 2,141,065
===============================================================================
INSURANCE BROKERS-0.50%
Aon Corp. 73,273 3,347,111
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. CAPITAL APPRECIATION FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
INTEGRATED OIL & GAS-2.39%
Exxon Mobil Corp. 35,520 $ 2,835,562
- -------------------------------------------------------------------------------
Marathon Oil Corp. 93,762 2,565,328
- -------------------------------------------------------------------------------
Occidental Petroleum Corp. 175,954 10,555,480
===============================================================================
15,956,370
===============================================================================
INTERNET SOFTWARE & SERVICES-1.34%
Google Inc.-Class A(b) 29,240 8,995,686
===============================================================================
IT CONSULTING & OTHER SERVICES-3.41%
Accenture Ltd.-Class A 592,569 19,430,337
- -------------------------------------------------------------------------------
Cognizant Technology Solutions Corp.-Class A(b) 186,330 3,365,120
===============================================================================
22,795,457
===============================================================================
MARINE-0.24%
Mitsui O.S.K. Lines, Ltd. (Japan) 48,336 296,591
- -------------------------------------------------------------------------------
Nippon Yusen Kabushiki Kaisha (Japan) 209,097 1,288,474
===============================================================================
1,585,065
===============================================================================
MULTI-LINE INSURANCE-0.41%
Assurant, Inc. 92,300 2,769,000
===============================================================================
OIL & GAS DRILLING-0.76%
Transocean Ltd. (Switzerland)(b) 107,268 5,068,413
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-1.70%
Baker Hughes Inc. 79,187 2,539,527
- -------------------------------------------------------------------------------
Cameron International Corp.(b) 129,155 2,647,678
- -------------------------------------------------------------------------------
National-Oilwell Varco Inc.(b) 147,355 3,601,356
- -------------------------------------------------------------------------------
Schlumberger Ltd. 60,595 2,564,986
===============================================================================
11,353,547
===============================================================================
OIL & GAS REFINING & MARKETING-0.42%
Valero Energy Corp. 129,097 2,793,659
===============================================================================
PACKAGED FOODS & MEATS-4.58%
General Mills, Inc. 158,169 9,608,767
- -------------------------------------------------------------------------------
Kellogg Co. 479,930 21,044,930
===============================================================================
30,653,697
===============================================================================
PERSONAL PRODUCTS-0.48%
Avon Products, Inc. 132,895 3,193,467
===============================================================================
PHARMACEUTICALS-7.31%
Abbott Laboratories 249,034 13,290,945
- -------------------------------------------------------------------------------
Johnson & Johnson 503,438 30,120,695
- -------------------------------------------------------------------------------
Shire PLC (United Kingdom) 370,645 5,499,963
===============================================================================
48,911,603
===============================================================================
PROPERTY & CASUALTY INSURANCE-4.39%
ACE Ltd. (Switzerland) 268,894 14,229,870
- -------------------------------------------------------------------------------
Chubb Corp. (The) 296,648 15,129,048
===============================================================================
29,358,918
===============================================================================
PUBLISHING-0.39%
Morningstar, Inc.(b) 72,835 2,585,643
===============================================================================
RAILROADS-0.48%
Norfolk Southern Corp. 45,967 2,162,747
- -------------------------------------------------------------------------------
Union Pacific Corp. 22,452 1,073,206
===============================================================================
3,235,953
===============================================================================
RESTAURANTS-0.50%
McDonald's Corp. 53,814 3,346,693
===============================================================================
SOFT DRINKS-7.18%
Coca-Cola Co. (The) 606,977 27,477,849
- -------------------------------------------------------------------------------
PepsiCo, Inc. 375,606 20,571,940
===============================================================================
48,049,789
===============================================================================
SYSTEMS SOFTWARE-3.28%
Microsoft Corp. 1,127,326 21,915,217
===============================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.18%
China Mobile Ltd. (China) 399,211 4,047,497
- -------------------------------------------------------------------------------
KDDI Corp. (Japan) 2,420 17,221,931
===============================================================================
21,269,428
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $715,842,107) 614,139,233
===============================================================================
MONEY MARKET FUNDS-7.36%
Liquid Assets Portfolio-Institutional Class(c) 24,636,873 24,636,873
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 24,636,873 24,636,873
===============================================================================
Total Money Market Funds (Cost $49,273,746) 49,273,746
===============================================================================
TOTAL INVESTMENTS-99.18% (Cost $765,115,853) 663,412,979
===============================================================================
OTHER ASSETS LESS LIABILITIES-0.82% 5,460,385
===============================================================================
NET ASSETS-100.00% $668,873,364
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$715,842,107) $ 614,139,233
- -------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 49,273,746
=======================================================
Total investments (Cost
$765,115,853) 663,412,979
=======================================================
Foreign currencies, at value (Cost
$4,923,602) 4,947,465
- -------------------------------------------------------
Receivables for:
Investments sold 113,845
- -------------------------------------------------------
Fund shares sold 755,716
- -------------------------------------------------------
Dividends 826,337
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 104,319
- -------------------------------------------------------
Other assets 387
=======================================================
Total assets 670,161,048
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 408,061
- -------------------------------------------------------
Accrued fees to affiliates 523,983
- -------------------------------------------------------
Accrued other operating expenses 106,950
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 248,690
=======================================================
Total liabilities 1,287,684
=======================================================
Net assets applicable to shares
outstanding $ 668,873,364
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,112,502,660
- -------------------------------------------------------
Undistributed net investment income 2,790,334
- -------------------------------------------------------
Undistributed net realized gain (loss) (344,740,104)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (101,679,526)
=======================================================
$ 668,873,364
_______________________________________________________
=======================================================
NET ASSETS:
Series I $ 492,079,229
_______________________________________________________
=======================================================
Series II $ 176,794,135
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 29,126,521
_______________________________________________________
=======================================================
Series II 10,643,840
_______________________________________________________
=======================================================
Series I:
Net asset value per share $ 16.89
_______________________________________________________
=======================================================
Series II:
Net asset value per share $ 16.61
_______________________________________________________
=======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $80,410) $ 12,072,724
- -------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $98,623) 1,233,538
=======================================================
Total investment income 13,306,262
=======================================================
EXPENSES:
Advisory fees 6,357,740
- -------------------------------------------------------
Administrative services fees 2,674,046
- -------------------------------------------------------
Custodian fees 89,080
- -------------------------------------------------------
Distribution fees -- Series II 652,493
- -------------------------------------------------------
Transfer agent fees 71,537
- -------------------------------------------------------
Trustees' and officers' fees and
benefits 47,030
- -------------------------------------------------------
Other 268,647
=======================================================
Total expenses 10,160,573
=======================================================
Less: Fees waived and expense offset
arrangement(s) (50,926)
- -------------------------------------------------------
Net expenses 10,109,647
- -------------------------------------------------------
Net investment income 3,196,615
=======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of $(737,523)) (106,531,607)
- -------------------------------------------------------
Foreign currencies (173,302)
=======================================================
(106,704,909)
=======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (443,154,750)
- -------------------------------------------------------
Foreign currencies 23,000
=======================================================
(443,131,750)
=======================================================
Net realized and unrealized gain (loss) (549,836,659)
=======================================================
Net increase (decrease) in net assets
resulting from operations $(546,640,044)
_______________________________________________________
=======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 3,196,615 $ (453,651)
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (106,704,909) 84,198,829
- ------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (443,131,750) 90,262,939
============================================================================================================
Net increase (decrease) in net assets resulting from operations (546,640,044) 174,008,117
============================================================================================================
SHARE TRANSACTIONS-NET:
Series I (183,737,135) (250,049,373)
- ------------------------------------------------------------------------------------------------------------
Series II (36,720,561) (63,863,071)
============================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (220,457,696) (313,912,444)
============================================================================================================
Net increase (decrease) in net assets (767,097,740) (139,904,327)
____________________________________________________________________________________________________________
============================================================================================================
NET ASSETS:
Beginning of year 1,435,971,104 1,575,875,431
============================================================================================================
End of year (includes undistributed net investment income of
$2,790,334 and $(284,803), respectively) $ 668,873,364 $1,435,971,104
____________________________________________________________________________________________________________
============================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. CAPITAL APPRECIATION FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. CAPITAL APPRECIATION FUND
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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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, the Advisor 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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The
Advisor did not waive fees and/or reimburse expenses during the period under
this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$50,220.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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
AIM V.I. CAPITAL APPRECIATION FUND
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, 2008, Invesco Aim was paid $248,922 for accounting and fund administrative
services and reimbursed $2,425,124 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INPUT LEVEL INVESTMENTS IN SECURITIES
- -----------------------------------------------------------------------------------------------------
Level 1 $630,934,038
- -----------------------------------------------------------------------------------------------------
Level 2 32,478,941
- -----------------------------------------------------------------------------------------------------
Level 3 --
=====================================================================================================
$663,412,979
_____________________________________________________________________________________________________
=====================================================================================================
</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, 2008, the Fund
engaged in securities purchases of $5,575,478 and securities sales of
$2,944,409, which resulted in net realized gains (losses) of $(737,523).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $706.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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
AIM V.I. CAPITAL APPRECIATION FUND
and receive benefits under such plan. "Trustees' and Officers' 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, 2008, the Fund paid legal fees of $6,159
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
There were no ordinary income or long term capital gain distributions paid
during the years ended December 31, 2008 and 2007.
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 3,436,061
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (110,397,308)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 23,348
- -------------------------------------------------------------------------------------------------
Temporary book/tax differences (294,915)
- -------------------------------------------------------------------------------------------------
Capital loss carryforward (205,110,697)
- -------------------------------------------------------------------------------------------------
Post-October loss deferrals (131,285,785)
- -------------------------------------------------------------------------------------------------
Shares of beneficial interest 1,112,502,660
=================================================================================================
Total net assets $ 668,873,364
_________________________________________________________________________________________________
=================================================================================================
</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 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.
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 to utilizing
$185,737,883 of capital loss carryforward in the fiscal year ending December 31,
2009.
The Fund utilized $26,543,378 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, 2008 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $ 8,262,478
- -----------------------------------------------------------------------------------------------
December 31, 2010 140,535,267
- -----------------------------------------------------------------------------------------------
December 31, 2011 56,312,952
===============================================================================================
Total capital loss carryforward $205,110,697
_______________________________________________________________________________________________
===============================================================================================
</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 Series I and II shares of the Fund valued at
$56,570,503 were redeemed by a significant shareholder and settled through a
redemption-in-kind transaction, which resulted in a realized gain of $11,904,147
to the Fund for book purposes. From a federal income tax perspective, the
realized gains are not recognized.
AIM V.I. CAPITAL APPRECIATION FUND
NOTE 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, 2008 was $1,044,911,980 and
$1,287,824,363, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 29,836,672
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (140,233,980)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(110,397,308)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $773,810,287.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, expired capital loss carryforward, and proxy costs on December 31,
2008, undistributed net investment income was decreased by $121,478,
undistributed net realized gain (loss) was increased by $1,843,766 and shares of
beneficial interest decreased by $1,722,288. This reclassification had no effect
on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2008(a) 2007
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,708,428 $ 40,436,878 2,435,959 $ 69,086,990
- --------------------------------------------------------------------------------------------------------------------------
Series II 1,300,851 26,652,962 1,121,588 30,704,269
==========================================================================================================================
Reacquired:
Series I (9,585,390) (224,174,013) (11,374,631) (319,136,363)
- --------------------------------------------------------------------------------------------------------------------------
Series II (2,724,387) (63,373,523) (3,386,840) (94,567,340)
==========================================================================================================================
Net increase (decrease) in share activity (9,300,498) $(220,457,696) (11,203,924) $(313,912,444)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 51% 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. CAPITAL APPRECIATION FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET (LOSSES)
VALUE, ON SECURITIES (BOTH TOTAL FROM
BEGINNING NET INVESTMENT REALIZED AND INVESTMENT DIVIDENDS FROM NET NET ASSET VALUE,
SERIES I OF PERIOD INCOME (LOSS) UNREALIZED) OPERATIONS INVESTMENT INCOME END OF PERIOD
- -------------------------------------------------------------------------------------------------------------------
Year ended
12/31/08 $29.37 $ 0.09(c) $(12.57) $(12.48) $ -- $16.89
Year ended
12/31/07 26.22 0.01 3.14 3.15 -- 29.37
Year ended
12/31/06 24.67 0.01 1.55 1.56 (0.01) 26.22
Year ended
12/31/05 22.69 0.03 1.97 2.00 (0.02) 24.67
Year ended
12/31/04 21.28 0.02(e) 1.39 1.41 -- 22.69
- -------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended
12/31/08 28.95 0.03(c) (12.37) (12.34) -- 16.61
Year ended
12/31/07 25.91 (0.07) 3.11 3.04 -- 28.95
Year ended
12/31/06 24.43 (0.05) 1.53 1.48 -- 25.91
Year ended
12/31/05 22.50 (0.03) 1.96 1.93 -- 24.43
Year ended
12/31/04 21.16 (0.02)(e) 1.36 1.34 -- 22.50
___________________________________________________________________________________________________________________
===================================================================================================================
<Caption>
RATIO OF EXPENSES RATIO OF EXPENSES
TO AVERAGE NET TO AVERAGE NET RATIO OF NET
NET ASSETS, END OF ASSETS WITH FEE ASSETS WITHOUT FEE INVESTMENT INCOME
PERIOD (000S WAIVERS AND/OR WAIVERS AND/OR (LOSS) TO AVERAGE PORTFOLIO
SERIES I TOTAL RETURN(A) OMITTED) EXPENSES ABSORBED EXPENSES ABSORBED NET ASSETS TURNOVER(B)
- -----------------------------------------------------------------------------------------------------------------------------
Year ended
12/31/08 (42.49)% $ 492,079 0.91%(d) 0.91%(d) 0.37%(d) 103%
Year ended
12/31/07 12.01 1,086,677 0.88 0.88 0.03 71
Year ended
12/31/06 6.34 1,204,559 0.91 0.91 0.06 120
Year ended
12/31/05 8.79 822,899 0.89 0.89 0.11 97
Year ended
12/31/04 6.62 886,990 0.91 0.91 0.09(e) 74
- -----------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended
12/31/08 (42.63) 176,794 1.16(d) 1.16(d) 0.12(d) 103
Year ended
12/31/07 11.73 349,294 1.13 1.13 (0.22) 71
Year ended
12/31/06 6.06 371,316 1.16 1.16 (0.19) 120
Year ended
12/31/05 8.58 339,190 1.14 1.14 (0.14) 97
Year ended
12/31/04 6.33 136,982 1.16 1.16 (0.16)(e) 74
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</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) Portfolio turnover is calculated at the fund level, and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $777,793
and $260,997 for Series I and Series II shares, respectively.
(e) 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)% and $(0.08) and (0.42)% for Series I and Series II
shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $647.90 $3.85 $1,020.46 $4.72 0.93%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 647.30 4.89 1,019.20 5.99 1.18
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. CAPITAL APPRECIATION FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. CAPITAL APPRECIATION FUND
[INVESCO AIM LOGO] AIM V.I. CAPITAL DEVELOPMENT FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. CAPITAL DEVELOPMENT FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
ber 31, 2008.(1) The chief catalyst was
PERFORMANCE SUMMARY primarily the ongoing subprime loan crisis
and its far-reaching effects on overall
For the fiscal year ended December 31, 2008, AIM V.I. Capital Development Fund had credit availability. Additionally, record
negative returns and underperformed the broad market, as measured by the S&P 500 Index, high crude oil prices,(2) falling home
and the Fund's style-specific benchmark, the Russell Midcap Growth Index.(triangle) values and the weak U.S. dollar placed
Underperformance was due to both stock selection and sector allocation. significant pressure on the purchasing
power of the U.S. consumer. Later in the
Your Fund's long-term performance appears later in this report. fiscal year, consumer confidence fell and
market volatility increased dramatically
FUND VS. INDEXES due to growing concerns of a global
economic recession.
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower. To facilitate the orderly functioning
of the credit markets and possibly prevent
Series I Shares -47.03% a more severe economic downturn, in early
Series II Shares -47.13 October Congress enacted a $700 billion
S&P 500 Index(triangle) (Broad Market Index) -36.99 rescue plan -- the Troubled Assets Relief
Russell Midcap Growth Index(triangle) (Style-Specific Index) -44.32 Program. In addition, the U.S. Federal
Lipper VUF Mid-Cap Growth Funds Index(triangle) (Peer Group Index) -44.86 Reserve (the Fed) -- in concert with other
world banks -- dramatically lowered
(triangle) Lipper Inc. short-term interest rates.
=======================================================================================
In this environment, the Fund had
HOW WE INVEST company's management team. We also analyze double-digit negative returns and
key competitors, customers and suppliers underperformed the Russell Midcap Growth
We believe a growth investment strategy is to assess the overall attractiveness and Index during the fiscal year.(1)
an essential component of a diversified growth potential of the industry. Underperformance was driven largely by
portfolio. stock selection in the financials,
Risk management plays an important role industrials and telecommunication services
Our investment process combines in portfolio construction, as our target sectors. Underweight positions in the
fundamental and quantitative analysis to portfolio attempts to limit volatility and energy and consumer staples sectors also
uncover companies exhibiting long-term, downside risk. We seek to accomplish this contributed to underperformance.
sustainable revenue, earnings and cash goal by investing in sectors, industries
flow growth that is not yet reflected by and companies with attractive fundamental The Fund underperformed by the widest
the stock's market price. prospects. We limit the Fund's sector margin in the financials sector, largely
exposure and also seek to minimize due to stock selection. The financials
Our quantitative model ranks companies stock-specific risk by building a sector was one of the weakest performing
based on a set of fundamental, valuation diversified portfolio. sectors in the Russell Midcap Growth Index
and timeliness factors. This quantitative during the fiscal year, as the credit
model is designed to identify stocks with We consider selling a stock for any of crisis intensified and a liquidity crisis
the highest probability of meeting our the following reasons: emerged. Two detractors to overall Fund
team's investment criteria. Stocks that performance were asset management holding
are ranked highest by our quantitative o There is a change in fundamentals, AFFILIATED MANAGERS GROUP and XL CAPITAL.
model are the focus of our fundamental market capitalization or deterioration XL Capital was sold at the end of the
research efforts. in the timeliness profile. period.
Our fundamental analysis focuses on o The price target set at purchase has Another area of weakness for the Fund
identifying companies and industries with been reached. was the industrials sector, where the
strong drivers of growth. To accomplish Fund's. holdings generally underperformed
this goal, we develop a fully integrated o The investment thesis is no longer those of. the Russell Midcap Growth Index.
financial model to gain a more complete valid. Many industrials holdings
understanding of the financial health of
each investment candidate. Additionally, o Insider selling indicates potential
our research involves due diligence of the issues
company, which includes a detailed
analysis of the strategic plans of the MARKET CONDITIONS AND YOUR FUND
Many factors contributed to the negative
performance of most major market indexes
for the fiscal year ended Decem-
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Information Technology 19.8% 1. Metal & Glass Containers 5.1% 1. Shoppers Drug Mart Corp. 1.9%
Consumer Discretionary 16.1 2. Health Care Services 4.8 2. McAfee Inc. 1.9
Industrials 15.6 3. Systems Software 4.7 3. Republic Services, Inc. 1.9
Health Care 13.9 4. Application Software 3.8 4. Crown Holdings, Inc. 1.9
Financials 8.5 5. Oil & Gas Exploration & 5. Pactiv Corp. 1.8
Energy 7.9 Production 3.8 6. Humana Inc. 1.8
Materials 5.6 ========================================== 7. TD Ameritrade Holding Corp. 1.7
Consumer Staples 3.3 8. Heartland Express, Inc. 1.7
Utilities 2.7 ========================================== 9. Solera Holdings, Inc. 1.7
Telecommunication Services 1.9 Total Net Assets $142.5 million 10. Check Point Software
U.S. Treasury Bills, Money Market Total Number of Holdings* 91 Technologies Ltd. 1.7
Funds Plus Other Assets Less ========================================== ==========================================
Liabilities 4.7
========================================== 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
were negatively affected by the global During the reporting period, the most PAUL RASPLICKA
economic slowdown, including engineering significant changes to the portfolio Chartered Financial Analyst,
and construction holdings FOSTER WHEELER included reductions in the energy, [RASPLICKA is lead manager of AIM V.I.
and CHICAGO BRIDGE & IRON. Other consumer discretionary, telecommunication PHOTO] Capital Development Fund.
industrials holdings that detracted from services and health care sectors. All Mr. Rasplicka has been
performance included CORRECTIONS CORP. OF changes to the Fund were based on our associated with the advisor
AMERICA, GENERAL CABLE and CON-WAY. Foster bottom-up stock selection process of and/or its affiliates since 1994. He began
Wheeler, Chicago Bridge & Iron and General identifying high quality growth companies his investment career in 1982 as an equity
Cable were no longer held at the end of trading at what we believe are attractive research analyst. A native of Denver,
the year. valuations. Mr. Rasplicka is a magna cum laude
graduate of the University of Colorado in
Underperformance in the We thank you for your commitment to AIM Boulder with a B.S. in business
telecommunication services sector was also V.I. Capital Development Fund. administration. He earned an M.B.A. from
driven by stock selection. Two detractors the University of Chicago. He is a
from Fund performance were wireless (1) Lipper Inc. Chartered Investment Counselor.
services holdings CROWN CASTLE (2) Bloomberg L.P.
INTERNATIONAL and SBA COMMUNICATIONS. SBA BRENT LIUM
Communications was sold at the end of the The views and opinions expressed in Chartered Financial Analyst,
year due to deteriorating fundamentals. management's discussion of Fund [LIUM portfolio manager, is manager
performance are those of Invesco Aim PHOTO] of AIM V.I. Capital
The Fund also underperformed in the Advisors, Inc. These views and opinions Development Fund. He joined
energy sector, primarily driven by an are subject to change at any time based on Invesco in 1999 in its
underweight position earlier in the year factors such as market and economic corporate associate program and joined
when many energy companies benefited from conditions. These views and opinions may Invesco Aim in 2003. Mr. Lium earned a
high prices for crude oil. In addition, not be relied upon as investment advice or B.B.A. from Texas A&M University and an
many energy companies were negatively recommendations, or as an offer for a M.B.A. from The University of Texas at
affected as the price of oil fell sharply particular security. The information is Austin.
in the second half of the year due to not a complete analysis of every aspect of
concerns of a global economic slow down. any market, country, industry, security or Assisted by the Mid Cap Growth Team
Key detractors to performance included the Fund. Statements of fact are from
energy equipment and services holdings sources considered reliable, but Invesco
NOBLE and SMITH INTERNATIONAL. Aim Advisors, Inc. makes no representation
or warranty as to their completeness or
An underweight position in the consumer accuracy. Although historical performance
staples sector also detracted from Fund is no guarantee of future results, these
performance. While the consumer staples insights may help you understand our
sector had negative returns, its more investment management philosophy.
defensive nature made it a refuge in the
volatile market environment, and it held See important Fund and index disclosures
up better than all other sectors in the later in this report.
index.
Some of this underperformance was
offset by outperformance in other sectors,
including utilities and materials. The
Fund's cash position also benefited
performance during the highly volatile
market environment.
The utilities sector was one of the
weakest performing sectors in the Russell
Midcap Growth Index during the fiscal
year, so the Fund's underweight position
helped performance relative to this index.
The Fund also benefited from stock
selection in this sector.
Outperformance in the materials sector
was largely due to solid stock selection.
Within this sector, one of the key
contributors to performance was fertilizer
maker POTASH CORP. OF SASKATCHEWAN, which
benefited from strong demand from emerging
markets during the first part of the
fiscal year. Potash Corp. of Saskatchewan
was sold at the end of the year due to
deteriorating fundamentals. The Fund also
owned several producers of food and
beverage containers, which held up well in
the difficult economy.
AIM V.I. CAPITAL DEVELOPMENT FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. CAPITAL DEVELOPMENT FUND, A
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/1/98) 0.95% CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 1.80 FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years -2.83 MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
1 Year -47.03 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
SERIES II SHARES REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
10 Years 1.56% NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
5 Years -3.07 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
1 Year -47.13 MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
========================================== SHARES. DETERMINED BY THE VARIABLE PRODUCT
ISSUERS, WILL VARY AND WILL LOWER THE
SERIES II SHARES' INCEPTION DATE IS AUGUST THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
21, 2001. RETURNS SINCE THAT DATE ARE RATIO SET FORTH IN THE MOST RECENT FUND
HISTORICAL. ALL OTHER RETURNS ARE THE PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
BLENDED RETURNS OF THE HISTORICAL FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
PERFORMANCE OF SERIES II SHARES SINCE 1.05% AND 1.30%, RESPECTIVELY.(1) THE PRODUCT CHARGES, IS AVAILABLE ON THE
THEIR INCEPTION AND THE RESTATED TOTAL ANNUAL FUND OPERATING EXPENSE RATIO INVESCO AIM AUTOMATED INFORMATION LINE,
HISTORICAL PERFORMANCE OF SERIES I SHARES SET FORTH IN THE MOST RECENT FUND 866 702 4402.
(FOR PERIODS PRIOR TO INCEPTION OF SERIES PROSPECTUS AS OF THE DATE OF THIS REPORT
II SHARES) ADJUSTED TO REFLECT THE RULE FOR SERIES I AND SERIES II SHARES WAS AS MENTIONED ABOVE, FOR THE MOST RECENT
12B-1 FEES APPLICABLE TO SERIES II SHARES. 1.06% AND 1.31%, RESPECTIVELY. THE EXPENSE MONTH-END PERFORMANCE INCLUDING VARIABLE
THE INCEPTION DATE OF SERIES I SHARES IS RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, PLEASE CONTACT YOUR
MAY 1, 1998. EXPENSE RATIOS PRESENTED IN OTHER SECTIONS VARIABLE PRODUCT ISSUER OR FINANCIAL
OF THIS REPORT THAT ARE BASED ON EXPENSES ADVISOR.
THE PERFORMANCE OF THE FUND'S SERIES I INCURRED DURING THE PERIOD COVERED BY THIS
AND SERIES II SHARE CLASSES WILL DIFFER REPORT. (1) Total annual operating expenses less
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. contractual advisory fee waivers by
the advisor in effect through at least
April 30, 2010. See current prospectus
for more information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/98, Fund data from 05/1/98
AIM V.I. Capital Lipper VUF
Development Fund- S&P 500 Russell Midcap Mid-Cap Growth
Date Series I Shares Index(1) Growth Index(1) Funds Index(1)
- ------- ----------------- -------- --------------- --------------
4/30/98 $10000 $10000 $10000
5/98 $ 9430 9828 9589 9457
6/98 9530 10227 9860 9961
7/98 8840 10119 9438 9409
8/98 7120 8657 7636 7430
9/98 7760 9212 8214 7958
10/98 7970 9960 8819 8256
11/98 8480 10564 9414 8816
12/98 9249 11172 10389 9975
1/99 9139 11639 10700 10230
2/99 8346 11278 10177 9595
3/99 8547 11729 10744 10173
4/99 8788 12183 11233 10616
5/99 8888 11895 11089 10476
6/99 9431 12554 11863 11331
7/99 9360 12164 11485 11090
8/99 8958 12103 11366 11168
9/99 9209 11772 11269 11224
10/99 9580 12517 12140 12260
11/99 10534 12771 13397 13631
12/99 11941 13522 15717 16360
1/00 11740 12843 15714 16398
2/00 14432 12600 19018 20153
3/00 14402 13832 19037 19389
4/00 13317 13416 17189 17375
5/00 12544 13141 15936 16239
6/00 13336 13464 17627 18492
7/00 12955 13254 16511 17889
8/00 14371 14077 19001 20367
9/00 13799 13334 18072 19405
10/00 13487 13277 16835 17807
11/00 11981 12231 13177 14352
12/00 13044 12291 13871 15161
1/01 13356 12727 14663 15587
2/01 12363 11567 12127 13157
3/01 11398 10835 10391 11387
4/01 12473 11676 12123 13014
5/01 12764 11755 12066 13002
6/01 12894 11469 12073 12848
7/01 12552 11356 11258 12063
8/01 11990 10646 10442 11127
9/01 10393 9786 8717 9514
10/01 10614 9973 9633 10106
11/01 11418 10738 10670 10865
12/01 11990 10832 11075 11251
1/02 11728 10674 10716 10638
2/02 11688 10468 10108 10089
3/02 12622 10861 10880 10723
4/02 12521 10203 10304 10340
5/02 12280 10128 9996 10084
6/02 11407 9407 8893 9205
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
7/02 10052 8674 8029 8324
8/02 9941 8731 8001 8236
9/02 8987 7783 7366 7768
10/02 9298 8467 7936 8148
11/02 9840 8965 8557 8528
12/02 9428 8439 8040 8114
1/03 9258 8218 7961 7969
2/03 9167 8095 7892 7903
3/03 9227 8173 8039 8019
4/03 9830 8846 8586 8530
5/03 10533 9311 9413 9229
6/03 10804 9430 9547 9363
7/03 11075 9597 9888 9704
8/03 11527 9784 10432 10217
9/03 11266 9680 10230 9869
10/03 12130 10227 11055 10634
11/03 12452 10317 11350 10843
12/03 12763 10858 11474 10957
1/04 13124 11057 11853 11187
2/04 13465 11211 12052 11365
3/04 13475 11042 12029 11463
4/04 13093 10868 11689 11104
5/04 13164 11017 11965 11335
6/04 13455 11231 12156 11681
7/04 12661 10860 11351 10879
8/04 12490 10903 11211 10718
9/04 13002 11021 11629 11223
10/04 13313 11190 12024 11531
11/04 14136 11642 12645 12257
12/04 14738 12038 13250 12782
1/05 14467 11745 12896 12387
2/05 14648 11992 13222 12553
3/05 14387 11780 13029 12278
4/05 13685 11557 12514 11709
5/05 14468 11924 13230 12403
6/05 14850 11941 13476 12638
7/05 15663 12385 14263 13340
8/05 15673 12272 14176 13302
9/05 15764 12371 14359 13519
10/05 15162 12165 13936 13223
11/05 15945 12625 14693 13940
12/05 16156 12629 14854 13998
1/06 17401 12964 15743 14863
2/06 17401 12999 15549 14722
3/06 18014 13160 15984 15237
4/06 18475 13337 16052 15274
5/06 17581 12954 15296 14400
6/06 17541 12971 15234 14367
7/06 16939 13051 14688 13700
8/06 17290 13361 15026 13934
9/06 17590 13705 15369 14167
10/06 18203 14151 15959 14668
11/06 18916 14420 16585 15273
12/06 18823 14622 16437 15189
1/07 19507 14843 17035 15679
2/07 19567 14554 16998 15631
3/07 19863 14716 17087 15794
4/07 20506 15368 17837 16426
5/07 21823 15904 18561 17301
6/07 21639 15640 18239 17183
7/07 20854 15155 17831 16953
8/07 20649 15382 17927 17209
9/07 21641 15957 18631 18174
10/07 22080 16211 19106 18958
11/07 20956 15533 18265 17945
12/07 20862 15425 18315 17983
1/08 18869 14500 16859 16290
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
2/08 18471 14029 16602 16007
3/08 17753 13969 16309 15660
4/08 18916 14649 17493 16854
5/08 19491 14838 18414 17571
6/08 18296 13589 17067 16369
7/08 17731 13474 16419 15802
8/08 17986 13669 16569 15885
9/08 15374 12453 14038 13666
10/08 12087 10362 10957 10798
11/08 10859 9618 9835 9632
12/08 11056 9719 10197 9916
====================================================================================================================================
AIM V.I. CAPITAL DEVELOPMENT FUND
AIM V.I. CAPITAL DEVELOPMENT FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Prices of equity securities change in The S&P 500--REGISTERED TRADEMARK-- INDEX The Chartered Financial
response to many factors, including the is a market capitalization-weighted index Analyst--REGISTERED TRADEMARK--
historical and prospective earnings of the covering all major areas of the U.S. (CFA--REGISTERED TRADEMARK--) designation
issuer, the value of its assets, general economy. It is not the 500 largest is a globally recognized standard for
economic conditions, interest rates, companies, but rather the most widely held measuring the competence and integrity of
investor perceptions and market liquidity. 500 companies chosen with respect to investment professionals.
market size, liquidity, and their
The Fund invests in "growth" stocks, industry. The returns shown in management's
which may be more volatile than other discussion of Fund performance are based
investment styles because growth stocks The RUSSELL MIDCAP--REGISTERED on net asset values calculated for
are more sensitive to investor perceptions TRADEMARK-- GROWTH INDEX measures the shareholder transactions. Generally
of an issuing company's growth potential. performance of those Russell Midcap accepted accounting principles require
companies with higher price-to-book ratios adjustments to be made to the net assets
There is no guarantee that the and higher forecasted growth values. The of the Fund at period end for financial
investment techniques and risk analysis Russell Midcap Growth Index is a reporting purposes, and as such, the net
used by the Fund's portfolio managers will trademark/ service mark of the Frank asset values for shareholder transactions
produce the desired results. Russell Company. Russell--REGISTERED and the returns based on those net asset
TRADEMARK-- is a trademark of the Frank values may differ from the net asset
Mid-cap companies tend to be more Russell Company. values and returns reported in the
vulnerable to adverse developments and Financial Highlights. Additionally, the
more volatile than larger companies. THE LIPPER VUF MID-CAP GROWTH FUNDS returns and net asset values shown
Investments in mid-cap companies may INDEX is an equally weighted throughout this report are at the Fund
involve special risks, including those representation of the largest variable level only and do not include variable
associated with dependence on a small insurance underlying funds in the Lipper product issuer charges. If such charges
management group, little or no operating Mid-Cap Growth Funds category. These funds were included, the total returns would be
history, little or no track record of have an above-average price-to-earnings lower.
success, limited product lines, less ratio, price-to-book ratio, and three-year
publicly available information, sales-per-share growth value, compared to Industry classifications used in this
illiquidity, restricted resale or less the S&P MidCap 400 Index. report are generally according to the
frequent trading. Global Industry Classification Standard,
The Fund is not managed to track the which was developed by and is the
The prices of securities held by the performance of any particular index, exclusive property and a service mark of
fund may decline in response to market including the indexes defined here, and MSCI Inc. and Standard & Poor's.
risks. consequently, the performance of the Fund
may deviate significantly from the
The Fund may engage in active and performance of the indexes.
frequent trading of portfolio securities
to achieve its investment objective. If a A direct investment cannot be made in
fund does trade in this way, it may incur an index. Unless otherwise indicated,
increased costs, which can lower the index results include reinvested
actual return of the Fund. Active trading dividends, and they do not reflect sales
may also increase short term gains and charges or fund expenses.
losses, which may affect taxes that must
be paid.
The prices of IPO securities may go up
and down more than prices of equity
securities of companies with longer
trading histories. In addition, companies
offering securities in IPOs may have less
experienced management or limited
operating histories. There can be no
assurance that the Fund will have
favorable IPO investment opportunities.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-95.34%
AEROSPACE & DEFENSE-2.55%
L-3 Communications Holdings, Inc. 28,015 $ 2,066,947
- -------------------------------------------------------------------------------
Precision Castparts Corp. 26,251 1,561,409
===============================================================================
3,628,356
===============================================================================
AIR FREIGHT & LOGISTICS-0.99%
Robinson (C.H.) Worldwide, Inc. 25,741 1,416,527
===============================================================================
APPAREL RETAIL-2.70%
Aeropostale, Inc.(b) 42,744 688,179
- -------------------------------------------------------------------------------
Guess?, Inc. 43,300 664,655
- -------------------------------------------------------------------------------
Ross Stores, Inc. 48,803 1,450,913
- -------------------------------------------------------------------------------
Urban Outfitters, Inc.(b) 69,251 1,037,380
===============================================================================
3,841,127
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.46%
Gildan Activewear Inc. (Canada)(b) 63,969 752,275
- -------------------------------------------------------------------------------
Hanesbrands, Inc.(b) 104,086 1,327,097
===============================================================================
2,079,372
===============================================================================
APPLICATION SOFTWARE-3.84%
Amdocs Ltd.(b) 82,870 1,515,692
- -------------------------------------------------------------------------------
ANSYS, Inc.(b) 55,303 1,542,401
- -------------------------------------------------------------------------------
Solera Holdings, Inc.(b) 100,065 2,411,566
===============================================================================
5,469,659
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.20%
Affiliated Managers Group, Inc.(b) 40,791 1,709,959
===============================================================================
AUTOMOTIVE RETAIL-1.31%
O'Reilly Automotive, Inc.(b) 60,674 1,865,119
===============================================================================
BIOTECHNOLOGY-2.77%
Genzyme Corp.(b) 24,078 1,598,057
- -------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(b) 59,971 2,341,867
===============================================================================
3,939,924
===============================================================================
CASINOS & GAMING-1.18%
Scientific Games Corp.-Class A(b) 95,621 1,677,192
===============================================================================
COMMUNICATIONS EQUIPMENT-1.23%
Juniper Networks, Inc.(b) 99,759 1,746,780
- -------------------------------------------------------------------------------
Lantronix Inc.-Wts. expiring 02/09/11 (Acquired
02/09/07; Cost $0)(c)(d) 576 0
===============================================================================
1,746,780
===============================================================================
COMPUTER & ELECTRONICS RETAIL-0.88%
GameStop Corp.-Class A(b) 57,814 1,252,251
===============================================================================
COMPUTER STORAGE & PERIPHERALS-0.90%
NetApp, Inc.(b) 92,313 1,289,613
===============================================================================
CONSTRUCTION & ENGINEERING-0.69%
Quanta Services, Inc.(b) 23,293 461,201
- -------------------------------------------------------------------------------
Shaw Group Inc. (The)(b) 25,433 520,614
===============================================================================
981,815
===============================================================================
CONSUMER FINANCE-1.14%
SLM Corp.(b) 183,036 1,629,020
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.47%
Alliance Data Systems Corp.(b) 44,946 2,091,337
===============================================================================
DISTRIBUTORS-1.22%
LKQ Corp.(b) 149,275 1,740,546
===============================================================================
DIVERSIFIED SUPPORT SERVICES-0.87%
Copart, Inc.(b) 45,632 1,240,734
===============================================================================
DRUG RETAIL-1.94%
Shoppers Drug Mart Corp. (Canada) 69,868 2,762,217
===============================================================================
EDUCATION SERVICES-3.62%
Apollo Group Inc.-Class A(b) 28,355 2,172,560
- -------------------------------------------------------------------------------
DeVry, Inc. 12,905 740,876
- -------------------------------------------------------------------------------
ITT Educational Services, Inc.(b) 23,627 2,244,093
===============================================================================
5,157,529
===============================================================================
ELECTRONIC COMPONENTS-1.14%
Amphenol Corp.-Class A 67,658 1,622,439
===============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.92%
Republic Services, Inc. 110,231 2,732,626
===============================================================================
HEALTH CARE EQUIPMENT-0.96%
St. Jude Medical, Inc.(b) 41,636 1,372,323
===============================================================================
HEALTH CARE SERVICES-4.83%
DaVita, Inc.(b) 30,338 1,503,855
- -------------------------------------------------------------------------------
Express Scripts, Inc.(b) 21,065 1,158,154
- -------------------------------------------------------------------------------
Laboratory Corp. of America Holdings(b) 36,915 2,377,695
- -------------------------------------------------------------------------------
Omnicare, Inc. 66,581 1,848,288
===============================================================================
6,887,992
===============================================================================
HEALTH CARE SUPPLIES-0.47%
Inverness Medical Innovations, Inc.(b) 35,065 663,079
===============================================================================
HOME ENTERTAINMENT SOFTWARE-0.55%
Activision Blizzard, Inc.(b) 90,319 780,356
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
HOUSEHOLD APPLIANCES-0.49%
Stanley Works (The) 20,313 $ 692,673
===============================================================================
HOUSEWARES & SPECIALTIES-0.95%
Jarden Corp.(b) 118,247 1,359,840
===============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.10%
Robert Half International, Inc. 74,991 1,561,313
===============================================================================
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-2.70%
KGEN Power Corp. (Acquired 01/12/07; Cost
$2,219,196)(b)(c) 158,514 2,377,710
- -------------------------------------------------------------------------------
NRG Energy, Inc.(b) 62,801 1,465,147
===============================================================================
3,842,857
===============================================================================
INDUSTRIAL MACHINERY-0.53%
Flowserve Corp. 14,675 755,762
===============================================================================
INVESTMENT BANKING & BROKERAGE-3.72%
Lazard Ltd.-Class A 69,352 2,062,529
- -------------------------------------------------------------------------------
Morgan Stanley 48,331 775,229
- -------------------------------------------------------------------------------
TD Ameritrade Holding Corp.(b) 173,297 2,469,482
===============================================================================
5,307,240
===============================================================================
IT CONSULTING & OTHER SERVICES-1.20%
Cognizant Technology Solutions Corp.-Class A(b) 94,895 1,713,804
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-2.96%
Covance Inc.(b) 22,711 1,045,387
- -------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 66,846 1,939,203
- -------------------------------------------------------------------------------
Waters Corp.(b) 33,771 1,237,707
===============================================================================
4,222,297
===============================================================================
MANAGED HEALTH CARE-1.93%
Aveta, Inc. (Acquired 12/21/05-02/21/06; Cost
$2,162,718)(b)(c) 157,251 235,877
- -------------------------------------------------------------------------------
Humana Inc.(b) 67,483 2,515,766
===============================================================================
2,751,643
===============================================================================
METAL & GLASS CONTAINERS-5.05%
Crown Holdings, Inc.(b) 137,252 2,635,239
- -------------------------------------------------------------------------------
Owens-Illinois, Inc.(b) 74,431 2,034,199
- -------------------------------------------------------------------------------
Pactiv Corp.(b) 101,307 2,520,518
===============================================================================
7,189,956
===============================================================================
OIL & GAS DRILLING-0.69%
Noble Corp. 44,318 978,985
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.30%
IHS Inc.-Class A(b) 58,120 2,174,850
- -------------------------------------------------------------------------------
Smith International, Inc. 48,004 1,098,812
===============================================================================
3,273,662
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.75%
Continental Resources, Inc.(b) 66,994 1,387,445
- -------------------------------------------------------------------------------
Petrohawk Energy Corp.(b) 21,957 343,188
- -------------------------------------------------------------------------------
Range Resources Corp. 37,520 1,290,313
- -------------------------------------------------------------------------------
Southwestern Energy Co.(b) 80,140 2,321,656
===============================================================================
5,342,602
===============================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.15%
Williams Cos., Inc. (The) 113,604 1,644,986
===============================================================================
PERSONAL PRODUCTS-1.40%
Estee Lauder Cos. Inc. (The)-Class A 64,579 1,999,366
===============================================================================
PUBLISHING-1.07%
McGraw-Hill Cos., Inc. (The) 65,910 1,528,453
===============================================================================
RESEARCH & CONSULTING SERVICES-1.23%
Equifax Inc. 66,034 1,751,222
===============================================================================
RESTAURANTS-1.18%
Burger King Holdings Inc. 70,430 1,681,868
===============================================================================
SECURITY & ALARM SERVICES-1.60%
Corrections Corp. of America(b) 139,419 2,280,895
===============================================================================
SEMICONDUCTOR EQUIPMENT-2.49%
ASML Holding N.V.-New York Shares (Netherlands) 102,058 1,844,188
- -------------------------------------------------------------------------------
Lam Research Corp.(b) 79,900 1,700,272
===============================================================================
3,544,460
===============================================================================
SEMICONDUCTORS-2.26%
Altera Corp. 63,974 1,069,006
- -------------------------------------------------------------------------------
Intersil Corp.-Class A 131,876 1,211,940
- -------------------------------------------------------------------------------
Maxim Integrated Products, Inc. 81,807 934,236
===============================================================================
3,215,182
===============================================================================
SPECIALIZED FINANCE-2.46%
Moody's Corp. 92,293 1,854,166
- -------------------------------------------------------------------------------
MSCI Inc.-Class A(b) 54,005 959,129
- -------------------------------------------------------------------------------
NASDAQ OMX Group, Inc. (The)(b) 28,112 694,648
===============================================================================
3,507,943
===============================================================================
STEEL-0.54%
Nucor Corp. 16,628 768,214
===============================================================================
SYSTEMS SOFTWARE-4.69%
CA Inc. 82,162 1,522,462
- -------------------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(b) 126,912 2,410,059
- -------------------------------------------------------------------------------
McAfee Inc.(b) 79,612 2,752,187
===============================================================================
6,684,708
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS-0.50%
Fastenal Co. 9,870 $ 343,969
- -------------------------------------------------------------------------------
W.W. Grainger, Inc. 4,614 363,768
===============================================================================
707,737
===============================================================================
TRUCKING-3.67%
Con-way Inc. 49,294 1,311,220
- -------------------------------------------------------------------------------
Heartland Express, Inc. 156,447 2,465,605
- -------------------------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc. 55,232 1,450,945
===============================================================================
5,227,770
===============================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.90%
American Tower Corp.-Class A(b) 67,482 1,978,572
- -------------------------------------------------------------------------------
Crown Castle International Corp.(b) 41,131 723,083
===============================================================================
2,701,655
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $165,725,174) 135,814,985
===============================================================================
<Caption>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
U.S. TREASURY BILLS-0.38%
1.41%, 03/12/09(e) $ 50,000 $ 49,994
- -------------------------------------------------------------------------------
1.77%, 03/12/09(e) 500,000 499,943
===============================================================================
Total U.S. Treasury Securities (Cost
$548,147) 549,937
===============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-4.53%
Liquid Assets Portfolio-Institutional Class(f) 3,227,736 3,227,736
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 3,227,736 3,227,736
===============================================================================
Total Money Market Funds (Cost $6,455,472) 6,455,472
===============================================================================
TOTAL INVESTMENTS-100.25% (Cost $172,728,793) 142,820,394
===============================================================================
OTHER ASSETS LESS LIABILITIES-(0.25)% (361,420)
===============================================================================
NET ASSETS-100.00% $142,458,974
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at December 31, 2008 was $2,613,587, which represented 1.83% of the Fund's
Net Assets.
(d) Non-income producing security acquired through a corporate action.
(e) Security traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$166,273,321) $136,364,922
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 6,455,472
======================================================
Total investments (Cost
$172,728,793) 142,820,394
======================================================
Receivables for:
Fund shares sold 122,561
- ------------------------------------------------------
Dividends 74,036
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 22,618
======================================================
Total assets 143,039,609
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 354,760
- ------------------------------------------------------
Accrued fees to affiliates 144,799
- ------------------------------------------------------
Accrued other operating expenses 40,196
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 40,880
======================================================
Total liabilities 580,635
======================================================
Net assets applicable to shares
outstanding $142,458,974
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $235,914,394
- ------------------------------------------------------
Undistributed net investment income
(loss) (51,174)
- ------------------------------------------------------
Undistributed net realized gain (loss) (63,495,893)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (29,908,353)
======================================================
$142,458,974
______________________________________________________
======================================================
NET ASSETS:
Series I $ 61,986,365
______________________________________________________
======================================================
Series II $ 80,472,609
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 7,811,787
______________________________________________________
======================================================
Series II 10,396,092
______________________________________________________
======================================================
Series I:
Net asset value per share $ 7.93
______________________________________________________
======================================================
Series II:
Net asset value per share $ 7.74
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $10,638) $ 1,368,865
- -------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $114,665) 390,058
- -------------------------------------------------------
Interest 2,957
=======================================================
Total investment income 1,761,880
=======================================================
EXPENSES:
Advisory fees 1,833,018
- -------------------------------------------------------
Administrative services fees 666,249
- -------------------------------------------------------
Custodian fees 21,404
- -------------------------------------------------------
Distribution fees -- Series II 344,500
- -------------------------------------------------------
Transfer agent fees 30,549
- -------------------------------------------------------
Trustees' and officers' fees and
benefits 23,250
- -------------------------------------------------------
Other 130,640
=======================================================
Total expenses 3,049,610
=======================================================
Less: Fees waived and expense offset
arrangement(s) (26,090)
=======================================================
Net expenses 3,023,520
=======================================================
Net investment income (loss) (1,261,640)
=======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of
$(1,500,696)) (59,616,432)
- -------------------------------------------------------
Foreign currencies (1,791)
- -------------------------------------------------------
Futures contracts (573,248)
=======================================================
(60,191,471)
=======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (79,981,820)
- -------------------------------------------------------
Foreign currencies 184
=======================================================
(79,981,636)
=======================================================
Net realized and unrealized gain (loss) (140,173,107)
=======================================================
Net increase (decrease) in net assets
resulting from operations $(141,434,747)
_______________________________________________________
=======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,261,640) $ (1,978,295)
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (60,191,471) 27,808,555
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (79,981,636) 4,000,926
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (141,434,747) 29,831,186
=========================================================================================================
Distributions to shareholders from net realized gains:
Series I (12,491,698) (12,026,991)
- ---------------------------------------------------------------------------------------------------------
Series II (16,383,949) (15,317,782)
=========================================================================================================
Total distributions from net realized gains (28,875,647) (27,344,773)
=========================================================================================================
Share transactions-net:
Series I (13,664,818) (2,786,456)
- ---------------------------------------------------------------------------------------------------------
Series II (14,156,607) 63,232,922
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (27,821,425) 60,446,466
=========================================================================================================
Net increase (decrease) in net assets (198,131,819) 62,932,879
=========================================================================================================
NET ASSETS:
Beginning of year 340,590,793 277,657,914
=========================================================================================================
End of year (includes undistributed net investment income (loss) of
$(51,174) and $(62,720), respectively) $ 142,458,974 $340,590,793
_________________________________________________________________________________________________________
=========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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. CAPITAL DEVELOPMENT FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. CAPITAL DEVELOPMENT FUND
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.
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
recalculating the value of the contracts on a daily basis. 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. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. By purchasing a
put option, the Fund obtains the right (but not the obligation) to sell
the option's underlying instrument at a fixed strike price. In return for
this right, the Fund pays an option premium. The option's underlying
instrument may be a security, securities index, or a futures contract. Put
options may be used by the Fund to hedge securities it owns by locking in
a minimum price at which the Fund can sell. If security prices fall, the
put option could be exercised to offset all or a portion of the Fund's
resulting losses. At the same time, because the maximum the Fund has at
risk is the cost of the option, purchasing put options does not eliminate
the potential for the Fund to profit from an increase in the value of the
securities hedged. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations. A risk in buying an
option is that the Fund pays a premium whether or not the option is
exercised. In addition, there can be no assurance that a liquid secondary
market will exist for any option purchased.
N. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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, 2010, the Advisor 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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
AIM V.I. CAPITAL DEVELOPMENT FUND
Also, the Advisor 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, 2010. 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. The Advisor did not waive fees and/or
reimburse expenses during the period under this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$24,792.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $66,213 for accounting and fund administrative
services and reimbursed $600,036 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INPUT LEVEL INVESTMENTS IN SECURITIES
- -------------------------------------------------
Level 1 $139,656,870
- -------------------------------------------------
Level 2 549,937
- -------------------------------------------------
Level 3 2,613,587
=================================================
$142,820,394
_________________________________________________
=================================================
</Table>
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, 2008, the Fund
engaged in securities purchases of $2,627,514 and securities sales of
$1,763,892, which resulted in net realized gains (losses) of $(1,500,696).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $1,298.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,809
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $ 3,219,994 $10,034,730
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 25,655,653 17,310,043
========================================================================================================
Total distributions $28,875,647 $27,344,773
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments $(31,586,820)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 46
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (51,174)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (50,024,391)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (11,793,081)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 235,914,394
================================================================================================
Total net assets $142,458,974
________________________________________________________________________________________________
================================================================================================
</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 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.
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.
AIM V.I. CAPITAL DEVELOPMENT FUND
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $50,024,391
_______________________________________________________________________________________________
===============================================================================================
</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, 2008 was $236,329,643 and
$293,861,344, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 9,413,997
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (41,000,817)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(31,586,820)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $174,407,214.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses on
December 31, 2008, undistributed net investment income (loss) was increased by
$1,273,186, undistributed net realized gain (loss) was increased by $8,500 and
shares of beneficial interest decreased by $1,281,686. This reclassification had
no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 785,197 $ 11,424,370 899,466 $ 18,335,807
- ------------------------------------------------------------------------------------------------------------------------
Series II 1,469,827 22,038,946 5,098,023 102,303,777
========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,624,408 12,491,698 620,908 12,026,991
- ------------------------------------------------------------------------------------------------------------------------
Series II 2,184,526 16,383,949 804,506 15,317,782
========================================================================================================================
Reacquired:
Series I (2,542,695) (37,580,886) (1,642,891) (33,149,254)
- ------------------------------------------------------------------------------------------------------------------------
Series II (3,554,464) (52,579,502) (2,699,333) (54,388,637)
========================================================================================================================
Net increase (decrease) in share activity (33,201) $(27,821,425) 3,080,679 $ 60,446,466
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. CAPITAL DEVELOPMENT FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET NET (LOSSES) ON
VALUE, INVESTMENT SECURITIES (BOTH TOTAL FROM DISTRIBUTIONS NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT FROM NET VALUE, END TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS REALIZED GAINS OF PERIOD RETURN(a)
- --------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $18.85 $(0.05)(b) $(8.88) $(8.93) $(1.99) $ 7.93 (47.03)%
Year ended 12/31/07 18.43 (0.10)(b) 2.14 2.04 (1.62) 18.85 10.84
Year ended 12/31/06 16.09 (0.07) 2.73 2.66 (0.32) 18.43 16.52
Year ended 12/31/05 14.68 (0.04) 1.45 1.41 -- 16.09 9.61
Year ended 12/31/04 12.71 (0.03)(b) 2.00 1.97 -- 14.68 15.50
- --------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 18.53 (0.09)(b) (8.71) (8.80) (1.99) 7.74 (47.13)
Year ended 12/31/07 18.19 (0.15)(b) 2.11 1.96 (1.62) 18.53 10.55
Year ended 12/31/06 15.92 (0.10) 2.69 2.59 (0.32) 18.19 16.26
Year ended 12/31/05 14.57 (0.07) 1.42 1.35 -- 15.92 9.27
Year ended 12/31/04 12.64 (0.06)(b) 1.99 1.93 -- 14.57 15.27
__________________________________________________________________________________________________________________________
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER
- -----------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $ 61,986 1.10%(c) 1.11%(c) (0.38)%(c) 99%
Year ended 12/31/07 149,776 1.05 1.06 (0.47) 109
Year ended 12/31/06 148,668 1.08 1.09 (0.48) 119
Year ended 12/31/05 117,674 1.09 1.09 (0.22) 125
Year ended 12/31/04 112,028 1.10 1.10 (0.21) 93
- -----------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 80,473 1.35(c) 1.36(c) (0.63)(c) 99
Year ended 12/31/07 190,815 1.30 1.31 (0.72) 109
Year ended 12/31/06 128,990 1.33 1.34 (0.73) 119
Year ended 12/31/05 83,388 1.34 1.34 (0.47) 125
Year ended 12/31/04 71,339 1.35 1.35 (0.46) 93
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(b) Calculated using average shares outstanding.
(c) Ratios are based on average daily net assets (000's omitted) of $106,602
and $137,800 for Series I and Series II, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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 four 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $604.10 $4.40 $1,019.66 $5.53 1.09%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 603.70 5.40 1,018.40 6.80 1.34
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $25,655,653
Corporate Dividends Received Deduction* 24.75%
</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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. CAPITAL DEVELOPMENT FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. CAPITAL DEVELOPMENT FUND
[INVESCO AIM LOGO] AIM V.I. CORE EQUITY FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. CORE EQUITY FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY MARKET CONDITIONS AND YOUR FUND
For the year ended December 31, 2008, Series I shares of AIM V.I. Core Equity Fund, The year ended December 31, 2008, was a
excluding variable product issuer charges, returned -30.14%, outpacing the broad market challenging time in the markets but it is
S&P 500 Index, which returned -36.99%, and the Fund's style-specific index, the Russell worth noting that Series I shares of AIM
1000 Index, which returned -37.60%.(triangle) V.I. Core Equity Fund, excluding variable
product issuer charges, held up relatively
All sectors of the market were down for the year but the Fund benefited from well compared to the broad market and the
exposure to consumer staples stocks and high quality financials. Select holdings in the Fund's peers, fulfilling one of our goals
information technology (IT) sector were some of the hardest hit stocks for the year. -- to be a source of strength during
turbulent times. It can be difficult to
Your Fund's long-term performance appears later in this report. maintain perspective during times of
crisis but we should all remember that
FUND VS. INDEXES markets have gone through similarly
difficult environments in the past and
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. have recovered. Today's challenges are
If variable product issuer charges were included, returns would be lower. serious, but the government is taking
aggressive action. These challenges are
Series I Shares -30.14% not insurmountable and we do not believe
Series II Shares -30.32 this is the time to abandon your long-term
S&P 500 Index(triangle) (Broad Market Index) -36.99 investment strategy.
Russell 1000 Index(triangle) (Style-Specific Index) -37.60
Lipper VUF Large-Cap Core Funds Index(triangle) (Peer Group Index) -37.21 These days we are often asked, "How did
our economy get into this mess?" It is not
(triangle) Lipper Inc. a simple question to answer, but
======================================================================================= essentially there was an excessive amount
of leverage in the system -- too much debt
HOW WE INVEST Financial analysis provides vital and not enough assets to back it up. For
insight into historical and potential many years, financial institutions took on
We manage your Fund as a conservative returns on invested capital, a key too much risk in an effort to keep up with
cornerstone, seeking to provide attractive indicator of business quality and the one another, and banks stretched beyond
upside participation (in up markets) and caliber of management. Business analysis their traditional revenue sources to keep
stronger downside protection in difficult allows us to identify key drivers of the up with their competitors.
markets. As part of a well-diversified company, understand industry challenges
asset allocation strategy, the Fund may and evaluate the sustainability of This was part of our reasoning for
serve as a foundation to a portfolio and competitive advantages. Both the financial moving out of financials several years
complement more aggressive or cyclical and business analyses serve as a basis to ago, a decision that helped the Fund avoid
investments. construct valuation models that help us much of the turmoil we saw this year in
estimate a company's value. We use three the sector. Likewise, many consumers took
We conduct fundamental research of primary valuation techniques, including on more and more risk through home equity
companies to gain a thorough understanding discounted cash flow, traditional loans, credit cards and other forms of
of their business prospects, appreciation valuation multiples and net asset value. credit. As our research began to uncover
potential and return on invested capital cracks in consumers' armor, we moved into
(ROIC). The process we use to identify We consider selling a stock when: more attractive areas. While financial
potential investments for the Fund institutions and individual consumers are
includes three phases: o It exceeds our target price. not exclusively behind the current crisis,
they
o Financial analysis to evaluate o We have not seen a demonstrable
returns on invested capital and improvement in fundamentals.
capital allocation
o More compelling investment
o Business analysis to determine opportunities exists.
competitive positioning
o Valuation analysis to identify
attractively valued companies
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Information Technology 21.8% 1. Industrial Conglomerates 6.7% 1. Progressive Corp. (The) 3.2%
Industrials 15.1 2. Pharmaceuticals 6.3 2. Symantec Corp. 3.1
Financials 15.0 3. Communications Equipment 5.8 3. Cadbury PLC 2.6
Health Care 13.9 4. Property & Casualty Insurance 5.7 4. Comcast Corp.-Class A 2.5
Consumer Staples 9.7 5. Systems Software 5.1 5. Berkshire Hathaway Inc.-Class A 2.4
Energy 6.0 ========================================== 6. Nokia Oyj-ADR 2.4
Consumer Discretionary 4.2 7. 3M Co. 2.2
Telecommunication Services 2.6 ========================================== 8. Medtronic, Inc. 2.1
Materials 0.9 Total Net Assets $1.4 billion 9. Cisco Systems, Inc. 2.1
Money Market Fund Plus 10. Automatic Data Processing, Inc. 2.1
Other Assets Less Liabilities 10.8 Total Number of Holdings* 69
========================================== ========================================== ==========================================
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
played a role and our economy is now going our team re-evaluates our investment RONALD SLOAN
through the painful process of thesis, sometimes deciding to move on and Chartered Financial Analyst,
"deleveraging." other times reaffirming our original [SLOAN senior portfolio manager, is
decision. In this case, we remained PHOTO] lead manager of AIM V.I. Core
During the year, consumer staples invested and added to our position because Equity Fund. Mr. Sloan has
holdings were a source of strength for the we believe Motorola has strong global worked in the investment industry since
Fund. One example was WAL-MART. The stock distribution, good brand recognition, a 1971 and joined Invesco Aim in 1998. Mr.
was a top contributor as a weakening sound balance sheet and that today's Sloan attended the University of Missouri,
economy and higher inflation caused many valuation does not adequately reflect the where he earned both a B.S. in business
consumers to change their shopping company's worth. administrationand an M.B.A.
patterns and seek out lower priced goods.
We originally invested in Wal-Mart in Maintaining a conservative approach is TYLER DANN II
early 2006 as our research indicated that an enduring part of our investment Chartered Financial Analyst,
the company was improving its inventory strategy. Despite market volatility, we [DANN portfolio manager, is manager
management. We believed this would enhance sought out judicious long-term investments PHOTO] of AIM V.I. Core Equity Fund.
the firm's financial flexibility, generate in high quality businesses that are less Mr. Dann joined Invesco
higher returns and increase company dependent on external sources of Aim in 2004. He serves on the board of
earnings. financing. At the end of the year, our directors of the National Association of
largest sector weightings were IT and Petroleum Investment Analysts and is a
Just as important as where we invested industrials; we had minimal exposure to member of the CFA Society of San
was what we avoided. In early 2008, we materials and utilities. Francisco. He earned an A.B. degree from
took profits in many of our energy Princeton University.
holdings as oil and natural gas prices We continue to focus on good companies
rallied due to fundamental factors and with sound balance sheets, reliable BRIAN NELSON
speculative activity. We believed the management teams and attractive Chartered Financial Analyst,
prices of many energy companies had valuations. This is a long-term strategy [NELSON portfolio manager, is manager
reached unjustified levels, reducing their that facilitates our role as a PHOTO] of AIM V.I. Core Equity Fund. He
attractiveness. As a result of our conservative cornerstone within your began his investment career in
actions, the Fund was underweight the broader asset allocation strategy. 1988 and joined Invesco Aim in 2004. He
energy sector versus our style-specific earned a B.A. from the University of
index -- a contrast to the notable Thank you for your continued trust and California-Santa Barbara and is a member
overweight position we had to energy for investment in AIM V.I. Core Equity Fund. of the Security Analyst Society of San
quite some time. It was a move that Francisco.
benefited shareholders as energy The views and opinions expressed in
companies' share prices fell sharply management's discussion of Fund Assisted by the Mid/Large Cap Core Team
beginning in the summer. performance are those of Invesco Aim
Advisors, Inc. These views and opinions
Earlier in the year, we decided to are subject to change at any time based on
hedge a portion of the euro and British factors such as market and economic
pound currency exposure of certain conditions. These views and opinions may
non-U.S. holdings. We did this by selling not be relied upon as investment advice or
euro and British pound futures contracts, recommendations, or as an offer for a
which allowed us to gain exposure to the particular security. The information is
U.S. dollar without having to take actual not a complete analysis of every aspect of
ownership of the underlying currency. This any market, country, industry, security or
benefited the Fund as the U.S. dollar the Fund. Statements of fact are from
appreciated versus the euro and pound. sources considered reliable, but Invesco
Currency hedging is not an investment Aim Advisors, Inc. makes no representation
strategy we frequently use, but we felt it or warranty as to their completeness or
was prudent in this situation. accuracy. Although historical performance
is no guarantee of future results, these
The Fund held 15.30% of its assets in insights may help you understand our
cash at the beginning of 2008, as the investment management philosophy.
number of attractive investments from a
risk-reward perspective diminished. Over See important Fund and index disclosures
the year, we took advantage of market later in this report.
turmoil to invest in high quality
companies that we believed had been unduly
punished -- namely, select financials,
industrials and IT stocks. The Fund's cash
weighting fell to 10.24% at the end of the
year.
One of our more disappointing
investments during the year was MOTOROLA.
The stock was under pressure as the
company lost market share to rivals such
as NOKIA and the market worried about its
ability to recover. In situations such as
these,
AIM V.I. CORE EQUITY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. CORE EQUITY FUND, A SERIES
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
COMPARABLE FUTURE RESULTS; CURRENT IS CURRENTLY OFFERED THROUGH INSURANCE
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE COMPANIES ISSUING VARIABLE PRODUCTS. YOU
Inception (5/2/94) 6.22% CONTACT YOUR VARIABLE PRODUCT ISSUER OR CANNOT PURCHASE SHARES OF THE FUND
10 Years -0.61 FINANCIAL ADVISOR FOR THE MOST RECENT DIRECTLY. PERFORMANCE FIGURES GIVEN
5 Years 0.23 MONTH-END VARIABLE PRODUCT PERFORMANCE. REPRESENT THE FUND AND ARE NOT INTENDED TO
1 Year -30.14 PERFORMANCE FIGURES REFLECT FUND EXPENSES, REFLECT ACTUAL VARIABLE PRODUCT VALUES.
REINVESTED DISTRIBUTIONS AND CHANGES IN THEY DO NOT REFLECT SALES CHARGES,
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND EXPENSES AND FEES ASSESSED IN CONNECTION
10 Years -0.85% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU WITH A VARIABLE PRODUCT. SALES CHARGES,
5 Years -0.02 MAY HAVE A GAIN OR LOSS WHEN YOU SELL EXPENSES AND FEES, WHICH ARE DETERMINED BY
1 Year -30.32 SHARES. THE VARIABLE PRODUCT ISSUERS, WILL VARY
========================================== AND WILL LOWER THE TOTAL RETURN.
THE NET ANNUAL FUND OPERATING EXPENSE
SERIES II SHARES' INCEPTION DATE IS RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END PERFORMANCE
OCTOBER 24, 2001. RETURNS SINCE THAT DATE PROSPECTUS AS OF THE DATE OF THIS REPORT DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
ARE HISTORICAL. ALL OTHER RETURNS ARE THE FOR SERIES I AND SERIES II SHARES WAS PRODUCT CHARGES, IS AVAILABLE ON THIS
BLENDED RETURNS OF THE HISTORICAL 0.89% AND 1.14%, RESPECTIVELY.(1) THE INVESCO AIM AUTOMATED INFORMATION LINE,
PERFORMANCE OF THE FUND'S SERIES II SHARES TOTAL ANNUAL FUND OPERATING EXPENSE RATIO 866 702 4402. AS MENTIONED ABOVE, FOR THE
SINCE THEIR INCEPTION AND THE RESTATED SET FORTH IN THE MOST RECENT FUND MOST RECENT MONTH-END PERFORMANCE
HISTORICAL PERFORMANCE OF SERIES I SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
(FOR PERIODS PRIOR TO INCEPTION OF THE FOR SERIES I AND SERIES II SHARES WAS CONTACT YOUR VARIABLE PRODUCT ISSUER OR
SERIES II SHARES) ADJUSTED TO REFLECT THE 0.90% AND 1.15%, RESPECTIVELY. THE EXPENSE FINANCIAL ADVISOR.
RULE 12B-1 FEES APPLICABLE TO THE SERIES RATIOS PRESENTED ABOVE MAY VARY FROM THE
II SHARES. THE INCEPTION DATE OF SERIES I EXPENSE RATIOS PRESENTED IN OTHER SECTIONS (1) Total annual operating expenses less
SHARES IS MAY 2, 1994. OF THIS REPORT THAT ARE BASED ON EXPENSES contractual advisory fee waivers by
INCURRED DURING THE PERIOD COVERED BY THIS the advisor in effect through at
THE PERFORMANCE OF THE FUND'S SERIES I REPORT. least April 30, 2010. See current
AND SERIES II SHARE CLASSES WILL DIFFER prospectus for more information.
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/94, Fund data from 5/2/94
AIM V.I. Lipper VUF
Core Equity Fund- Russell 1000 Large-Cap Core
Date Series I Shares S&P 500 Index(1) Index(1) Funds Index(1)
- ------- ----------------- ---------------- ------------ ---------------
4/30/94 $10000 $10000 $10000
5/94 $ 9820 10163 10133 $10115
6/94 9770 9915 9862 9896
7/94 10030 10240 10183 10193
8/94 10450 10659 10613 10593
9/94 10194 10399 10366 10333
10/94 10345 10632 10562 10467
11/94 9903 10245 10182 10078
12/94 9999 10397 10327 10238
1/95 10090 10666 10594 10408
2/95 10454 11081 11025 10839
3/95 10867 11408 11309 11147
4/95 11202 11744 11609 11436
5/95 11577 12212 12055 11790
6/95 12014 12495 12374 12101
7/95 12562 12910 12847 12555
8/95 12724 12942 12944 12653
9/95 13301 13488 13476 13099
10/95 13058 13440 13415 12935
11/95 13454 14029 14013 13518
12/95 13388 14299 14227 13663
1/96 13684 14785 14687 14097
2/96 13968 14923 14878 14287
3/96 14052 15066 15011 14446
4/96 14401 15288 15240 14694
5/96 14707 15682 15606 15017
6/96 14644 15742 15623 14927
7/96 13884 15047 14870 14245
8/96 14327 15364 15274 14620
9/96 15161 16228 16133 15363
10/96 15277 16676 16490 15683
11/96 16228 17935 17707 16778
12/96 16057 17580 17421 16538
1/97 16998 18678 18454 17330
2/97 16934 18824 18524 17422
3/97 15930 18052 17690 16740
4/97 16720 19129 18647 17565
5/97 17990 20299 19841 18652
6/97 18739 21201 20664 19416
7/97 20427 22887 22355 20965
8/97 19455 21606 21300 20123
9/97 20641 22789 22468 21223
10/97 19744 22029 21740 20454
11/97 20097 23048 22683 21084
12/97 20187 23443 23144 21332
1/98 20337 23702 23316 21348
2/98 21610 25411 24978 22906
3/98 22615 26711 26238 24111
4/98 22583 26984 26508 24352
5/98 21985 26521 25934 23934
6/98 23097 27598 26894 24591
7/98 23118 27306 26571 24137
8/98 19384 23361 22599 20495
9/98 20379 24859 24121 21519
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
10/98 22154 26878 26026 23216
11/98 23609 28506 27637 24512
12/98 25774 30148 29398 25849
1/99 27174 31408 30447 26558
2/99 26133 30432 29480 25760
3/99 27902 31649 30610 26601
4/99 28293 32875 31890 27565
5/99 27532 32099 31201 27164
6/99 29528 33876 32791 28698
7/99 28441 32823 31789 27824
8/99 28418 32660 31492 27408
9/99 28060 31766 30626 26731
10/99 29741 33775 32684 28124
11/99 30978 34462 33525 28718
12/99 34597 36489 35545 30770
1/00 33317 34656 34090 29329
2/00 34456 34000 33999 29487
3/00 37467 37324 37097 31929
4/00 34991 36202 35860 30896
5/00 33031 35460 34933 29887
6/00 34980 36333 35823 30723
7/00 35057 35765 35228 30335
8/00 37851 37986 37836 32602
9/00 35330 35981 36079 30738
10/00 33875 35828 35645 30182
11/00 29044 33006 32385 27330
12/00 29561 33167 32777 27864
1/01 30826 34343 33855 28427
2/01 26357 31214 30697 25734
3/01 23523 29238 28658 23860
4/01 26221 31508 30961 25875
5/01 26266 31719 31170 26005
6/01 25420 30948 30466 25244
7/01 24505 30643 30050 24789
8/01 22552 28726 28219 23180
9/01 19945 26407 25826 21319
10/01 20825 26911 26363 21841
11/01 22745 28974 28393 23353
12/01 22813 29228 28696 23637
1/02 22395 28802 28332 23138
2/02 22158 28247 27767 22661
3/02 23073 29309 28908 23532
4/02 22316 27533 27252 22247
5/02 22305 27331 27011 22024
6/02 21130 25385 25018 20387
7/02 19458 23406 23167 18966
8/02 19661 23560 23288 19108
9/02 18159 21002 20787 17105
10/02 19175 22848 22514 18393
11/02 20102 24192 23831 19315
12/02 19257 22771 22483 18205
1/03 18622 22176 21938 17801
2/03 18225 21843 21598 17573
3/03 18316 22054 21822 17708
4/03 19620 23870 23584 19054
5/03 20935 25126 24928 20092
6/03 21117 25447 25256 20347
7/03 21413 25896 25759 20684
8/03 21980 26400 26282 21025
9/03 21640 26121 26013 20815
10/03 22364 27598 27538 21996
11/03 22830 27840 27868 22237
12/03 23962 29299 29203 23312
1/04 24226 29837 29758 23613
2/04 24662 30251 30170 23934
3/04 24077 29795 29758 23616
4/04 24306 29328 29221 23134
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
5/04 24478 29730 29642 23398
6/04 24936 30307 30176 23857
7/04 24158 29305 29117 22959
8/04 24091 29422 29260 22973
9/04 24298 29741 29630 23248
10/04 24572 30195 30108 23513
11/04 25270 31416 31397 24522
12/04 26114 32485 32533 25355
1/05 25548 31693 31714 24849
2/05 26391 32360 32427 25369
3/05 25953 31787 31913 24899
4/05 25420 31185 31325 24467
5/05 25733 32176 32435 25254
6/05 25859 32222 32568 25406
7/05 26772 33420 33834 26277
8/05 26678 33115 33542 26148
9/05 26886 33383 33853 26467
10/05 26263 32827 33260 25917
11/05 27326 34067 34526 27010
12/05 27501 34079 34572 27128
1/06 28511 34982 35541 27875
2/06 28605 35076 35621 27829
3/06 29085 35513 36125 28163
4/06 29402 35989 36558 28516
5/06 28699 34955 35479 27588
6/06 28616 35001 35525 27581
7/06 28817 35217 35603 27686
8/06 29497 36053 36457 28379
9/06 30281 36982 37322 29052
10/06 31008 38186 38589 29901
11/06 31724 38911 39412 30474
12/06 32095 39457 39917 30889
1/07 32660 40053 40686 31383
2/07 32095 39272 39986 30764
3/07 32731 39711 40401 31157
4/07 34344 41469 42099 32475
5/07 35062 42915 43616 33652
6/07 35003 42202 42783 33179
7/07 34212 40896 41461 32165
8/07 34129 41508 42025 32547
9/07 35379 43058 43630 33856
10/07 36026 43743 44391 34517
11/07 35014 41914 42498 33196
12/07 34695 41623 42222 32982
1/08 33016 39127 39690 30986
2/08 32907 37857 38478 30100
3/08 32621 37693 38217 29703
4/08 33622 39529 40155 31287
5/08 34671 40041 40891 31951
6/08 32383 36668 37495 29498
7/08 32681 36360 37059 29010
8/08 33360 36886 37569 29349
9/08 30692 33603 33990 26545
10/08 25732 27960 28055 22090
11/08 23943 25953 25933 20374
12/08 24236 26227 26348 20711
====================================================================================================================================
AIM V.I. CORE EQUITY FUND
AIM V.I. CORE EQUITY FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
To the extent the Fund holds cash or cash The S&P 500--REGISTERED TRADEMARK-- The Chartered Financial
equivalents rather than equity securities INDEX is a market capitalization-weighted Analyst--REGISTERED TRADEMARK--
for risk management purposes, the Fund may index covering all major areas of the U.S. (CFA--REGISTERED TRADEMARK--) designation
not achieve its investment objective. economy. It is not the 500 largest is a globally recognized standard for
companies, but rather the most widely held measuring the competence and integrity of
Prices of equity securities change in 500 companies chosen with respect to investment professionals.
response to many factors, including the market size, liquidity, and their
historical and prospective earnings of the industry. The returns shown in management's
issuer, the value of its assets, general discussion of Fund performance are based
economic conditions, interest rates, The RUSSELL 1000--REGISTERED on net asset values calculated for
investor perceptions and market liquidity. TRADEMARK-- INDEX is comprised of 1000 of shareholder transactions. Generally
the largest capitalized U.S. domiciled accepted accounting principles require
Foreign securities have additional companies whose common stock is traded in adjustments to be made to the net assets
risks, including exchange rate changes, the United States. The Russell 1000 Index of the Fund at period end for financial
political and economic upheaval, relative is a trademark/service mark of the Frank reporting purposes, and as such, the net
lack of information, relatively low market Russell Company. Russell--REGISTERED asset values for shareholder transactions
liquidity, and the potential lack of TRADEMARK-- is a trademark of the Frank and the returns based on those net asset
strict financial and accounting controls Russell Company. values may differ from the net asset
and standards. values and returns reported in the
The LIPPER VUF LARGE-CAP CORE FUNDS Financial Highlights. Additionally, the
There is no guarantee that the INDEX is an equally weighted returns and net asset values shown
investment techniques and risk analysis representation of the largest variable throughout this report are at the Fund
used by the Fund's portfolio managers will insurance underlying funds in the Lipper level only and do not include variable
produce the desired results. Large-Cap Core Funds category. These funds product issuer charges. If such charges
typically have an average were included, the total returns would be
The prices of securities held by the price-to-earnings ratio, price-to-book lower.
Fund may decline in response to market ratio, and three-year sales-per-share
risks. growth value, compared to the S&P 500 Industry classifications used in this
Index. report are generally according to the
Global Industry Classification Standard,
The Fund is not managed to track the which was developed by and is the
performance of any particular index, exclusive property and a service mark of
including the indexes defined here, and MSCI Inc. and Standard & Poor's.
consequently, the performance of the Fund
may deviate significantly from the
performance of the indexes.
A direct investment cannot be made in
an index. Unless otherwise indicated,
index results include reinvested
dividends, and they do not reflect sales
charges. Performance of an index of funds
reflects fund expenses; performance of a
market index does not.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-88.57%
AEROSPACE & DEFENSE-3.27%
Lockheed Martin Corp. 129,229 $ 10,865,574
- ---------------------------------------------------------------------------------
Northrop Grumman Corp. 291,219 13,116,504
- ---------------------------------------------------------------------------------
United Technologies Corp. 379,220 20,326,192
=================================================================================
44,308,270
=================================================================================
AIR FREIGHT & LOGISTICS-1.50%
United Parcel Service, Inc.-Class B 367,797 20,287,683
=================================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.89%
Polo Ralph Lauren Corp. 264,952 12,031,470
=================================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.29%
Legg Mason, Inc. 796,811 17,458,129
=================================================================================
AUTOMOBILE MANUFACTURERS-0.19%
Renault S.A. (France) 98,927 2,592,965
=================================================================================
BIOTECHNOLOGY-1.52%
Amgen Inc.(b) 356,534 20,589,839
=================================================================================
CABLE & SATELLITE-2.47%
Comcast Corp.-Class A 1,982,317 33,461,511
=================================================================================
COMMUNICATIONS EQUIPMENT-5.78%
Cisco Systems, Inc.(b) 1,715,404 27,961,085
- ---------------------------------------------------------------------------------
Motorola, Inc. 4,020,913 17,812,645
- ---------------------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 2,084,834 32,523,410
=================================================================================
78,297,140
=================================================================================
COMPUTER HARDWARE-2.12%
Fujitsu Ltd. (Japan) 3,018,000 14,575,337
- ---------------------------------------------------------------------------------
International Business Machines Corp. 167,423 14,090,320
=================================================================================
28,665,657
=================================================================================
COMPUTER STORAGE & PERIPHERALS-1.24%
EMC Corp.(b) 1,127,290 11,802,726
- ---------------------------------------------------------------------------------
Seagate Technology 1,114,518 4,937,315
=================================================================================
16,740,041
=================================================================================
CONSUMER FINANCE-1.70%
American Express Co. 1,243,825 23,072,954
=================================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.06%
Automatic Data Processing, Inc. 710,329 27,944,343
=================================================================================
DIVERSIFIED BANKS-3.15%
U.S. Bancorp 664,618 16,622,096
- ---------------------------------------------------------------------------------
Wells Fargo & Co. 880,752 25,964,569
=================================================================================
42,586,665
=================================================================================
DIVERSIFIED METALS & MINING-0.18%
Freeport-McMoRan Copper & Gold, Inc.(b) 97,000 2,370,680
=================================================================================
DRUG RETAIL-1.29%
Walgreen Co. 707,474 17,453,384
=================================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.49%
Agilent Technologies, Inc.(b) 1,294,591 20,234,457
=================================================================================
ELECTRONIC MANUFACTURING SERVICES-1.23%
Tyco Electronics Ltd. 1,029,108 16,681,841
=================================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.75%
Waste Management, Inc. 716,716 23,751,968
=================================================================================
HEALTH CARE EQUIPMENT-3.50%
Covidien Ltd. 534,479 19,369,519
- ---------------------------------------------------------------------------------
Medtronic, Inc. 893,636 28,078,043
=================================================================================
47,447,562
=================================================================================
HEALTH CARE SUPPLIES-1.09%
Alcon, Inc. 165,858 14,792,875
=================================================================================
HYPERMARKETS & SUPER CENTERS-1.94%
Wal-Mart Stores, Inc. 468,801 26,280,984
=================================================================================
INDUSTRIAL CONGLOMERATES-6.65%
3M Co. 521,148 29,986,856
- ---------------------------------------------------------------------------------
General Electric Co. 565,919 9,167,888
- ---------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Netherlands) 1,349,856 26,380,820
- ---------------------------------------------------------------------------------
Tyco International Ltd. 1,136,596 24,550,474
=================================================================================
90,086,038
=================================================================================
INDUSTRIAL GASES-0.78%
Air Products and Chemicals, Inc. 209,400 10,526,538
=================================================================================
INDUSTRIAL MACHINERY-1.07%
Danaher Corp. 255,126 14,442,683
=================================================================================
INSURANCE BROKERS-1.01%
Marsh & McLennan Cos., Inc. 563,201 13,668,888
=================================================================================
INTEGRATED OIL & GAS-0.55%
Total S.A. (France) 136,263 7,464,819
=================================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.97%
AT&T Inc. 460,300 13,118,550
=================================================================================
MANAGED HEALTH CARE-1.43%
UnitedHealth Group Inc. 729,484 19,404,274
=================================================================================
MOVIES & ENTERTAINMENT-0.64%
News Corp.-Class A 958,166 8,709,729
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. CORE EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
OFFICE ELECTRONICS-1.02%
Xerox Corp. 1,734,243 $ 13,821,917
=================================================================================
OIL & GAS EQUIPMENT & SERVICES-2.24%
BJ Services Co. 1,513,338 17,660,655
- ---------------------------------------------------------------------------------
Tenaris S.A.-ADR (Argentina) 276,838 5,808,061
- ---------------------------------------------------------------------------------
Weatherford International Ltd.(b) 629,706 6,813,419
=================================================================================
30,282,135
=================================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.44%
Apache Corp. 163,260 12,167,768
- ---------------------------------------------------------------------------------
Chesapeake Energy Corp. 374,108 6,049,326
- ---------------------------------------------------------------------------------
XTO Energy, Inc. 420,264 14,822,711
=================================================================================
33,039,805
=================================================================================
OIL & GAS STORAGE & TRANSPORTATION-0.74%
Williams Cos., Inc. (The) 689,708 9,986,972
=================================================================================
PACKAGED FOODS & MEATS-4.07%
Cadbury PLC (United Kingdom) 3,891,750 34,569,814
- ---------------------------------------------------------------------------------
Unilever N.V. (Netherlands) 843,555 20,538,701
=================================================================================
55,108,515
=================================================================================
PERSONAL PRODUCTS-0.97%
Avon Products, Inc. 547,806 13,163,778
=================================================================================
PHARMACEUTICALS-6.31%
Allergan, Inc. 273,345 11,021,270
- ---------------------------------------------------------------------------------
Merck & Co. Inc. 427,944 13,009,498
- ---------------------------------------------------------------------------------
Pfizer Inc. 712,763 12,623,033
- ---------------------------------------------------------------------------------
Schering-Plough Corp. 776,276 13,219,980
- ---------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR (Israel) 452,681 19,270,630
- ---------------------------------------------------------------------------------
Wyeth 433,219 16,250,045
=================================================================================
85,394,456
=================================================================================
PROPERTY & CASUALTY INSURANCE-5.66%
Berkshire Hathaway Inc.-Class A(b) 340 32,844,000
- ---------------------------------------------------------------------------------
Progressive Corp. (The)(b) 2,957,693 43,803,433
=================================================================================
76,647,433
=================================================================================
RAILROADS-0.84%
Union Pacific Corp. 237,019 11,329,508
=================================================================================
REGIONAL BANKS-2.17%
BB&T Corp.(c) 513,448 14,099,282
- ---------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 311,465 15,261,785
=================================================================================
29,361,067
=================================================================================
SEMICONDUCTORS-1.82%
Intel Corp. 878,912 12,884,850
- ---------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.
(Taiwan) 8,580,000 11,752,838
=================================================================================
24,637,688
=================================================================================
SOFT DRINKS-0.81%
Coca-Cola Co. (The) 242,480 10,977,070
=================================================================================
SYSTEMS SOFTWARE-5.07%
Microsoft Corp. 1,358,104 26,401,542
- ---------------------------------------------------------------------------------
Symantec Corp.(b) 3,119,723 42,178,655
=================================================================================
68,580,197
=================================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.66%
Vodafone Group PLC (United Kingdom) 10,973,123 22,415,081
=================================================================================
Total Common Stocks & Other Equity Interests
(Cost $1,539,238,960) 1,199,217,559
=================================================================================
PREFERRED STOCKS-0.59%
HOUSEHOLD PRODUCTS-0.59%
Henkel AG & Co. KGaA(Germany)-Pfd. (Cost
$13,346,361) 247,757 7,981,980
=================================================================================
MONEY MARKET FUNDS-10.05%
Liquid Assets Portfolio-Institutional Class(d) 68,045,069 68,045,069
- ---------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 68,045,069 68,045,069
=================================================================================
Total Money Market Funds (Cost $136,090,138) 136,090,138
=================================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.21% (Cost $1,688,675,459) 1,343,289,677
=================================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-0.77%
Liquid Assets Portfolio-Institutional Class (Cost
$10,445,820)(d)(e) 10,445,820 10,445,820
=================================================================================
TOTAL INVESTMENTS-99.98% (Cost $1,699,121,279) 1,353,735,497
=================================================================================
OTHER ASSETS LESS LIABILITIES-0.02% 310,773
=================================================================================
NET ASSETS-100.00% $1,354,046,270
_________________________________________________________________________________
=================================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI 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, 2008.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1I.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$1,552,585,321)* $1,207,199,539
- -------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 146,535,958
=======================================================
Total investments (Cost
$1,699,121,279) 1,353,735,497
=======================================================
Foreign currencies, at value (Cost
$285,605) 295,341
- -------------------------------------------------------
Receivables for:
Fund shares sold 12,118,342
- -------------------------------------------------------
Dividends 3,131,829
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 105,506
- -------------------------------------------------------
Other assets 191
=======================================================
Total assets 1,369,386,706
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 895,888
- -------------------------------------------------------
Foreign currency contracts 2,699,536
- -------------------------------------------------------
Collateral upon return of securities
loaned 10,445,820
- -------------------------------------------------------
Accrued fees to affiliates 844,090
- -------------------------------------------------------
Accrued other operating expenses 83,574
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 371,528
=======================================================
Total liabilities 15,340,436
=======================================================
Net assets applicable to shares
outstanding $1,354,046,270
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,968,254,313
- -------------------------------------------------------
Undistributed net investment income 23,956,084
- -------------------------------------------------------
Undistributed net realized gain (loss) (290,022,711)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (348,141,416)
=======================================================
$1,354,046,270
_______________________________________________________
=======================================================
NET ASSETS:
Series I $1,330,160,873
_______________________________________________________
=======================================================
Series II $ 23,885,397
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 67,360,811
_______________________________________________________
=======================================================
Series II 1,217,710
_______________________________________________________
=======================================================
Series I:
Net asset value per share $ 19.75
_______________________________________________________
=======================================================
Series II:
Net asset value per share $ 19.62
_______________________________________________________
=======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $10,572,100 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $775,954) $ 34,547,778
- -------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $330,040) 6,025,835
=======================================================
Total investment income 40,573,613
=======================================================
EXPENSES:
Advisory fees 11,422,098
- -------------------------------------------------------
Administrative services fees 4,878,935
- -------------------------------------------------------
Custodian fees 82,327
- -------------------------------------------------------
Distribution fees -- Series II 74,597
- -------------------------------------------------------
Transfer agent fees 49,853
- -------------------------------------------------------
Trustees' and officers' fees and
benefits 70,218
- -------------------------------------------------------
Other 490,375
=======================================================
Total expenses 17,068,403
=======================================================
Less: Fees waived and expense offset
arrangement(s) (263,052)
=======================================================
Net expenses 16,805,351
=======================================================
Net investment income 23,768,262
=======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of (3,869,925)) (38,195,466)
- -------------------------------------------------------
Foreign currencies 469,287
- -------------------------------------------------------
Foreign currency contracts 19,365,310
=======================================================
(18,360,869)
=======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (627,225,132)
- -------------------------------------------------------
Foreign currencies 28,047
- -------------------------------------------------------
Foreign currency contracts (2,770,451)
=======================================================
(629,967,536)
=======================================================
Net realized and unrealized gain (loss) (648,328,405)
=======================================================
Net increase (decrease) in net assets
resulting from operations $(624,560,143)
_______________________________________________________
=======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 23,768,262 $ 37,033,376
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (18,360,869) 387,454,941
- ------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (629,967,536) (212,013,364)
============================================================================================================
Net increase (decrease) in net assets resulting from operations (624,560,143) 212,474,953
============================================================================================================
Distributions to shareholders from net investment income:
Series I (37,970,942) (26,080,139)
- ------------------------------------------------------------------------------------------------------------
Series II (580,118) (332,527)
============================================================================================================
Total distributions from net investment income (38,551,060) (26,412,666)
============================================================================================================
Share transactions-net:
Series I (315,589,332) (584,578,394)
- ------------------------------------------------------------------------------------------------------------
Series II (32,094) (7,686,109)
============================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (315,621,426) (592,264,503)
============================================================================================================
Net increase (decrease) in net assets (978,732,629) (406,202,216)
============================================================================================================
NET ASSETS:
Beginning of year 2,332,778,899 2,738,981,115
============================================================================================================
End of year (includes undistributed net investment income of
$23,956,084 and $38,129,325, respectively) $1,354,046,270 $2,332,778,899
____________________________________________________________________________________________________________
============================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. CORE EQUITY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. CORE EQUITY FUND
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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The
Advisor did not waive fees and/or reimburse expenses during the period under
this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$260,300.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $404,770 for accounting and fund administrative
services and reimbursed $4,474,165 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
AIM V.I. CORE EQUITY FUND
Certain officers and trustees of the Trust are officers and directors of
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- ---------------------------------------------------------------
Level 1 $1,205,463,140 $(2,770,451)
- ---------------------------------------------------------------
Level 2 148,272,357 --
- ---------------------------------------------------------------
Level 3 -- --
===============================================================
$1,353,735,497 $(2,770,451)
_______________________________________________________________
===============================================================
</Table>
* Other investments include foreign currency contracts, which are included at
unrealized appreciation/(depreciation).
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, 2008, the Fund
engaged in securities purchases of $1,852,823 and securities sales of
$10,693,669, which resulted in net realized gains (losses) of $(3,869,925).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $2,752.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $8,394
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
AIM V.I. CORE EQUITY FUND
NOTE 8--FOREIGN CURRENCY CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS
- -----------------------------------------------------------------------------------------------------------------------
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------------------------ APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------
3/04/09 GBP 18,300,000 USD 27,355,389 $ 26,659,956 $ 695,433
- -----------------------------------------------------------------------------------------------------------------------
3/10/09 EUR 33,600,000 USD 43,357,776 $ 46,823,660 $ (3,465,884)
=======================================================================================================================
Total open foreign
currency contracts $ (2,770,451)
=======================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
CONTRACT TO
CLOSED ------------------------------------------
DATE DELIVER RECEIVE VALUE REALIZED GAIN
- ---------------------------------------------------------------------------------------------------------------------
12/08/08 USD 5,150,000 GBP 7,698,374 $ 7,627,459 $ 70,915
=====================================================================================================================
Total closed foreign
currency contracts $ 70,915
=====================================================================================================================
Total foreign currency
contracts $ (2,699,536)
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
Currency Abbreviations:
<Table>
EUR - Euro
GBP - British Pound Sterling
USD - U.S. Dollar
</Table>
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------------
Ordinary income $38,551,060 $26,412,666
_____________________________________________________________________________________________________________
=============================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 24,371,702
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (348,159,289)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 14,817
- -------------------------------------------------------------------------------------------------
Temporary book/tax differences (415,618)
- -------------------------------------------------------------------------------------------------
Capital loss carryforward (211,670,138)
- -------------------------------------------------------------------------------------------------
Post-October Capital Loss deferral (78,349,517)
- -------------------------------------------------------------------------------------------------
Shares of beneficial interest 1,968,254,313
=================================================================================================
Total net assets $1,354,046,270
_________________________________________________________________________________________________
=================================================================================================
</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 wash sales
and the realization for tax purposes of unrealized gains on certain foreign
currency contracts.
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 to utilizing $
211,670,138 of capital loss carryforward in the fiscal year ending December 31,
2009.
AIM V.I. CORE EQUITY FUND
The Fund utilized $56,332,868 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, 2008 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- ---------------------------------------------------------------------------------
December 31, 2009 $ 33,267,817
- ---------------------------------------------------------------------------------
December 31, 2010 157,184,467
- ---------------------------------------------------------------------------------
December 31, 2011 21,217,854
=================================================================================
Total capital loss carryforward $211,670,138
_________________________________________________________________________________
=================================================================================
</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 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, 2008 was $615,170,395 and
$708,536,103, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 45,750,225
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (393,909,514)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(348,159,289)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $1,701,894,786.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, proxy costs and partnership investments, on December 31, 2008,
undistributed net investment income was increased by $609,557, undistributed net
realized gain (loss) was decreased by $483,178 and shares of beneficial interest
decreased by $126,379. This reclassification had no effect on the net assets of
the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2008(a) 2007
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 4,038,365 $ 99,125,887 1,426,134 $ 41,447,869
- --------------------------------------------------------------------------------------------------------------------------
Series II 303,531 7,308,692 162,780 4,629,698
==========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,942,248 37,970,942 869,048 26,080,138
- --------------------------------------------------------------------------------------------------------------------------
Series II 29,872 580,118 11,166 332,527
==========================================================================================================================
Reacquired:
Series I (17,562,746) (452,686,161) (22,533,393) (652,106,401)
- --------------------------------------------------------------------------------------------------------------------------
Series II (319,907) (7,920,904) (440,110) (12,648,334)
==========================================================================================================================
Net decrease in share activity (11,568,637) $(315,621,426) (20,504,375) $(592,264,503)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. CORE EQUITY FUND
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET (LOSSES) ON DIVIDENDS
VALUE, NET SECURITIES (BOTH TOTAL FROM FROM NET NET ASSET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT VALUE, END TOTAL
OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME OF PERIOD RETURN(A)
- -----------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $29.11 $0.33(c) $(9.11) $(8.78) $(0.58) $19.75 (30.14)%
Year ended 12/31/07 27.22 0.42(c) 1.80 2.22 (0.33) 29.11 8.12
Year ended 12/31/06 23.45 0.34(c) 3.58 3.92 (0.15) 27.22 16.70
Year ended 12/31/05 22.60 0.24(c) 0.96 1.20 (0.35) 23.45 5.31
Year ended 12/31/04 20.94 0.30(e) 1.58 1.88 (0.22) 22.60 8.97
- -----------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 28.88 0.26(c) (9.02) (8.76) (0.50) 19.62 (30.32)
Year ended 12/31/07 27.02 0.34(c) 1.80 2.14 (0.28) 28.88 7.88
Year ended 12/31/06 23.33 0.28(c) 3.55 3.83 (0.14) 27.02 16.42
Year ended 12/31/05 22.48 0.18(c) 0.96 1.14 (0.29) 23.33 5.08
Year ended 12/31/04 20.85 0.21(e) 1.60 1.81 (0.18) 22.48 8.67
_______________________________________________________________________________________________________________________
=======================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME
END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(B)
- -------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $1,330,161 0.89%(d) 0.90%(d) 1.26%(d) 36%
Year ended 12/31/07 2,298,007 0.87 0.88 1.44 45
Year ended 12/31/06 2,699,252 0.89 0.89 1.35 45
Year ended 12/31/05 1,246,529 0.89 0.89 1.08 52
Year ended 12/31/04 1,487,462 0.91 0.91 1.25(e) 52
- -------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 23,885 1.14(d) 1.15(d) 1.01(d) 36
Year ended 12/31/07 34,772 1.12 1.13 1.19 45
Year ended 12/31/06 39,729 1.14 1.14 1.10 45
Year ended 12/31/05 3,858 1.14 1.14 0.83 52
Year ended 12/31/04 4,173 1.16 1.16 1.00(e) 52
_____________________________________________________________________________________________________________
=============================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $1,853,011
and $29,839 for Series I and Series II shares, respectively.
(e) 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%, $0.14 and 0.67% for
Series I and Series II shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $748.50 $3.91 $1,020.66 $4.52 0.89%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 747.50 5.01 1,019.41 5.79 1.14
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Qualified Dividend Income* N/A
Corporate Dividends Received Deduction* 81.13%
</Table>
* The above percentage is 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. CORE EQUITY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. CORE EQUITY FUND
[INVESCO AIM LOGO] AIM V.I. DIVERSIFIED INCOME FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. DIVERSIFIED INCOME FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
continued to worsen and mortgage defaults
PERFORMANCE SUMMARY began to reach high levels,(1) the two
largest providers of U.S. mortgages,
For the year ended December 31, 2008, Series I shares of AIM V.I. Diversified Income Fannie Mae and Freddie Mac (not Fund
Fund, excluding variable product issuer charges, underperformed the Fund's broad market holdings), were placed into U.S.
and style-specific indexes.(triangle) This underperformance can be attributed mainly government conservatorship in an effort to
to our exposure to the financials sector and financial related companies. Price inject stability into the financial and
declines of financial bonds were substantial in 2008 and reflected a negative sentiment housing markets. In addition, large
toward the entire financials sector. In addition, the Fund's overall positioning in the financial institutions that were highly
credit-sensitive areas of the market, including corporate bonds and mortgage-backed leveraged or under-capitalized, such as
securities (MBS), detracted from performance, as all credit markets underperformed Lehman Brothers, AIG, Merrill Lynch,
government securities for the year, reflecting an unprecedented flight to safety. Washington Mutual and Wachovia (not Fund
holdings) became insolvent, causing
Your Fund's long-term performance appears later in this report. significant market disruptions.
FUND VS. INDEXES Since the middle of 2007, the U.S.
Federal Reserve (the Fed) deployed a range
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. If of policy tools to deal with a combination
variable product issuer charges were included, returns would be lower. of economic weakness and financial market
distress. Since December 2007, the Fed
Series I Shares -15.73% lowered the federal funds target rate from
Series II Shares -15.93 4.25% to a range of zero to 0.25%.(2) The
Barclays Capital U.S. Aggregate Index(triangle)* (Broad Market Index) 5.24 central bank, in conjunction with the U.S.
Barclays Capital U.S. Credit Index(triangle)* (Style-Specific Index) -3.08 Department of the Treasury, sought to
Lipper VUF Corporate Debt BBB-Rated Funds Index(triangle) (Peer Group Index) -4.97 enhance market liquidity by introducing a
large number of programs.
(triangle) Lipper Inc.
Most fixed-income securities lost
* Effective 11/03/08, Lehman Brothers indexes were rebranded as Barclays Capital ground along with other financial assets
indexes. during the year as the crisis within the
======================================================================================= financial system deepened. Interest rates
HOW WE INVEST In evaluating the credit quality of a fell, credit spreads increased to record
security, we use input from various rating levels(1) and the yield curve steepened as
We seek to provide consistent returns agencies and Wall Street fixed-income and investors fled to the safety of government
while minimizing risk. Our security equity analysts, and conduct our own bonds, especially those with short
selection process involves both top-down internal credit analysis. maturities. While credit and yield spreads
analysis, which takes into account overall widened substantially throughout 2008,
economic and market trends, and bottom-up We consider selling a bond when: default rates lagged, but picked up in the
analysis, which includes an evaluation of second half of the year.
individual bond issuers. We look for o It becomes fully valued.
potential investments in all sectors of The Fund began the year with a
the bond market: domestic and foreign o Overall market and economic trends long-to-neutral duration positioning
government securities, U.S. corporate indicate that sector emphasis should be versus its style-specific index. Duration
bonds, mortgages, asset-backed securities, changed. is a measure of a bond's sensitivity to
money market funds, high yield debt and interest rate changes. In response to the
convertible corporate bonds. We make o Fundamentals, such as credit quality deepening turmoil in the credit markets,
allocation decisions based on performance ratings, deteriorate for an individual bond yields had declined by the middle of
and valuations among the different areas issuer or a sector.
of the bond market. Our focus is on bonds
that are attractively valued relative to o An unanticipated change occurs
the rest of the bond market. involving an individual issuer or
sector.
MARKET CONDITIONS AND YOUR FUND
Financial markets across the globe faced
severe challenges throughout 2008. During
the year, as the housing market
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 FIXED INCOME ISSUERS* Total Net Assets $24.5 million
By industry
1. Federal National Mortgage Total Number of Holdings* 166
Other Diversified Financial Services 12.7% Association 9.1% ==========================================
Diversified Banks 9.2 2. First American Capital Trust I 3.3
Federal National Mortgage 3. SLM Corp. 3.2 The Fund's holdings are subject to change,
Association (FNMA) 9.1 4. Citicorp Lease Pass-Through Trust 2.6 and there is no assurance that the Fund
Property & Casualty Insurance 7.8 5. Federal Home Loan Mortgage Corp. 2.4 will continue to hold any particular
Integrated Telecommunication 6. Industry (City of) California security.
Services 5.5 Urban Development Agency 2.3
Cable & Satellite 4.0 7. Centura Capital Trust I 2.1 * Excluding money market fund holdings.
Investment Banking & Brokerage 3.8 8. Comcast Holdings Corp. 2.1
Regional Banks 3.4 9. Silicon Valley Bank 1.6
Office Services & Supplies 3.2 10. Macys Retail Holdings Inc. 1.6
Consumer Finance 3.1 ==========================================
Other Industries,
Each with Less Than 3%
of Total Net Assets 39.6
Money Market Funds Plus
Other Assets Less Liabilities (1.4)
==========================================
AIM V.I. DIVERSIFIED INCOME FUND
March 2008. Then, as market liquidity The Fund's overweight position in high PETER EHRET
improved, yields rose considerably through yield bonds also was negative for relative Chartered Financial
the end of May. Consequently, our performance. The high yield market [EHRET Analyst, senior
long-to-neutral duration structure over suffered significant losses during the PHOTO] portfolio manager, is
the first few months of 2008 was negative year. The disparity between yields on U.S. manager of AIM V.I.
for performance. Treasuries and high yield bonds reflected Diversified Income Fund.
a significant flight to quality. Mr. Ehret joined Invesco Aim in 2001. He
During the summer of 2008, we shifted graduated cum laude with a B.S. in
toward a short-to-neutral duration stance. We maintained a small position in economics from the University of
As the credit markets came under renewed mortgage-backed securities, primarily Minnesota. He also earned an M.S. in real
pressure and concerns about financial focusing on higher coupon agency mortgage estate appraisal and investment analysis
stability increased, government bond bonds. During the year, the MBS market from the University of Wisconsin- Madison.
yields declined sharply through the end of underperformed the U.S. Treasury market,
the year. As a result, the Fund's driven by a general flight to safety. As a DARREN HUGHES
short-to-neutral duration detracted from result, the Fund's exposure to MBS Chartered Financial
relative performance. detracted from relative performance. [HUGHES Analyst, senior
PHOTO] portfolio manager, is
We used U.S. Treasury notes and U.S. Thank you for your investment in AIM manager of AIM V.I.
Treasury bond futures contracts to manage V.I. Diversified Income Fund. Diversified Income
the Fund's duration. In our view, gaining Fund. He joined Invesco Aim in 1992. Mr.
exposure to the U.S. Treasury market The views and opinions expressed in Hughes earned a B.B.A. in finance and
through U.S. Treasury futures is a more management's discussion of Fund economics from Baylor University.
efficient way to employ the Fund's cash performance are those of Invesco Aim
for duration management purposes than Advisors, Inc. These views and opinions CYNTHIA BRIEN
buying actual bonds. are subject to change at any time based on Chartered Financial
factors such as market and economic [BRIEN Analyst, portfolio
The Fund was positioned for a conditions. These views and opinions may PHOTO] manager, is manager of
steepening of the yield curve throughout not be relied upon as investment advice or AIM V.I. Diversified
the year. As long term bond yields fell by recommendations, or as an offer for a Income Fund. She joined
less than short term yields, the yield particular security. The information is Invesco Aim in 1996. Ms. Brien earned a
curve steepened, which benefited relative not a complete analysis of every aspect of B.B.A. from the University of Texas at
performance. any market, country, industry, security or Austin. She is a director, and a past
the Fund. Statements of fact are from president, of the CFA Society of Houston.
The Fund maintained an overweight sources considered reliable, but Invesco She joined the team on Jan. 14, 2009,
exposure to the investment-grade corporate Aim Advisors, Inc. makes no representation after the close of the reporting period.
bond market by investing primarily in or warranty as to their completeness or
actual bonds. We also used credit default accuracy. Although historical performance CHUCK BURGE
swaps (CDS) as a way to get exposure to is no guarantee of future results, these Senior portfolio
the credit market. In their simplest form, insights may help you understand our manager, is manager of
CDS contracts provide default protection investment management philosophy. [BURGE AIM V.I. Diversified
on a bond position. In addition, CDS may PHOTO] Income Fund. He joined
be used to adjust or tailor credit market (1) Barclays Capital Invesco Aim in 2002. Mr.
exposure without owning the underlying (2) U.S. Federal Reserve Burge earned a B.S. in
bonds. In our view, this is a more economics from Texas A&M University and an
efficient way to gain exposure to the See important Fund and index disclosures M.B.A. in finance and accounting from Rice
credit of a particular bond. During the later in this report. University. He joined the team on Jan.
year, we increased our credit exposure and 14, 2009, after the close of the reporting
assumed more credit risk by purchasing CDS period.
contracts. However, credit spreads widened
considerably, resulting in the BRENDAN GAU left the team on Jan. 14,
underperformance of investment-grade 2009, after the close of the reporting
corporate bonds relative to U.S. Treasury period.
securities. This had a negative impact on
the Fund's relative performance. MARK GILLEY left the team on Jan. 14,
2009, after the close of the reporting
Our exposure to the financials sector period.
and financial related positions, including
WACHOVIA and LEHMAN BROTHERS HOLDINGS,
detracted from relative and absolute
performance. We eliminated our position in
Lehman Brothers Holdings before the end of
the year covered by this report. While the
Fund's exposure to specific securities in
the financials sector represented small
positions, the price declines of these
bonds were substantial and reflected
concerns about the entire financials
sector.
AIM V.I. DIVERSIFIED INCOME FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic chart, investment, is constructed with each size as the space between $10,000 and
presents the fluctuations in the value of segment representing a percent change in $20,000, and so on.
the Fund and its indexes. We believe that the value of the investment. In this
a logarithmic chart is more effective than chart, each segment represents a
other types of charts in illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. DIVERSIFIED INCOME FUND, A
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/5/93) 3.27% CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 1.02 FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years -0.65 MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
1 Year -15.73 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years 0.77% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years -0.90 MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year -15.93 SHARES. DETERMINED BY THE VARIABLE PRODUCT
========================================== ISSUERS, WILL VARY AND WILL LOWER THE
THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS MARCH RATIO SET FORTH IN THE MOST RECENT FUND
14, 2002. RETURNS SINCE THAT DATE ARE PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
HISTORICAL. ALL OTHER RETURNS ARE THE FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
BLENDED RETURNS OF THE HISTORICAL 0.75% AND 1.00%, RESPECTIVELY.(1) THE TOTAL PRODUCT CHARGES, IS AVAILABLE ON THE
PERFORMANCE OF SERIES II SHARES SINCE ANNUAL FUND OPERATING EXPENSE RATIO SET INVESCO AIM AUTOMATED INFORMATION LINE,
THEIR INCEPTION AND THE RESTATED FORTH IN THE MOST RECENT FUND PROSPECTUS 866 702 4402. AS MENTIONED ABOVE, FOR THE
HISTORICAL PERFORMANCE OF SERIES I SHARES AS OF THE DATE OF THIS REPORT FOR SERIES I MOST RECENT MONTH-END PERFORMANCE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES AND SERIES II SHARES WAS 1.17% AND 1.42%, INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
II SHARES) ADJUSTED TO REFLECT THE RULE RESPECTIVELY. THE EXPENSE RATIOS PRESENTED CONTACT YOUR VARIABLE PRODUCT ISSUER OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. ABOVE MAY VARY FROM THE EXPENSE RATIOS FINANCIAL ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS PRESENTED IN OTHER SECTIONS OF THIS REPORT
MAY 5, 1993. THAT ARE BASED ON EXPENSES INCURRED DURING HAD THE ADVISOR NOT WAIVED FEES AND/OR
THE PERIOD COVERED BY THIS REPORT. REIMBURSED EXPENSES, PERFORMANCE WOULD
THE PERFORMANCE OF THE FUND'S SERIES I HAVE BEEN LOWER.
AND SERIES II SHARE CLASSES WILL DIFFER
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. (1) Total annual operating expenses less
any contractual fee waivers and/or
expense reimbursements by the advisor
in effect through at least April 30,
2010. See current prospectus for more
information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/93, Fund data from 5/5/93
AIM V.I. Lipper VUF
Diversified Corporate Debt
Income Fund- Barclays Capital U.S. Barclays Capital BBB-Rated
Date Series I Shares Aggregate Index(1) U.S. Credit Index(1) Funds Index(1)
4/30/93 $10000 $10000 $10000
5/93 $9980 10013 10012 10011
6/93 10160 10194 10255 10225
7/93 10240 10252 10329 10310
8/93 10480 10432 10586 10540
9/93 10510 10460 10611 10584
10/93 10622 10499 10665 10632
11/93 10500 10410 10534 10522
12/93 10605 10466 10596 10500
1/94 10833 10608 10801 10657
2/94 10574 10423 10546 10433
3/94 10271 10166 10223 10136
4/94 10166 10085 10124 10033
5/94 10093 10084 10087 10017
6/94 10124 10062 10062 9994
7/94 10178 10261 10316 10172
8/94 10188 10274 10328 10182
9/94 10177 10123 10135 10019
10/94 10231 10114 10112 9999
11/94 10090 10091 10095 9991
12/94 10068 10161 10179 10072
1/95 10146 10362 10395 10261
2/95 10446 10609 10694 10520
3/95 10603 10674 10782 10593
4/95 10795 10823 10964 10749
5/95 11123 11242 11480 11281
6/95 11191 11324 11584 11354
7/95 11281 11299 11533 11287
8/95 11372 11435 11718 11462
9/95 11564 11546 11857 11594
10/95 11734 11696 12012 11798
11/95 11812 11872 12242 12007
12/95 11984 12038 12443 12215
1/96 12056 12118 12524 12280
2/96 11971 11908 12226 11971
3/96 11983 11825 12122 11875
4/96 12007 11758 12021 11784
5/96 12043 11735 12000 11768
6/96 12235 11892 12176 11939
7/96 12259 11925 12200 11962
8/96 12343 11905 12162 11941
9/96 12582 12112 12420 12201
10/96 12881 12380 12759 12521
11/96 13182 12592 13032 12797
12/96 13205 12475 12852 12653
1/97 13129 12514 12870 12676
2/97 13244 12545 12924 12736
3/97 12989 12406 12723 12557
4/97 13168 12591 12916 12738
5/97 13372 12710 13062 12887
6/97 13577 12861 13247 13082
7/97 13947 13208 13731 13554
8/97 13806 13095 13529 13353
9/97 14178 13289 13765 13627
10/97 14242 13481 13940 13770
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
11/97 14293 13543 14019 13859
12/97 14446 13680 14167 13995
1/98 14688 13855 14335 14189
2/98 14740 13845 14331 14197
3/98 14931 13893 14384 14316
4/98 14945 13965 14474 14376
5/98 15047 14098 14646 14486
6/98 15047 14217 14754 14584
7/98 15072 14247 14741 14593
8/98 14739 14479 14810 14475
9/98 14881 14818 15289 14826
10/98 14625 14740 15054 14656
11/98 14983 14824 15337 14918
12/98 14963 14868 15382 14953
1/99 15168 14974 15534 15101
2/99 14841 14713 15165 14767
3/99 14977 14794 15272 14913
4/99 15100 14841 15317 15039
5/99 14759 14711 15112 14827
6/99 14663 14664 15033 14767
7/99 14622 14602 14950 14698
8/99 14525 14595 14914 14648
9/99 14634 14764 15076 14783
10/99 14580 14818 15145 14802
11/99 14621 14817 15161 14846
12/99 14677 14746 15081 14839
1/00 14618 14698 15028 14816
2/00 14779 14875 15167 15017
3/00 14793 15071 15296 15198
4/00 14487 15028 15162 15045
5/00 14225 15021 15106 14932
6/00 14531 15334 15485 15293
7/00 14574 15473 15673 15431
8/00 14764 15697 15877 15665
9/00 14764 15796 15960 15673
10/00 14603 15901 15976 15647
11/00 14530 16160 16183 15799
12/00 14777 16460 16497 16115
1/01 15291 16729 16948 16493
2/01 15400 16875 17096 16645
3/01 15150 16960 17202 16645
4/01 14932 16890 17140 16539
5/01 15072 16991 17297 16668
6/01 14979 17056 17385 16682
7/01 15337 17437 17839 17069
8/01 15493 17637 18078 17273
9/01 15198 17842 18051 17181
10/01 15571 18215 18499 17561
11/01 15478 17964 18338 17416
12/01 15308 17850 18213 17272
1/02 15341 17995 18367 17383
2/02 15257 18169 18505 17498
3/02 15056 17867 18164 17292
4/02 15223 18213 18417 17618
5/02 15273 18368 18660 17754
6/02 15071 18527 18691 17726
7/02 14702 18750 18681 17712
8/02 15021 19067 19165 18077
9/02 15255 19376 19529 18263
10/02 15021 19288 19303 18120
11/02 15238 19282 19553 18307
12/02 15657 19681 20130 18734
1/03 15767 19698 20195 18861
2/03 16040 19970 20599 19196
3/03 16094 19955 20614 19223
4/03 16423 20119 20995 19507
5/03 16878 20495 21657 19898
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
6/03 16950 20454 21604 19907
7/03 16294 19766 20683 19276
8/03 16403 19897 20845 19410
9/03 16913 20424 21573 19935
10/03 16822 20234 21343 19821
11/03 16894 20282 21441 19910
12/03 17104 20489 21680 20147
1/04 17297 20653 21899 20331
2/04 17434 20877 22174 20527
3/04 17570 21033 22389 20690
4/04 17143 20486 21683 20202
5/04 17066 20404 21531 20085
6/04 17143 20519 21622 20204
7/04 17297 20723 21889 20404
8/04 17646 21118 22405 20777
9/04 17743 21175 22531 20862
10/04 17898 21353 22749 21045
11/04 17801 21183 22521 20921
12/04 17963 21377 22815 21128
1/05 18087 21512 22996 21230
2/05 18025 21385 22861 21164
3/05 17861 21275 22576 21004
4/05 18108 21563 22879 21233
5/05 18334 21796 23199 21460
6/05 18479 21915 23383 21611
7/05 18355 21715 23149 21492
8/05 18623 21994 23501 21745
9/05 18398 21767 23149 21518
10/05 18212 21595 22896 21363
11/05 18314 21690 23035 21454
12/05 18486 21897 23262 21649
1/06 18508 21898 23215 21682
2/06 18595 21971 23318 21756
3/06 18398 21755 22990 21571
4/06 18288 21716 22906 21588
5/06 18310 21692 22866 21574
6/06 18354 21738 22901 21611
7/06 18616 22032 23238 21894
8/06 18901 22370 23668 22232
9/06 19120 22566 23932 22440
10/06 19229 22715 24123 22622
11/06 19449 22979 24464 22902
12/06 19312 22846 24253 22806
1/07 19289 22836 24247.51 22814.09
2/07 19733 23188 24737.1 23207.51
3/07 19709 23189 24618 23192
4/07 19849 23314 24796 23364
5/07 19663 23137 24553 23191
6/07 19570 23069 24438 23067
7/07 19570 23261 24522 23126
8/07 19617 23546 24748 23363
9/07 19664 23725 24946 23646
10/07 19827 23938 25238 23864
11/07 19710 24369 25453 24040
12/07 19647 24437 25491 24181
1/08 19596 24848 25801 24496
2/08 19169 24882 25849 24443
3/08 19043 24967 25601 24352
4/08 19420 24915 25748 24480
5/08 19293 24732 25505 24310
6/08 19193 24712 25369 24193
7/08 19118 24692 25220 23980
8/08 19395 24926 25419 24069
9/08 17683 24592 23750 23040
10/08 15895 24011 22371 21601
11/08 15895 24793 23249 21841
12/08 16558 25718 24707 22979
====================================================================================================================================
AIM V.I. DIVERSIFIED INCOME FUND
AIM V.I. DIVERSIFIED INCOME FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE A HIGH LEVEL OF CURRENT INCOME.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
IN THE FUND
The BARCLAYS CAPITAL U.S. AGGREGATE INDEX The Chartered Financial
The Fund may invest in debt securities, covers U.S. investment-grade fixed-rate Analyst--REGISTERED TRADEMARK--
such as notes and bonds, which carry bonds with components for government and (CFA--REGISTERED TRADEMARK--) designation
interest rate and credit risk. corporate securities, mortgage is a globally recognized standard for
pass-throughs, and asset-backed measuring the competence and integrity of
Investing in developing countries can securities. investment professionals.
add additional risk, such as high rates of
inflation or sharply devalued currencies The BARCLAYS CAPITAL U.S. CREDIT INDEX The returns shown in management's
against the U.S. dollar. Transaction costs is an unmanaged index that consists of discussion of Fund performance are based
are often higher, and there may be delays publicly issued, SEC-registered U.S. on net asset values calculated for
in settlement procedures. corporate and specified foreign debentures shareholder transactions. Generally
and secured notes that meet specified accepted accounting principles require
Prices of equity securities change in maturity, liquidity and quality adjustments to be made to the net assets
response to many factors, including the requirements. of the Fund at period end for financial
historical and prospective earnings of the reporting purposes, and as such, the net
issuer, the value of its assets, general The LIPPER VUF CORPORATE DEBT BBB-RATED asset values for shareholder transactions
economic conditions, interest rates, FUNDS INDEX is an equally weighted and the returns based on those net asset
investor perceptions and market liquidity. representation of the largest variable values may differ from the net asset
insurance underlying funds in the Lipper values and returns reported in the
Foreign securities have additional Corporate Debt BBB-Rated Funds category. Financial Highlights. Additionally, the
risks, including exchange rate changes, These funds invest at least 65% of assets returns and net asset values shown
political and economic upheaval, relative in corporate and government debt issues throughout this report are at the Fund
lack of information, relatively low market rated in the top four grades. level only and do not include variable
liquidity, and the potential lack of product issuer charges. If such charges
strict financial and accounting controls The Fund is not managed to track the were included, the total returns would be
and standards. performance of any particular index, lower.
including the indexes defined here, and
High-coupon, U.S. government agency consequently, the performance of the Fund Industry classifications used in this
mortgage-backed securities provide a may deviate significantly from the report are generally according to the
higher coupon than current prevailing performance of the indexes. Global Industry Classification Standard,
market interest rates, and the Fund may which was developed by and is the
purchase such securities at a premium. If A direct investment cannot be made in exclusive property and a service mark of
these securities experience a an index. Unless otherwise indicated, MSCI Inc. and Standard & Poor's.
faster-than-expected principal prepayment index results include reinvested
rate, both the market value and income dividends, and they do not reflect sales
from such securities will decrease. charges. Performance of an index of funds
reflects fund expenses; performance of a
Interest rate risk refers to the risk market index does not.
that bond prices generally fall as
interest rates rise and vice versa.
The Fund may invest in lower quality
debt securities, commonly known as "junk
bonds." Compared to higher quality debt
securities, junk bonds involve greater
risk of default or price changes due to
changes in credit quality of the issuer
because they are generally unsecured and
may be subordinated to other creditors'
claims. Credit ratings on junk bonds do
not necessarily reflect their actual
market risk.
Leveraging entails risks such as
magnifying changes in the value of the
portfolio's securities.
There is no guarantee that the
investment techniques and risk analysis
used by the Fund's portfolio managers will
produce the desired results.
The prices of securities held by the
Fund may decline in response to market
risks.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
BONDS & NOTES-74.18%
AEROSPACE & DEFENSE-1.04%
Systems 2001 Asset Trust LLC (United Kingdom)
-Series 2001, Class G, Jr. Sec. Gtd. Notes,
(INS-MBIA Insurance Corp.)
6.66%, 09/15/13(b)(c) $ 256,843 $ 254,274
==============================================================================
AIRLINES-0.66%
Southwest Airlines Co.,
Sr. Unsec. Unsub. Bonds,
7.38%, 03/01/27 190,000 161,021
==============================================================================
ALTERNATIVE CARRIERS-0.14%
Level 3 Financing Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
9.25%, 11/01/14 60,000 35,100
==============================================================================
ALUMINUM-0.49%
Novelis Inc. (Canada),
Sr. Unsec. Gtd. Global Notes,
7.25%, 02/15/15 205,000 120,950
==============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.94%
Bank of New York Institutional Capital Trust
-Series A, Jr. Sub. Trust Pfd. Capital
Securities,
7.78%, 12/01/26(c) 250,000 231,159
==============================================================================
AUTOMOTIVE RETAIL-0.36%
Autozone Inc.,
Sr. Unsec. Global Notes,
6.50%, 01/15/14 100,000 88,818
==============================================================================
BROADCASTING-1.08%
Cox Communications Inc.,
Sr. Unsec. Notes,
9.38%, 01/15/19(c) 140,000 147,393
- ------------------------------------------------------------------------------
Cox Enterprises, Inc.,
Sr. Unsec. Notes,
7.88%, 09/15/10(c) 120,000 116,278
==============================================================================
263,671
==============================================================================
CABLE & SATELLITE-3.88%
Comcast Cable Communications Holdings Inc.,
Sr. Unsec. Gtd. Global Notes,
9.46%, 11/15/22 290,000 328,079
- ------------------------------------------------------------------------------
Comcast Corp.,
Unsec. Gtd. Unsub. Notes,
5.70%, 05/15/18 120,000 114,758
- ------------------------------------------------------------------------------
Comcast Holdings Corp.,
Sr. Gtd. Sub. Notes,
10.63%, 07/15/12 485,000 506,954
==============================================================================
949,791
==============================================================================
CONSUMER FINANCE-3.09%
American Express Credit Corp.,
-Series C, Sr. Unsec. Floating Rate Medium-Term
Notes,
1.87%, 05/27/10(d) 70,000 64,962
- ------------------------------------------------------------------------------
Series C, Sr. Unsec. Global Medium-Term Notes,
7.30%, 08/20/13 30,000 30,942
- ------------------------------------------------------------------------------
Capital One Capital III,
Jr. Unsec. Gtd. Sub. Notes,
7.69%, 08/15/36 260,000 110,500
- ------------------------------------------------------------------------------
Ford Motor Credit Co. LLC,
Sr. Unsec. Notes,
8.00%, 12/15/16 230,000 154,100
- ------------------------------------------------------------------------------
SLM Corp.,
Sr. Unsec. Floating Rate Medium-Term Notes,
2.10%, 03/16/09(c)(d) 400,000 394,752
==============================================================================
755,256
==============================================================================
DEPARTMENT STORES-1.56%
Macys Retail Holdings Inc.,
Sr. Unsec. Gtd. Notes,
6.30%, 04/01/09 390,000 383,078
==============================================================================
DISTILLERS & VINTNERS-0.16%
Constellation Brands Inc.,
Sr. Unsec. Gtd. Global Notes,
7.25%, 05/15/17 40,000 38,200
==============================================================================
DIVERSIFIED BANKS-9.23%
Bangkok Bank PCL (Hong Kong),
Unsec. Sub. Notes,
9.03%, 03/15/29 (Acquired 4/21/05-5/11/06; Cost
$493,483)(c) 400,000 330,079
- ------------------------------------------------------------------------------
BankAmerica Institutional
-Series A, Jr. Unsec. Gtd. Sub. Trust Pfd.
Capital Securities,
8.07%, 12/31/26(c) 200,000 157,795
- ------------------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain),
Jr. Unsec. Gtd. Sub. Notes,
5.92%(e) 250,000 100,981
- ------------------------------------------------------------------------------
Centura Capital Trust I,
Jr. Gtd. Sub. Trust Pfd. Capital Securities,
8.85%, 06/01/27(c) 500,000 522,108
- ------------------------------------------------------------------------------
First Empire Capital Trust I,
Jr. Unsec. Gtd. Sub. Trust Pfd. Capital
Securities,
8.23%, 02/01/27 260,000 206,669
- ------------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)
-Series 1, Unsec. Sub. Floating Rate Euro Notes,
2.13%(d)(e) 180,000 96,451
- ------------------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands),
Jr. Unsec. Gtd. Sub. Second Tier Euro Bonds,
8.38%(e) 100,000 95,693
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DIVERSIFIED INCOME FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
DIVERSIFIED BANKS-(CONTINUED)
National Bank of Canada (Canada),
Unsec. Sub. Floating Rate Euro Deb.,
3.31%, 08/29/87(d) $ 200,000 $ 105,000
- ------------------------------------------------------------------------------
National Westminster Bank PLC (United Kingdom)
-Series B, Sr. Unsec. Sub. Floating Rate Euro
Notes, 3.31%(d)(e) 280,000 143,252
- ------------------------------------------------------------------------------
RBS Capital Trust III,
Unsec. Gtd. Sub. Trust Pfd. Global Notes,
5.51%(e) 120,000 51,863
- ------------------------------------------------------------------------------
Sovereign Bancorp Inc.,
Sr. Unsec. Floating Rate Global Notes,
2.46%, 03/01/09(d) 110,000 106,877
- ------------------------------------------------------------------------------
Wachovia Capital Trust V,
Jr. Unsec. Gtd. Sub. Trust Pfd. Capital
Securities,
7.97%, 06/01/27(c) 260,000 215,150
- ------------------------------------------------------------------------------
Wells Fargo Capital XV,
Jr. Unsec. Gtd. Sub. Notes,
9.75%(e) 125,000 128,125
==============================================================================
2,260,043
==============================================================================
DIVERSIFIED CAPITAL MARKETS-0.37%
UBS AG (Switzerland),
Sr. Unsec. Medium-Term Notes,
5.75%, 04/25/18 100,000 91,494
==============================================================================
DIVERSIFIED METALS & MINING-0.20%
Reynolds Metals Co.,
Sr. Unsec. Unsub. Medium-Term Notes,
7.00%, 05/15/09 47,000 47,766
==============================================================================
ELECTRIC UTILITIES-1.50%
DCP Midstream LLC,
Notes,
9.70%, 12/01/13(c) 100,000 101,819
- ------------------------------------------------------------------------------
Edison Mission Energy,
Sr. Unsec. Global Notes,
7.00%, 05/15/17 80,000 70,000
- ------------------------------------------------------------------------------
Tenaska Alabama Partners L.P.,
Sr. Sec. Mortgage Notes,
7.00%, 06/30/21(c) 119,886 91,114
- ------------------------------------------------------------------------------
Westar Energy, Inc.,
Sr. Sec. First Mortgage Notes,
7.13%, 08/01/09 105,000 104,428
==============================================================================
367,361
==============================================================================
GENERAL MERCHANDISE STORES-0.09%
Pantry, Inc. (The),
Sr. Unsec. Gtd. Sub. Global Notes,
7.75%, 02/15/14 30,000 21,150
==============================================================================
HEALTH CARE SERVICES-0.81%
Orlando Lutheran Towers Inc.,
Bonds,
7.75%, 07/01/11 70,000 67,079
- ------------------------------------------------------------------------------
8.00%, 07/01/17 125,000 131,131
==============================================================================
198,210
==============================================================================
HOMEBUILDING-1.46%
D.R. Horton, Inc.,
Sr. Unsec. Gtd. Unsub. Notes,
7.88%, 08/15/11 200,000 162,000
- ------------------------------------------------------------------------------
8.00%, 02/01/09 200,000 196,500
==============================================================================
358,500
==============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-5.47%
Embarq Corp.,
Sr. Unsec. Unsub. Notes,
7.08%, 06/01/16 150,000 115,570
- ------------------------------------------------------------------------------
Pacific Bell Telephone Co.,
Sr. Unsec. Gtd. Bonds,
7.38%, 07/15/43 380,000 357,504
- ------------------------------------------------------------------------------
Southwestern Bell Telephone L.P.,
Sr. Unsec. Gtd. Unsub. Notes,
7.20%, 10/15/26 180,000 168,610
- ------------------------------------------------------------------------------
Verizon Florida Inc.
-Series F, Sr. Unsec. Deb.,
6.13%, 01/15/13 150,000 148,876
- ------------------------------------------------------------------------------
Verizon New York Inc.,
Sr. Unsec. Bonds,
7.00%, 12/01/33 180,000 140,699
- ------------------------------------------------------------------------------
Verizon Virginia Inc.
-Series A, Sr. Unsec. Global Bonds,
4.63%, 03/15/13 108,000 97,948
- ------------------------------------------------------------------------------
Verizon Wireless,
Sr. Unsec. Unsub. Notes,
7.38%, 11/15/13(c) 140,000 147,706
- ------------------------------------------------------------------------------
8.50%, 11/15/18(c) 140,000 162,016
==============================================================================
1,338,929
==============================================================================
INTERNET RETAIL-1.19%
Expedia, Inc.,
Sr. Unsec. Gtd. Putable Global Notes,
7.46%, 08/15/13 400,000 292,000
==============================================================================
INVESTMENT BANKING & BROKERAGE-3.83%
Bear Stearns Cos. Inc. (The),
Sr. Unsec. Unsub. Floating Rate Notes,
4.90%, 07/19/10(d) 260,000 246,631
- ------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The),
Sr. Unsec. Global Notes,
6.15%, 04/01/18 55,000 51,997
- ------------------------------------------------------------------------------
Unsec. Sub. Global Notes,
6.75%, 10/01/37 140,000 115,882
- ------------------------------------------------------------------------------
Jefferies Group, Inc.,
Sr. Unsec. Notes,
6.45%, 06/08/27 400,000 248,889
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DIVERSIFIED INCOME FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-(CONTINUED)
Merrill Lynch & Co. Inc.,
Sr. Unsec. Medium-Term Notes,
6.88%, 04/25/18 $ 155,000 $ 163,690
- ------------------------------------------------------------------------------
Morgan Stanley
-Series F, Sr. Unsec. Medium-Term Global Notes,
5.95%, 12/28/17 130,000 111,059
==============================================================================
938,148
==============================================================================
LIFE & HEALTH INSURANCE-1.66%
Americo Life Inc.,
Notes,
7.88%, 05/01/13(c) 95,000 89,961
- ------------------------------------------------------------------------------
Prudential Financial, Inc.,
Jr. Unsec. Sub. Global Notes,
8.88%, 06/15/38 130,000 84,099
- ------------------------------------------------------------------------------
Prudential Holdings, LLC
-Series B, Sr. Sec. Bonds, (INS-Financial
Security Assurance Inc.)
7.25%, 12/18/23(b)(c) 260,000 231,955
==============================================================================
406,015
==============================================================================
MORTGAGE BACKED SECURITIES-0.89%
U.S. Bank N.A.,
Sr. Unsec. Medium-Term Global Notes,
5.92%, 05/25/12 206,240 217,296
==============================================================================
MOVIES & ENTERTAINMENT-2.58%
News America Holdings Inc.,
Sr. Unsec. Gtd. Deb.,
7.75%, 12/01/45 380,000 364,159
- ------------------------------------------------------------------------------
Time Warner Cable, Inc.,
Sr. Unsec. Gtd. Global Notes,
6.75%, 07/01/18 55,000 53,062
- ------------------------------------------------------------------------------
Time Warner Inc.,
Sr. Unsec. Gtd. Deb.,
6.50%, 11/15/36 240,000 215,309
==============================================================================
632,530
==============================================================================
MULTI-LINE INSURANCE-0.16%
Liberty Mutual Group, Inc.,
Jr. Gtd. Sub. Notes,
10.75%, 06/15/58(c) 80,000 39,698
==============================================================================
MULTI-SECTOR HOLDINGS-0.48%
Capmark Financial Group, Inc.,
Sr. Unsec. Gtd. Floating Rate Global Notes,
3.04%, 05/10/10(d) 230,000 116,437
==============================================================================
MULTI-UTILITIES-1.52%
Dominion Resources Capital Trust I,
Jr. Unsec. Gtd. Sub. Trust Pfd. Capital
Securities,
7.83%, 12/01/27 400,000 370,965
==============================================================================
OFFICE ELECTRONICS-0.29%
Xerox Corp.,
Sr. Unsec. Notes,
5.65%, 05/15/13 90,000 71,248
==============================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.51%
XTO Energy Inc.,
Sr. Unsec. Unsub. Notes,
5.75%, 12/15/13 130,000 125,977
==============================================================================
OIL & GAS REFINING & MARKETING-1.22%
Western Power Distribution Holdings Ltd. (United
Kingdom),
Sr. Unsec. Unsub. Notes,
7.38%, 12/15/28(c) 375,000 298,618
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-6.86%
Allstate Life Global Funding Trusts,
Medium-Term Global Notes,
5.38%, 04/30/13 140,000 141,475
- ------------------------------------------------------------------------------
BankAmerica Capital II
-Series 2, Jr. Unsec. Gtd. Sub. Trust Pfd.
Capital Securities,
8.00%, 12/15/26 130,000 101,865
- ------------------------------------------------------------------------------
BankAmerica Capital III,
Jr. Unsec. Gtd. Sub. Floating Rate Trust Pfd.
Capital Securities,
5.32%, 01/15/27(d) 410,000 220,805
- ------------------------------------------------------------------------------
Citigroup Inc.,
Jr. Sub. Notes,
8.40%(e) 135,000 91,800
- ------------------------------------------------------------------------------
JPMorgan Chase & Co.,
Sr. Unsec. Notes,
4.75%, 05/01/13 115,000 115,778
- ------------------------------------------------------------------------------
Lazard Group LLC,
Sr. Unsec. Global Notes,
6.85%, 06/15/17 210,000 133,475
- ------------------------------------------------------------------------------
NB Capital Trust IV,
Jr. Unsec. Gtd. Sub. Trust Pfd. Capital
Securities,
8.25%, 04/15/27 470,000 376,844
- ------------------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)
-Series 1999-2, Class A1, Sr. Unsec. Global
Bonds,
9.69%, 08/15/09 100,500 101,247
- ------------------------------------------------------------------------------
Regional Diversified Funding (Cayman Islands),
Sr. Notes,
9.25%, 03/15/30(c) 453,889 190,633
- ------------------------------------------------------------------------------
Regional Diversified Funding (Cayman Islands)
-Class A-1a, Sr. Sec. Floating Rate Notes,
3.87%, 01/25/36 (Acquired 3/21/05; Cost
$393,174)(c)(d) 393,174 116,232
- ------------------------------------------------------------------------------
Twin Reefs Pass-Through Trust,
Floating Rate Pass Through Ctfs.,
2.83% (Acquired 12/07/04-4/03/06; Cost
$130,332)(c)(d)(e) 130,000 1,463
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DIVERSIFIED INCOME FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Two-Rock Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs.,
3.23% (Acquired 11/10/06; Cost
$220,260)(c)(d)(e) $ 220,000 $ 4,675
- ------------------------------------------------------------------------------
Windsor Financing LLC,
Sr. Sec. Gtd. Notes,
5.88%, 07/15/17(c) 84,440 83,246
==============================================================================
1,679,538
==============================================================================
PACKAGED FOODS & MEATS-1.12%
Kraft Foods Inc.,
Sr. Unsec. Notes,
6.13%, 08/23/18 135,000 134,876
- ------------------------------------------------------------------------------
6.88%, 01/26/39 135,000 138,691
==============================================================================
273,567
==============================================================================
PAPER PRODUCTS-0.57%
International Paper Co.,
Sr. Unsec. Unsub. Notes,
5.13%, 11/15/12 80,000 67,606
- ------------------------------------------------------------------------------
Mercer International Inc.,
Sr. Unsec. Global Notes,
9.25%, 02/15/13 140,000 70,700
==============================================================================
138,306
==============================================================================
PROPERTY & CASUALTY INSURANCE-7.79%
Chubb Corp. (The),
Sr. Notes,
5.75%, 05/15/18 50,000 49,378
- ------------------------------------------------------------------------------
-Series 1, Sr. Notes,
6.50%, 05/15/38 20,000 19,167
- ------------------------------------------------------------------------------
First American Capital Trust I,
Jr. Gtd. Sub. Trust Pfd. Capital Securities,
8.50%, 04/15/12 790,000 811,059
- ------------------------------------------------------------------------------
North Front Pass-Through Trust,
Sec. Pass Through Ctfs.,
5.81%, 12/15/24(c) 350,000 173,461
- ------------------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda),
Unsec. Gtd. Bonds,
8.00%, 09/15/34(c) 330,000 241,528
- ------------------------------------------------------------------------------
Oil Insurance Ltd.,
Notes,
7.56%(c)(e) 870,000 331,723
- ------------------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia),
Unsec. Gtd. Sub. Bonds,
6.80%(c)(e) 280,000 279,614
==============================================================================
1,905,930
==============================================================================
REGIONAL BANKS-3.38%
Cullen/Frost Capital Trust I,
Jr. Unsec. Gtd. Sub. Floating Rate Notes,
3.75%, 03/01/34(d) 600,000 223,500
- ------------------------------------------------------------------------------
PNC Capital Trust C,
Jr. Unsec. Gtd. Sub. Floating Rate Trust Pfd.
Capital Securities,
2.77%, 06/01/28(d) 100,000 49,901
- ------------------------------------------------------------------------------
Silicon Valley Bank,
Unsec. Sub. Notes,
6.05%, 06/01/17 480,000 388,073
- ------------------------------------------------------------------------------
TCF National Bank,
Sub. Notes,
5.00%, 06/15/14 175,000 166,642
==============================================================================
828,116
==============================================================================
REINSURANCE-0.25%
Stingray Pass-Through Trust,
Pass Through Ctfs.,
5.90%, 01/12/15 (Acquired 1/07/05-11/03/05; Cost
$493,840)(c) 500,000 61,250
==============================================================================
RESEARCH & CONSULTING SERVICES-0.83%
ERAC USA Finance Co.,
Sr. Unsec. Gtd. Notes,
7.00%, 10/15/37(c) 400,000 202,678
==============================================================================
SECURITY & ALARM SERVICES-0.14%
Geo Group, Inc. (The),
Sr. Unsec. Global Notes,
8.25%, 07/15/13 40,000 35,400
==============================================================================
SEMICONDUCTORS-0.24%
Viasystems Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
10.50%, 01/15/11 80,000 59,200
==============================================================================
SPECIALIZED REIT'S-0.70%
HCP, Inc.,
Sr. Unsec. Medium-Term Notes,
6.70%, 01/30/18 140,000 64,173
- ------------------------------------------------------------------------------
Health Care REIT Inc.,
Sr. Unsec. Notes,
5.88%, 05/15/15 175,000 107,080
==============================================================================
171,253
==============================================================================
SPECIALTY CHEMICALS-0.74%
Valspar Corp.,
Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12 100,000 94,865
- ------------------------------------------------------------------------------
6.05%, 05/01/17 100,000 87,367
==============================================================================
182,232
==============================================================================
STEEL-0.54%
United States Steel Corp.,
Sr. Unsec. Bonds,
6.65%, 06/01/37 80,000 42,909
- ------------------------------------------------------------------------------
Sr. Unsec. Notes,
6.05%, 06/01/17 150,000 88,294
==============================================================================
131,203
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DIVERSIFIED INCOME FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-1.23%
Countrywide Financial Corp.,
Sr. Unsec. Gtd. Unsub. Floating Rate Medium-Term
Notes,
4.35%, 01/05/09(d) $ 260,000 $ 260,975
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Medium-Term Global Notes,
5.80%, 06/07/12 40,000 39,350
==============================================================================
300,325
==============================================================================
TOBACCO-0.78%
Philip Morris International Inc.,
Sr. Unsec. Unsub. Global Notes,
5.65%, 05/16/18 190,000 189,783
==============================================================================
TRADING COMPANIES & DISTRIBUTORS-0.26%
United Rentals North America, Inc.,
Sr. Unsec. Gtd. Global Notes,
6.50%, 02/15/12 80,000 63,600
==============================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.89%
Nextel Communications, Inc.
-Series D, Sr. Unsec. Gtd. Notes,
7.38%, 08/01/15 710,000 298,174
- ------------------------------------------------------------------------------
Sprint Nextel Corp.,
Sr. Unsec. Bonds,
9.25%, 04/15/22 235,000 163,683
==============================================================================
461,857
==============================================================================
Total Bonds & Notes (Cost $25,003,460) 18,157,941
==============================================================================
U.S. GOVERNMENT SPONSORED MORTGAGE-BACKED SECURITIES-11.68%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-2.36%
Pass Through Ctfs.,
8.50%, 03/01/10 59 61
- ------------------------------------------------------------------------------
6.50%, 05/01/16 to 08/01/32 18,748 19,556
- ------------------------------------------------------------------------------
6.00%, 05/01/17 to 12/01/31 76,381 79,124
- ------------------------------------------------------------------------------
5.50%, 09/01/17 66,034 68,355
- ------------------------------------------------------------------------------
7.00%, 08/01/21 99,734 104,930
- ------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 01/01/38 300,000 306,609
==============================================================================
578,635
==============================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-9.13%
Pass Through Ctfs.,
7.00%, 02/01/16 to 09/01/32 32,897 34,740
- ------------------------------------------------------------------------------
6.50%, 05/01/16 to 10/01/35 26,725 27,926
- ------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 11/01/18 to 02/01/39 264,101 269,777
- ------------------------------------------------------------------------------
Pass Through Ctfs.,
7.50%, 04/01/29 to 10/01/29 98,044 103,965
- ------------------------------------------------------------------------------
8.00%, 04/01/32 6,139 6,527
- ------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 01/01/39 1,200,000 1,230,187
- ------------------------------------------------------------------------------
6.50%, 01/01/39(f) 540,000 560,841
==============================================================================
2,233,963
==============================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)-0.19%
Pass Through Ctfs.,
7.50%, 06/15/23 13,840 14,674
- ------------------------------------------------------------------------------
8.50%, 11/15/24 9,903 10,594
- ------------------------------------------------------------------------------
7.00%, 07/15/31 to 08/15/31 3,973 4,203
- ------------------------------------------------------------------------------
6.50%, 11/15/31 to 03/15/32 8,150 8,568
- ------------------------------------------------------------------------------
6.00%, 11/15/32 6,927 7,174
==============================================================================
45,213
==============================================================================
Total U.S. Government Sponsored Mortgage-
Backed Securities (Cost $2,834,364) 2,857,811
==============================================================================
<Caption>
SHARES
PREFERRED STOCKS-7.12%
OFFICE SERVICES & SUPPLIES-3.20%
Pitney Bowes International Holdings Inc.,
-Series D,
4.85% Pfd.(c) 8 783,312
==============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.19%
Auction Pass Through Trust,
Series 2007-T2, Class A,
7.96% Pfd. (Acquired 12/14/07; Cost $975,000)(c) 13 780,007
==============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.73%
Telephone & Data Systems, Inc.
-Series A,
7.60% Pfd.(g) 12,000 180,000
==============================================================================
Total Preferred Stocks (Cost $2,053,774) 1,743,319
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
ASSET-BACKED SECURITIES-3.17%
HOME EQUITY LOAN-0.57%
Countrywide Asset-Backed Ctfs.
-Series 2007-4, Class A1B, Pass Through Ctfs.,
5.81%, 09/25/37 $ 147,053 137,900
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DIVERSIFIED INCOME FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-2.60%
Citicorp Lease Pass-Through Trust
-Series 1999-1, Class A2, Pass Through Ctfs.,
8.04%, 12/15/19(c) $ 675,000 $ 636,888
==============================================================================
Total Asset-Backed Securities (Cost $906,197) 774,788
==============================================================================
MUNICIPAL OBLIGATIONS-3.00%
Blount (County of), Tennessee Health & Educational
Facilities Board (Asbury Inc.);
Series 2007 B, Ref. Taxable RB,
7.50%, 04/01/09 30,000 29,868
- ------------------------------------------------------------------------------
Detroit (City of), Michigan;
Series 2005 A-1, Taxable Capital Improvement
Limited Tax GO, (INS-Ambac Assurance Corp.)
4.96%, 04/01/20(b) 130,000 95,237
- ------------------------------------------------------------------------------
Florida (State of) Development Finance Corp. (Palm
Bay Academy Inc.);
Series 2006 B, Taxable RB,
7.50%, 05/15/17 65,000 55,884
- ------------------------------------------------------------------------------
Industry (City of), California Urban Development
Agency (Project No. 3);
Series 2003, Taxable Allocation RB, (INS-MBIA
Insurance Corp.)
6.10%, 05/01/24(b) 650,000 554,183
==============================================================================
Total Municipal Obligations (Cost $888,735) 735,172
==============================================================================
U.S. GOVERNMENT SPONSORED AGENCY SECURITIES-1.63%
STUDENT LOAN MARKETING ASSOCIATION-1.63%
Sr. Unsec. Unsub. Medium-Term Notes,
5.05%, 11/14/14 360,000 241,428
- ------------------------------------------------------------------------------
Sr. Unsec. Unsub. Floating Rate Medium-Term Notes,
0.50%, 03/15/10(d) 200,000 157,953
==============================================================================
Total U.S. Government Sponsored Agency
Securities (Cost $522,135) 399,381
==============================================================================
U.S. TREASURY SECURITIES-0.50%
U.S. TREASURY NOTES-0.50%
4.88%
08/15/09, (Cost $123,341)(h) 120,000 123,328
==============================================================================
<Caption>
SHARES
COMMON STOCKS & OTHER EQUITY INTERESTS-0.14%
BROADCASTING-0.01%
Adelphia Recovery Trust
-Series ACC-1(g) 87,412 3,059
==============================================================================
CABLE & SATELLITE-0.13%
Adelphia Communications Corp.(g) -- 4,106
- ------------------------------------------------------------------------------
Time Warner Cable, Inc.
-Class A(g) 1,304 27,972
==============================================================================
32,078
==============================================================================
Total Common Stocks & Other Equity Interests
(Cost $86,729) 35,137
==============================================================================
MONEY MARKET FUNDS-5.80%
Liquid Assets Portfolio-Institutional Class(i) 709,137 709,137
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(i) 709,137 709,137
==============================================================================
Total Money Market Funds (Cost $1,418,274) 1,418,274
==============================================================================
TOTAL INVESTMENTS-107.22% (Cost $33,837,009) 26,245,151
==============================================================================
OTHER ASSETS LESS LIABILITIES-(7.22)% (1,766,904)
==============================================================================
NET ASSETS-100.00% $24,478,247
______________________________________________________________________________
==============================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
Pfd. - Preferred
RB - Revenue Bonds
Ref. - Refunding
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Principal and/or interest payments are secured by the bond insurance
company listed.
(c) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at December 31, 2008 was $7,418,585, which represented 30.31% of the
Fund's Net Assets.
(d) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2008.
(e) Perpetual bond with no specified maturity date.
(f) Security purchased on forward commitment basis. This security is subject
to dollar roll transactions. See Note 1J.
(g) Non-income producing security acquired as part of the Adelphia
Communications bankruptcy reorganization.
(h) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1M and Note 8.
(i) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$32,418,735) $ 24,826,877
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 1,418,274
======================================================
Total investments (Cost
$33,837,009) 26,245,151
======================================================
Receivables for:
Investments sold 640,078
- ------------------------------------------------------
Collateral for credit default swap
contracts 1,100,000
- ------------------------------------------------------
Fund shares sold 609
- ------------------------------------------------------
Dividends and Interest 409,481
- ------------------------------------------------------
Fund expenses absorbed 8,498
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 28,269
- ------------------------------------------------------
Other assets 2,745
======================================================
Total assets 28,434,831
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 2,294,988
- ------------------------------------------------------
Credit default swap contracts close-
out 675,534
- ------------------------------------------------------
Fund shares reacquired 26,069
- ------------------------------------------------------
Amount due custodian 642,578
- ------------------------------------------------------
Variation margin 79,469
- ------------------------------------------------------
Accrued fees to affiliates 12,134
- ------------------------------------------------------
Accrued other operating expenses 47,272
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 35,720
- ------------------------------------------------------
Unrealized depreciation on swap
agreements 26,769
- ------------------------------------------------------
Premiums received on swap agreements 116,051
======================================================
Total liabilities 3,956,584
======================================================
Net assets applicable to shares
outstanding $ 24,478,247
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 45,474,045
- ------------------------------------------------------
Undistributed net investment income 2,373,638
- ------------------------------------------------------
Undistributed net realized gain (loss) (16,018,458)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (7,350,978)
======================================================
$ 24,478,247
______________________________________________________
======================================================
NET ASSETS:
Series I $ 24,069,586
______________________________________________________
======================================================
Series II $ 408,661
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 4,101,697
______________________________________________________
======================================================
Series II 70,136
______________________________________________________
======================================================
Series I:
Net asset value per share $ 5.87
______________________________________________________
======================================================
Series II:
Net asset value per share $ 5.83
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Interest $ 2,277,036
- ------------------------------------------------------
Dividends 153,585
- ------------------------------------------------------
Dividends from affiliated money market
funds 7,456
======================================================
Total investment income 2,438,077
======================================================
EXPENSES:
Advisory fees 193,129
- ------------------------------------------------------
Administrative services fees 106,793
- ------------------------------------------------------
Custodian fees 16,947
- ------------------------------------------------------
Distribution fees -- Series II 1,216
- ------------------------------------------------------
Transfer agent fees 8,698
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 16,796
- ------------------------------------------------------
Professional services fees 51,665
- ------------------------------------------------------
Other 28,578
======================================================
Total expenses 423,822
======================================================
Less: Fees waived and expense offset
arrangement(s) (181,408)
======================================================
Net expenses 242,414
======================================================
Net investment income 2,195,663
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains from securities sold to
affiliates of $25,683) (900,983)
- ------------------------------------------------------
Foreign currencies 62
- ------------------------------------------------------
Futures contracts 585,301
- ------------------------------------------------------
Swap agreements (1,917,610)
======================================================
(2,233,230)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (5,965,837)
- ------------------------------------------------------
Foreign currencies (9)
- ------------------------------------------------------
Futures contracts 249,895
- ------------------------------------------------------
Swap agreements 675,821
======================================================
(5,040,130)
======================================================
Net realized and unrealized gain (loss) (7,273,360)
======================================================
Net increase (decrease) in net assets
resulting from operations $(5,077,697)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,195,663 $ 2,624,188
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (2,233,230) (278,106)
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (5,040,130) (1,542,510)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (5,077,697) 803,572
========================================================================================================
Distributions to shareholders from net investment income:
Series I (2,560,300) (2,880,489)
- --------------------------------------------------------------------------------------------------------
Series II (44,345) (43,745)
========================================================================================================
Total distributions from net investment income (2,604,645) (2,924,234)
========================================================================================================
Share transactions-net:
Series I (6,708,387) (6,318,959)
- --------------------------------------------------------------------------------------------------------
Series II (73,155) (74,221)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (6,781,542) (6,393,180)
========================================================================================================
Net increase (decrease) in net assets (14,463,884) (8,513,842)
========================================================================================================
NET ASSETS:
Beginning of year 38,942,131 47,455,973
========================================================================================================
End of year (includes undistributed net investment income of $2,373,638
and $2,561,896, respectively) $ 24,478,247 $38,942,131
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is to achieve a high level of current income.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. DIVERSIFIED INCOME FUND
Paydown gains and losses on mortgage and asset-backed securities are
recorded as adjustments to interest income. Dividend income is recorded on
the ex-dividend date. Bond premiums and discounts are amortized and/or
accreted for financial reporting purposes.
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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/to 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.
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
recalculating the value of the contracts on a daily basis. 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 a fixed payment over the life of the agreement and in some
situations an upfront payment 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 eligible bonds issued by the 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 a fixed payment over the life of the
agreement and an upfront payment, if applicable. 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 "par value" or the full notional
value of the referenced obligation, and the Fund would receive the
eligible bonds issued by the reference entity. In turn, these bonds may be
sold in order to realize a recovery value. Alternatively, the seller of
the CDS and its counterparty may agree to net the notional amount and the
market value of the bonds and make a cash payment equal to the difference
to the buyer of protection. 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
AIM V.I. DIVERSIFIED INCOME FUND
subject to investment exposure on the notional amount of the CDS. In
connection with these agreements, cash and securities may be identified as
collateral in accordance with the terms of the respective swap agreements
to provide assets of value and recourse in the event of default under the
swap agreement or bankruptcy/insolvency of a party to the swap agreement.
Implied credit spreads represent the current level at which protection
could be bought or sold given the terms of the existing CDS contract and
serve as an indicator of the current status of the payment/performance
risk of the CDS. An implied spread that has widened or increased since
entry into the initial contract may indicate a deteriorating credit
profile and increased risk of default for the reference entity. A
declining or narrowing spread may indicate an improving credit profile or
decreased risk of default for the reference entity. Alternatively, credit
spreads may increase or decrease reflecting the general tolerance for risk
in the credit markets.
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 accrues for the fixed payment
stream and amortizes upfront payments, if any, 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash in such affiliated money
market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$180,697.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $56,793 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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. DIVERSIFIED INCOME FUND
IADI 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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- ---------------------------------------------------------------
Level 1 $ 1,626,246 $267,649
- ---------------------------------------------------------------
Level 2 24,428,272 (26,769)
- ---------------------------------------------------------------
Level 3 190,633 --
===============================================================
$26,245,151 $240,880
_______________________________________________________________
===============================================================
</Table>
* Other investments include futures contracts and swap agreements, which are
included at unrealized appreciation/(depreciation).
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, 2008, the Fund
engaged in securities sales of $698,150, which resulted in net realized gains of
$25,683.
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $711.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,175
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. DIVERSIFIED INCOME FUND
NOTE 7--CASH BALANCES
The Fund may borrow for leveraging in an amount up to 5% of the Fund's total
assets (excluding the amount borrowed) at the time the borrowing is made. In
doing so, the Fund is permitted to temporarily carry a negative or overdrawn
balance in its account with The State Street Bank and Trust Company, 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 Invesco Aim, not to exceed the contractually agreed
upon rate. A Fund may not purchase additional securities when any borrowings
from banks exceeds 5% of the Fund's total assets.
NOTE 8--FUTURES CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 13 March-2009/Long $1,547,711 $ 2,657
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 12 March-2009/Long 1,509,000 82,169
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bond 16 March-2009/Long 2,208,750 182,823
======================================================================================================================
41 $5,265,461 $267,649
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- -------------------------------------------------------------------------------------------------------------------------------
IMPLIED NOTIONAL
BUY/SELL (PAY)/RECEIVE EXPIRATION CREDIT AMOUNT
REFERENCE ENTITY COUNTERPARTY PROTECTION FIXED RATE DATE SPREAD(a) (000)
- -------------------------------------------------------------------------------------------------------------------------------
Assured Guaranty Corp. Merrill Lynch International Sell 5.00% 03/20/09 34.67% $ 235
- -------------------------------------------------------------------------------------------------------------------------------
CDX North America Bank of America, N.A.
Investment Grade Sell 1.50%(b) 12/20/13 1.95% 2,000
- -------------------------------------------------------------------------------------------------------------------------------
CDX North America Morgan Stanley & Co.
Investment Grade International PLC Sell 1.50%(c) 12/20/13 1.95% 2,000
- -------------------------------------------------------------------------------------------------------------------------------
IStar Financial Inc. UBS AG Sell 5.00%(d) 03/20/09 132.46% 215
===============================================================================================================================
Total Credit Default Swap
Agreements $4,450
_______________________________________________________________________________________________________________________________
===============================================================================================================================
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- --------------------------------------------
MARKET VALUE
UNREALIZED
APPRECIATION
REFERENCE ENTITY (DEPRECIATION)
- --------------------------------------------
Assured Guaranty Corp. $(14,385)
- --------------------------------------------
CDX North America
Investment Grade 15,770
- --------------------------------------------
CDX North America
Investment Grade 16,633
- --------------------------------------------
IStar Financial Inc. (44,787)
============================================
Total Credit Default Swap
Agreements $(26,769)
____________________________________________
============================================
</Table>
(a) Implied credit spreads represent the current level at which protection
could be bought or sold given the terms of the existing credit default swap
contract and serve as an indicator of the current status of the
payment/performance risk of the credit default swap contract. An implied
credit spread that has widened or increased since entry into the initial
contract may indicate a deteriorating credit profile and increased risk of
default for the reference entity. A declining or narrowing spread may
indicate an improving credit profile or decreased risk of default for the
reference entity. Alternatively, credit spreads may increase or decrease
reflecting the general tolerance for risk in the credit markets generally.
(b) Unamortized premium at period-end of $55,713
(c) Unamortized premium at period-end of $56,576
(d) Unamortized premium at period-end of $3,762
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Distributions paid from ordinary income $2,604,645 $2,924,234
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 2,422,226
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (7,597,323)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (26,769)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (48,588)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (15,745,344)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 45,474,045
================================================================================================
Total net assets $ 24,478,247
________________________________________________________________________________________________
================================================================================================
</Table>
AIM V.I. DIVERSIFIED INCOME FUND
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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $ 6,105,068
- -----------------------------------------------------------------------------------------------
December 31, 2010 6,879,052
- -----------------------------------------------------------------------------------------------
December 31, 2014 341,884
- -----------------------------------------------------------------------------------------------
December 31, 2015 221,396
- -----------------------------------------------------------------------------------------------
December 31, 2016 2,197,944
===============================================================================================
Total capital loss carryforward $15,745,344
_______________________________________________________________________________________________
===============================================================================================
</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, 2008 was $8,895,252 and $19,257,811,
respectively. Cost of investments on a tax basis includes the adjustments for
financial reporting purposes as of the most recently completed Federal income
tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 275,555
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,872,878)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(7,597,323)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $33,842,474.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, partnership transactions, credit default swap transactions and
capital loss carryforward expirations, on December 31, 2008, undistributed net
investment income was increased by $220,724, undistributed net realized gain
(loss) was increased by $4,216,538 and shares of beneficial interest decreased
by $4,437,262. This reclassification had no effect on the net assets of the
Fund.
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 263,402 $ 1,949,370 731,982 $ 6,147,850
- ------------------------------------------------------------------------------------------------------------------------
Series II 5,542 36,732 6,451 53,596
========================================================================================================================
Issued as reinvestment of dividends:
Series I 450,757 2,560,300 370,719 2,880,489
- ------------------------------------------------------------------------------------------------------------------------
Series II 7,863 44,345 5,674 43,745
========================================================================================================================
Reacquired:
Series I (1,527,553) (11,218,057) (1,834,796) (15,347,298)
- ------------------------------------------------------------------------------------------------------------------------
Series II (21,536) (154,232) (20,652) (171,562)
========================================================================================================================
Net increase (decrease) in share activity (821,525) $ (6,781,542) (740,622) $ (6,393,180)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities
AIM V.I. DIVERSIFIED INCOME FUND
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--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008. Management is
currently in the process of determining the impact of the standard on the Fund's
disclosures in the financial statements.
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET ON SECURITIES DIVIDENDS
VALUE, NET (BOTH TOTAL FROM FROM NET NET ASSET NET ASSETS,
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT VALUE, END TOTA END OF PERIOD
OF PERIOD INCOME(a) UNREALIZED) OPERATIONS INCOME OF PERIOD RETURN(b) (000S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $7.80 $0.50 $(1.74) $(1.24) $(0.69) $5.87 (15.59)% $24,070
Year ended 12/31/07 8.28 0.51 (0.37) 0.14 (0.62) 7.80 1.72 38,336
Year ended 12/31/06 8.43 0.46 (0.08) 0.38 (0.53) 8.28 4.48 46,743
Year ended 12/31/05 8.74 0.40 (0.15) 0.25 (0.56) 8.43 2.90 55,065
Year ended 12/31/04 8.82 0.36 0.08 0.44 (0.52) 8.74 5.03 65,069
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 7.74 0.48 (1.72) (1.24) (0.67) 5.83 (15.78) 409
Year ended 12/31/07 8.21 0.48 (0.36) 0.12 (0.59) 7.74 1.51 606
Year ended 12/31/06 8.36 0.44 (0.09) 0.35 (0.50) 8.21 4.17 713
Year ended 12/31/05 8.67 0.38 (0.15) 0.23 (0.54) 8.36 2.67 902
Year ended 12/31/04 8.78 0.33 0.08 0.41 (0.52) 8.67 4.69 980
___________________________________________________________________________________________________________________________________
===================================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
WITH FEE WAIVERS FEE WAIVERS INCOME
AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- -------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 0.75%(d) 1.31%(d) 6.83%(d) 35%
Year ended 12/31/07 0.75 1.17 6.04 67
Year ended 12/31/06 0.75 1.10 5.47 78
Year ended 12/31/05 0.89 1.08 4.54 92
Year ended 12/31/04 1.01 1.01 4.01 113
- -------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 1.00(d) 1.56(d) 6.58(d) 35
Year ended 12/31/07 1.00 1.42 5.79 67
Year ended 12/31/06 1.00 1.35 5.22 78
Year ended 12/31/05 1.14 1.33 4.29 92
Year ended 12/31/04 1.26 1.26 3.76 113
_________________________________________________________________________________________________
=================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios are based on average daily net assets (000's omitted) of $31,702 and
$486 for Series I and Series II shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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
AIM V.I. DIVERSIFIED INCOME FUND
NOTE 16--LEGAL PROCEEDINGS--(CONTINUED)
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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 four 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $862.60 $3.51 $1,021.37 $3.81 0.75%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 861.90 4.68 1,020.11 5.08 1.00
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Corporate Dividends Received Deduction* 1.52%
U.S. Treasury Obligations* 0.76%
</Table>
* The above percentages are 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. DIVERSIFIED INCOME FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. DIVERSIFIED INCOME FUND
[INVESCO AIM LOGO] AIM V.I. DYNAMICS FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. DYNAMICS FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
MARKET CONDITIONS AND YOUR FUND
PERFORMANCE SUMMARY
Many factors contributed to the negative
For the fiscal year ended December 31, 2008, AIM V.I. Dynamics Fund had double-digit performance of most major market indexes
negative returns and underperformed the broad market, as measured by the S&P 500 Index, for the fiscal year ended December 31,
and the Fund's style-specific benchmark, the Russell Midcap Growth Index.(triangle) 2008.(1) The chief catalyst was primarily
Underperformance was due to both stock selection and sector allocation. the ongoing subprime loan crisis and its
far-reaching effects on overall credit
Your Fund's long-term performance appears later in this report. availability. Additionally, record high
crude oil prices(2), falling home values
FUND VS. INDEXES and the weak U.S. dollar placed
significant pressure on the purchasing
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. power of the U.S. consumer. Later in the
fiscal year, consumer confidence fell and
If variable product issuer charges were included, returns would be lower. market volatility increased dramatically
due to growing fears of a global economic
Series I Shares -48.08% recession.
Series II Shares -48.16
S&P 500 Index(triangle) (Broad Market Index) -36.99 To facilitate the orderly functioning
Russell Midcap Growth Index(triangle) (Style-Specific Index) -44.32 of the credit markets and possibly prevent
Lipper VUF Mid-Cap Growth Funds Index(triangle) (Peer Group Index) -44.86 a more severe economic downturn, in early
October Congress enacted a $700 billion
(triangle) Lipper Inc. rescue plan -- the Troubled Assets Relief
======================================================================================= Program. In addition, the U.S. Federal
Reserve (the Fed) -- in concert with other
HOW WE INVEST company, which includes a detailed world banks -- dramatically lowered
analysis of the strategic plans of the short-term interest rates.
We believe a growth investment strategy is company's management team. We also analyze
an essential component of a diversified key competitors, customers and suppliers In this environment, the Fund had
portfolio. to assess the overall attractiveness and double-digit negative returns and
growth potential of the industry. underperformed the Russell Midcap Growth
Our investment process combines Index during the fiscal year.(1)
fundamental and quantitative analysis to Risk management plays an important Underperformance was driven largely by
uncover companies exhibiting long-term, role in portfolio construction, as our stock selection in the financials,
sustainable revenue, earnings and cash target portfolio attempts to limit industrials and health care sectors. An
flow growth that is not yet reflected by volatility and downside risk. We seek to underweight position in the consumer
the stock's market price. accomplish this goal by investing in staples sector and an overweight position
sectors, industries and companies with in the consumer discretionary sector also
Our quantitative model ranks attractive fundamental prospects. We limit contributed to underperformance.
companies based on a set of fundamental, the Fund's sector exposure and also seek
valuation and timeliness factors. This to minimize stock-specific risk by The Fund underperformed by the widest
quantitative model is designed to identify building a diversified portfolio. margin in the financials sector, largely
stocks with the highest probability of due to stock selection. The financials
meeting our team's investment criteria. We consider selling a stock for any sector was one of the weakest performing
Stocks that are ranked highest by our of the following reasons: sectors in the Russell Midcap Growth Index
quantitative model are the focus of our during the fiscal year, as the credit
fundamental research efforts. o There is a change in fundamentals, crisis intensified and a liquidity crisis
market capitalization or emerged. Examples of holdings that
Our fundamental analysis focuses on deterioration in the timeliness detracted from performance include
identifying companies and industries with profile.
strong drivers of growth. To accomplish
this goal, we develop a fully integrated o The price target set at purchase has
financial model to gain a more complete been reached.
understanding of the financial health of
each investment candidate. Additionally, o The investment thesis is no longer
our research involves due diligence of the valid
o Insider selling indicates potential
issues
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Information Technology 20.5% 1. Metal & Glass Containers 5.8% 1. Crown Holdings, Inc. 2.2%
Consumer Discretionary 17.0 2. Health Care Services 5.2 2. KGEN Power Corp. 2.2
Industrials 15.7 3. Systems Software 4.9 3. Pactiv Corp. 2.2
Health Care 12.6 4. Investment Banking & Brokerage 3.9 4. Shoppers Drug Mart Corp. 2.1
Financials 8.9 5. Application Software 3.9 5. Republic Services, Inc. 2.1
Energy 8.1 ========================================== 6. McAfee Inc. 2.0
Materials 6.8 7. Corrections Corp. of America 1.8
Consumer Staples 3.6 ========================================== 8. Solera Holdings Inc. 1.8
Utilities 3.5 Total Net Assets $41.7 million 9. Landstar System, Inc. 1.8
Telecommunication Services 2.1 10. Check Point Software
U.S. Treasury Bills, Money Market Total Number of Holdings* 89 Technologies Ltd. 1.8
Funds Plus Other Assets Less ========================================== ==========================================
Liabilities 1.2
========================================= 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
insurance provider XL CAPITAL and asset During the reporting period, the most PAUL RASPLICKA
management holding AFFILIATED MANAGERS significant changes to the portfolio Chartered Financial Analyst,
GROUP. XL Capital was sold at the end of included reductions in the more is lead manager of AIM V.I.
the period. economically sensitive consumer [RASPLICKA Dynamics Fund. Mr. Rasplicka
discretionary sector, as well as the PHOTO] has been associated with the
Another area of weakness for the Fund energy and health care sectors. Meaningful advisor and/or its affiliates
was the industrials sector, where the additions to the portfolio were made in since 1994. He began his
Fund's holdings generally underperformed the information technology, utilities and investment career in 1982 as an equity
those of the Russell Midcap Growth Index. financials sectors. All changes to the research analyst. A native of Denver, Mr.
Many industrials holdings were negatively Fund were based on our bottom-up stock Rasplicka is a magna cum laude graduate of
affected by the global economic slowdown, selection process of identifying high the University of Colorado in Boulder with
including engineering and construction quality growth companies trading at what a B.S. in business administration. He
holdings FOSTER WHEELER, and SHAW GROUP. we believe are attractive valuations. earned an M.B.A. from the University of
Other industrials holdings that detracted Chicago. He's a Chartered Investment
from performance included BUCYRUS We thank you for your commitment to AIM Counselor.
INTERNATIONAL, GENERAL CABLE and CON-WAY. V.I. Dynamics Fund.
Foster Wheeler, Bucyrus International and BRENT LIUM
General Cable were no longer held at the (1) Lipper Inc. Chartered Financial Analyst,
end of the year. (2) Bloomberg L.P. portfolio manager, is manager
[LIUM of AIM V.I. Dynamics Fund. He
Underperformance in the health care The views and opinions expressed in PHOTO] joined Invesco in 1999 in its
sector was also driven by stock selection. management's discussion of Fund corporate associate program
Examples of companies that detracted from performance are those of Invesco Aim and joined Invesco Aim in
performance included health insurer HUMANA Advisors, Inc. These views and opinions 2003. Mr. Lium earned a B.B.A. from Texas
and health care equipment maker Hologic. are subject to change at any time based on A&M University and an M.B.A. from The
Hologic was sold at the end of the year factors such as market and economic University of Texas at Austin.
due to deteriorating fundamentals. conditions. These views and opinions may
not be relied upon as investment advice or Assisted by the Mid Cap Growth Team
An underweight position in the recommendations, or as an offer for a
consumer staples sector detracted from particular security. The information is
performance. While the consumer staples not a complete analysis of every aspect of
sector had negative returns, its more any market, country, industry, security or
defensive nature made it a refuge in the the Fund. Statements of fact are from
volatile market environment, and it held sources considered reliable, but Invesco
up better than all other sectors in the Aim Advisors, Inc. makes no representation
index. Additionally, an overweight or warranty as to their completeness or
position in the consumer discretionary accuracy. Although historical performance
sector detracted from performance, as many is no guarantee of future results, these
stock prices were negatively affected by insights may help you understand our
the slowdown in consumer spending. investment management philosophy.
Some of this underperformance was See important Fund and index disclosures
offset by outperformance in other sectors, later in this report.
including materials and utilities. The
Fund's cash position also benefited
performance during the highly volatile
market environment.
The utilities sector was one of the
weakest performing sectors in the Russell
Midcap Growth Index during the fiscal
year, so the Fund's underweight position
helped performance relative to this index.
The Fund also benefited from stock
selection in this sector.
Outperformance in the materials
sector was largely due to solid stock
selection. Within this sector, one of the
key contributors to performance was
fertilizer maker POTASH CORP. OF
SASKATCHEWAN, which benefited from strong
demand from emerging markets during the
first part of the fiscal year. The Fund
also owned several producers of food and
beverage containers, which held up well in
the difficult economy.
AIM V.I. DYNAMICS FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT PRODUCTS. YOU CANNOT PURCHASE SHARES
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE OF THE FUND DIRECTLY. PERFORMANCE FIGURES
COMPARABLE FUTURE RESULTS; CURRENT GIVEN REPRESENT THE FUND AND ARE NOT
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INTENDED TO REFLECT ACTUAL VARIABLE
Inception (8/22/97) 0.14% CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCT VALUES. THEY DO NOT REFLECT SALES
10 Years -1.93 FINANCIAL ADVISOR FOR THE MOST RECENT CHARGES, EXPENSES AND FEES ASSESSED IN
5 Years -3.23 MONTH-END VARIABLE PRODUCT PERFORMANCE. CONNECTION WITH A VARIABLE PRODUCT. SALES
1 Year -48.08 PERFORMANCE FIGURES REFLECT FUND EXPENSES, CHARGES, EXPENSES AND FEES, WHICH ARE
REINVESTED DISTRIBUTIONS AND CHANGES IN DETERMINED BY THE VARIABLE PRODUCT
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND ISSUERS, WILL VARY AND WILL LOWER THE
10 Years -2.16% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU TOTAL RETURN.
5 Years -3.46 MAY HAVE A GAIN OR LOSS WHEN YOU SELL
1 Year -48.16 SHARES. THE MOST RECENT MONTH-END PERFORMANCE
========================================== DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
THE TOTAL ANNUAL FUND OPERATING PRODUCT CHARGES, IS AVAILABLE ON THE
SERIES II SHARES' INCEPTION DATE IS APRIL EXPENSE RATIO SET FORTH IN THE MOST RECENT INVESCO AIM AUTOMATED INFORMATION LINE,
30, 2004. RETURNS SINCE THAT DATE ARE FUND PROSPECTUS AS OF THE DATE OF THIS 866 702 4402.
HISTORICAL. ALL OTHER RETURNS ARE THE REPORT FOR SERIES I AND SERIES II SHARES
BLENDED RETURNS OF THE HISTORICAL WAS 1.11% AND 1.36%, RESPECTIVELY. THE AS MENTIONED ABOVE, FOR THE MOST
PERFORMANCE OF SERIES II SHARES SINCE EXPENSE RATIOS PRESENTED ABOVE MAY VARY RECENT MONTH-END PERFORMANCE INCLUDING
THEIR INCEPTION AND THE RESTATED FROM THE EXPENSE RATIOS PRESENTED IN OTHER VARIABLE PRODUCT CHARGES, PLEASE CONTACT
HISTORICAL PERFORMANCE OF SERIES I SHARES SECTIONS OF THIS REPORT THAT ARE BASED ON YOUR VARIABLE PRODUCT ISSUER OR FINANCIAL
(FOR PERIODS PRIOR TO INCEPTION OF SERIES EXPENSES INCURRED DURING THE PERIOD ADVISOR.
II SHARES) ADJUSTED TO REFLECT THE RULE COVERED BY THIS REPORT.
12B-1 FEES APPLICABLE TO SERIES II SHARES.
THE INCEPTION DATE OF SERIES I SHARES IS AIM V.I. DYNAMICS FUND, A SERIES
AUGUST 22, 1997. PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
IS CURRENTLY OFFERED THROUGH INSURANCE
THE PERFORMANCE OF THE FUND'S SERIES COMPANIES ISSUING VARIABLE
I AND SERIES II SHARE CLASSES WILL DIFFER
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - OLDEST SHARE CLASS SINCE INCEPTION
Fund data from 8/22/97, Index data from 8/31/97
AIM V.I. Lipper VUF
Dynamics Fund- Russell Midcap Mid-Cap Growth
Date Series I Shares S&P 500 Index(1) Growth Index(1) Funds Index(1)
8/22/97 $10000
8/97 9930 $10000 $10000 $10000
9/97 10610 10547 10506 10591
10/97 10240 10196 9980 10032
11/97 10190 10667 10085 9982
12/97 10340 10850 10217 10042
1/98 10290 10970 10033 9879
2/98 11240 11761 10977 10726
3/98 11889 12363 11437 11257
4/98 12069 12489 11592 11290
5/98 11609 12275 11115 10678
6/98 12179 12773 11430 11246
7/98 11619 12638 10940 10623
8/98 8959 10812 8852 8389
9/98 9749 11505 9522 8985
10/98 10550 12440 10223 9322
11/98 10980 13193 10912 9954
12/98 12341 13953 12043 11262
1/99 13184 14536 12404 11550
2/99 12462 14085 11797 10833
3/99 13549 14648 12454 11486
4/99 14148 15215 13022 11986
5/99 14077 14856 12854 11828
6/99 14849 15679 13751 12793
7/99 14524 15191 13314 12521
8/99 14229 15116 13175 12610
9/99 14412 14702 13063 12672
10/99 15682 15632 14073 13843
11/99 16855 15950 15530 15390
12/99 19201 16888 18220 18471
1/00 18917 16040 18216 18514
2/00 23001 15736 22046 22753
3/00 21985 17275 22068 21891
4/00 20085 16755 19926 19617
5/00 18926 16412 18473 18334
6/00 21822 16816 20434 20878
7/00 21141 16553 19140 20197
8/00 24158 17581 22026 22995
9/00 24047 16653 20949 21909
10/00 22056 16582 19516 20105
11/00 17298 15276 15275 16204
12/00 18518 15351 16079 17117
1/01 19147 15895 16998 17599
2/01 15527 14447 14057 14855
3/01 13240 13532 12046 12857
4/01 15416 14583 14053 14693
5/01 15162 14681 13987 14679
6/01 14989 14323 13995 14506
7/01 13881 14182 13051 13619
8/01 12518 13295 12105 12563
9/01 9864 12222 10104 10742
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
10/01 10912 12455 11167 11410
11/01 12366 13410 12369 12267
12/01 12754 13528 12839 12703
1/02 12570 13330 12422 12011
2/02 11401 13073 11718 11391
3/02 12316 13565 12612 12106
4/02 11502 12743 11944 11674
5/02 11024 12649 11588 11386
6/02 9773 11749 10309 10392
7/02 8827 10833 9308 9398
8/02 8633 10904 9275 9299
9/02 7942 9720 8538 8770
10/02 8765 10575 9200 9200
11/02 9345 11197 9920 9628
12/02 8684 10539 9320 9162
1/03 8684 10264 9229 8997
2/03 8542 10109 9149 8923
3/03 8633 10207 9319 9054
4/03 9233 11048 9953 9631
5/03 9925 11629 10911 10420
6/03 10066 11778 11067 10571
7/03 10412 11985 11462 10957
8/03 10920 12219 12094 11536
9/03 10554 12089 11859 11143
10/03 11480 12773 12815 12006
11/03 11836 12885 13158 12242
12/03 11968 13560 13301 12371
1/04 12253 13809 13741 12630
2/04 12375 14001 13971 12832
3/04 12294 13790 13944 12943
4/04 12141 13574 13551 12537
5/04 12344 13760 13870 12797
6/04 12517 14027 14091 13189
7/04 11663 13563 13158 12283
8/04 11491 13617 12996 12101
9/04 11969 13765 13481 12671
10/04 12253 13975 13938 13019
11/04 13006 14540 14658 13839
12/04 13565 15035 15360 14431
1/05 13311 14669 14949 13985
2/05 13546 14977 15328 14173
3/05 13363 14712 15104 13863
4/05 12621 14433 14506 13219
5/05 13313 14892 15337 14003
6/05 13730 14913 15622 14269
7/05 14594 15468 16534 15062
8/05 14615 15327 16433 15019
9/05 14646 15451 16645 15263
10/05 14117 15193 16155 14929
11/05 14850 15767 17032 15739
12/05 15022 15773 17219 15804
1/06 16079 16190 18250 16781
2/06 16070 16234 18025 16622
3/06 16589 16436 18529 17203
4/06 17005 16657 18607 17245
5/06 16192 16178 17732 16258
6/06 16131 16200 17659 16220
7/06 15510 16299 17026 15467
8/06 15784 16687 17419 15732
9/06 16120 17116 17816 15995
10/06 16791 17674 18500 16561
11/06 17503 18009 19226 17243
12/06 17442 18262 19054 17149
1/07 18042 18538 19747 17702
2/07 18022 18176 19704 17648
3/07 18184 18379 19808 17832
4/07 18844 19193 20678 18546
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
5/07 20135 19862 21516 19533
6/07 19912 19532 21143 19401
7/07 19384 18928 20670 19141
8/07 19190 19211 20782 19430
9/07 20115 19929 21597 20519
10/07 20594 20246 22148 21404
11/07 19618 19399 21173 20261
12/07 19567 19265 21231 20304
1/08 17573 18109 19544 18392
2/08 17237 17521 19246 18073
3/08 16363 17446 18906 17681
4/08 17502 18295 20278 19029
5/08 18326 18532 21346 19839
6/08 17249 16971 19785 18481
7/08 16628 16828 19033 17841
8/08 16781 17072 19208 17935
9/08 14218 15552 16273 15430
10/08 11258 12941 12702 12192
11/08 10017 12012 11401 10875
12/08 10160 12139 11820 11196
====================================================================================================================================
AIM V.I. DYNAMICS FUND
AIM V.I. DYNAMICS FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL GROWTH.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Prices of equity securities change in The S&P 500--REGISTERED TRADEMARK-- INDEX The Chartered Financial
response to many factors, including the is a market capitalization-weighted index Analyst--REGISTERED TRADEMARK--
historical and prospective earnings of the covering all major areas of the U.S. (CFA--REGISTERED TRADEMARK--) designation
issuer, the value of its assets, general economy. It is not the 500 largest is a globally recognized standard for
economic conditions, interest rates, companies, but rather the most widely held measuring the competence and integrity of
investor perceptions and market liquidity. 500 companies chosen with respect to investment professionals.
market size, liquidity, and their
The Fund invests in "growth" stocks, industry. The returns shown in management's
which may be more volatile than other discussion of Fund performance are based
investment styles because growth stocks The RUSSELL MIDCAP--REGISTERED on net asset values calculated for
are more sensitive to investor perceptions TRADEMARK-- GROWTH INDEX measures the shareholder transactions. Generally
of an issuing company's growth potential. performance of those Russell Midcap accepted accounting principles require
companies with higher price-to-book ratios adjustments to be made to the net assets
There is no guarantee that the and higher forecasted growth values. The of the Fund at period end for financial
investment techniques and risk analysis Russell Midcap Growth Index is a reporting purposes, and as such, the net
used by the Fund's portfolio managers will trademark/ service mark of the Frank asset values for shareholder transactions
produce the desired results. Russell Company. Russell--REGISTERED and the returns based on those net asset
TRADEMARK-- is a trademark of the Frank values may differ from the net asset
The prices of securities held by the Russell Company. values and returns reported in the
Fund may decline in response to market Financial Highlights. Additionally, the
risks. The LIPPER VUF MID-CAP GROWTH FUNDS returns and net asset values shown
INDEX is an equally weighted throughout this report are at the Fund
Small- and mid-cap companies tend to representation of the largest variable level only and do not include variable
be more vulnerable to adverse developments insurance underlying funds in the Lipper product issuer charges. If such charges
and more volatile than larger companies. Mid-Cap Growth Funds category. These funds were included, the total returns would be
Investments in these sized companies may have an above-average price-to-earnings lower.
involve special risks, including those ratio, price-to-book ratio, and three-
associated with dependence on a small year sales-per-share growth value, Industry classifications used in this
management group, little or no operating compared to the S&P MidCap 400 Index. report are generally according to the
history, little or no track record of Global Industry Classification Standard,
success, limited product lines, less The Fund is not managed to track the which was developed by and is the
publicly available information, performance of any particular index, exclusive property and a service mark of
illiquidity, restricted resale or less including the indexes defined here, and MSCI Inc. and Standard & Poor's.
frequent trading. consequently, the performance of the Fund
may deviate significantly from the
The Fund may engage in active and performance of the indexes.
frequent trading of portfolio securities
to achieve its investment objective. If a A direct investment cannot be made in
fund does trade in this way, it may incur an index. Unless otherwise indicated,
increased costs, which can lower the index results include reinvested
actual return of the Fund. Active trading dividends, and they do not reflect sales
may also increase short term gains and charges or fund expenses.
losses, which may affect taxes that must
be paid.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.77%
AEROSPACE & DEFENSE-1.10%
Precision Castparts Corp. 7,708 $ 458,472
=============================================================================
APPAREL RETAIL-1.44%
Aeropostale, Inc.(b) 12,570 202,377
- -----------------------------------------------------------------------------
Guess?, Inc. 12,392 190,217
- -----------------------------------------------------------------------------
Urban Outfitters, Inc.(b) 13,815 206,949
=============================================================================
599,543
=============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.81%
Gildan Activewear Inc. (Canada)(b) 20,036 236,318
- -----------------------------------------------------------------------------
Hanesbrands, Inc.(b) 40,603 517,689
=============================================================================
754,007
=============================================================================
APPLICATION SOFTWARE-3.93%
Amdocs Ltd.(b) 23,979 438,576
- -----------------------------------------------------------------------------
ANSYS, Inc.(b) 15,761 439,574
- -----------------------------------------------------------------------------
Solera Holdings Inc.(b) 31,496 759,054
=============================================================================
1,637,204
=============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.21%
Affiliated Managers Group, Inc.(b) 12,000 503,040
=============================================================================
AUTOMOTIVE RETAIL-1.33%
O'Reilly Automotive, Inc.(b) 18,059 555,134
=============================================================================
BIOTECHNOLOGY-2.05%
Genzyme Corp.(b) 6,600 438,042
- -----------------------------------------------------------------------------
United Therapeutics Corp.(b) 6,625 414,394
=============================================================================
852,436
=============================================================================
CASINOS & GAMING-1.09%
Scientific Games Corp.-Class A(b) 25,930 454,812
=============================================================================
COMMUNICATIONS EQUIPMENT-1.20%
Juniper Networks, Inc.(b) 28,669 501,994
=============================================================================
COMPUTER & ELECTRONICS RETAIL-0.84%
GameStop Corp.-Class A(b) 16,081 348,314
=============================================================================
COMPUTER STORAGE & PERIPHERALS-0.91%
NetApp, Inc.(b) 27,251 380,696
=============================================================================
CONSTRUCTION & ENGINEERING-1.78%
Quanta Services, Inc.(b) 22,262 440,787
- -----------------------------------------------------------------------------
Shaw Group Inc. (The)(b) 14,780 302,547
=============================================================================
743,334
=============================================================================
CONSUMER FINANCE-1.12%
SLM Corp.(b) 52,510 467,339
=============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.75%
Alliance Data Systems Corp.(b) 15,663 728,799
=============================================================================
DISTRIBUTORS-1.24%
LKQ Corp.(b) 44,348 517,098
=============================================================================
DIVERSIFIED SUPPORT SERVICES-0.89%
Copart, Inc.(b) 13,582 369,295
=============================================================================
DRUG RETAIL-2.12%
Shoppers Drug Mart Corp. (Canada) 22,291 881,270
=============================================================================
EDUCATION SERVICES-3.64%
Apollo Group Inc.-Class A(b) 8,338 638,858
- -----------------------------------------------------------------------------
DeVry, Inc. 3,795 217,871
- -----------------------------------------------------------------------------
ITT Educational Services, Inc.(b) 6,948 659,921
=============================================================================
1,516,650
=============================================================================
ELECTRONIC COMPONENTS-1.16%
Amphenol Corp.-Class A 20,126 482,622
=============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-3.16%
Republic Services, Inc. 35,000 867,650
- -----------------------------------------------------------------------------
Waste Management, Inc. 13,538 448,649
=============================================================================
1,316,299
=============================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.44%
Intrepid Potash, Inc.(b) 8,746 181,654
=============================================================================
GENERAL MERCHANDISE STORES-1.00%
Dollar Tree, Inc.(b) 9,971 416,788
=============================================================================
HEALTH CARE SERVICES-5.23%
Amedisys, Inc.(b) 8,322 344,031
- -----------------------------------------------------------------------------
DaVita, Inc.(b) 9,099 451,037
- -----------------------------------------------------------------------------
Express Scripts, Inc.(b) 8,776 482,505
- -----------------------------------------------------------------------------
Fresenius Medical Care AG & Co. KGaA (Germany) 4,393 207,002
- -----------------------------------------------------------------------------
Laboratory Corp. of America Holdings(b) 10,811 696,337
=============================================================================
2,180,912
=============================================================================
HOME ENTERTAINMENT SOFTWARE-0.55%
Activision Blizzard, Inc.(b) 26,392 228,027
=============================================================================
HOUSEHOLD APPLIANCES-0.49%
Stanley Works (The) 5,973 203,679
=============================================================================
HOUSEWARES & SPECIALTIES-1.15%
Jarden Corp.(b) 41,520 477,480
=============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.10%
Robert Half International, Inc. 22,067 459,435
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DYNAMICS FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-3.55%
KGEN Power Corp. (Acquired 01/12/07; Cost
$865,032)(b)(c) 61,788 $ 926,820
- -----------------------------------------------------------------------------
NRG Energy, Inc.(b) 23,625 551,171
=============================================================================
1,477,991
=============================================================================
INDUSTRIAL MACHINERY-0.55%
Flowserve Corp. 4,421 227,682
=============================================================================
INVESTMENT BANKING & BROKERAGE-3.93%
Lazard Ltd.-Class A 23,533 699,872
- -----------------------------------------------------------------------------
Morgan Stanley 18,322 293,885
- -----------------------------------------------------------------------------
TD Ameritrade Holding Corp.(b) 45,309 645,653
=============================================================================
1,639,410
=============================================================================
IT CONSULTING & OTHER SERVICES-1.19%
Cognizant Technology Solutions Corp.-Class A(b) 27,467 496,054
=============================================================================
LIFE SCIENCES TOOLS & SERVICES-3.21%
Pharmaceutical Product Development, Inc. 19,695 571,352
- -----------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(b) 11,575 394,360
- -----------------------------------------------------------------------------
Waters Corp.(b) 10,128 371,191
=============================================================================
1,336,903
=============================================================================
MANAGED HEALTH CARE-2.07%
Aveta, Inc. (Acquired 12/21/05-05/22/06; Cost
$1,300,095)(b)(c) 90,000 135,000
- -----------------------------------------------------------------------------
Humana Inc.(b) 19,528 728,004
=============================================================================
863,004
=============================================================================
METAL & GLASS CONTAINERS-5.82%
Crown Holdings, Inc.(b) 48,751 936,019
- -----------------------------------------------------------------------------
Owens-Illinois, Inc.(b) 20,582 562,506
- -----------------------------------------------------------------------------
Pactiv Corp.(b) 37,198 925,487
=============================================================================
2,424,012
=============================================================================
OIL & GAS DRILLING-0.63%
Noble Corp. 11,860 261,987
=============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.47%
Baker Hughes Inc. 12,378 396,962
- -----------------------------------------------------------------------------
IHS Inc.-Class A(b) 16,933 633,633
=============================================================================
1,030,595
=============================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.71%
Continental Resources, Inc.(b) 19,617 406,268
- -----------------------------------------------------------------------------
Petrohawk Energy Corp.(b) 6,435 100,579
- -----------------------------------------------------------------------------
Range Resources Corp. 11,071 380,732
- -----------------------------------------------------------------------------
Southwestern Energy Co.(b) 22,777 659,850
=============================================================================
1,547,429
=============================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.30%
Williams Cos., Inc. (The) 37,483 542,754
=============================================================================
PERSONAL PRODUCTS-1.43%
Estee Lauder Cos. Inc. (The)-Class A 19,302 597,590
=============================================================================
PUBLISHING-1.19%
McGraw-Hill Cos., Inc. (The) 21,441 497,217
=============================================================================
RESEARCH & CONSULTING SERVICES-1.27%
Equifax Inc. 19,900 527,748
=============================================================================
RESTAURANTS-1.20%
Burger King Holdings Inc. 20,963 500,596
=============================================================================
SECURITY & ALARM SERVICES-1.84%
Corrections Corp. of America(b) 46,779 765,304
=============================================================================
SEMICONDUCTOR EQUIPMENT-2.74%
ASML Holding N.V. (Netherlands) 30,003 538,007
- -----------------------------------------------------------------------------
Lam Research Corp.(b) 28,287 601,947
=============================================================================
1,139,954
=============================================================================
SEMICONDUCTORS-2.26%
Altera Corp. 18,694 312,377
- -----------------------------------------------------------------------------
Intersil Corp.-Class A 38,434 353,208
- -----------------------------------------------------------------------------
Maxim Integrated Products, Inc. 24,150 275,793
=============================================================================
941,378
=============================================================================
SPECIALIZED FINANCE-2.62%
IntercontinentalExchange Inc.(b) 2,680 220,939
- -----------------------------------------------------------------------------
Moody's Corp. 29,594 594,543
- -----------------------------------------------------------------------------
MSCI Inc.-Class A(b) 15,593 276,932
=============================================================================
1,092,414
=============================================================================
SPECIALTY STORES-0.58%
Ulta Salon, Cosmetics & Fragrance, Inc.(b) 29,407 243,490
=============================================================================
STEEL-0.54%
Nucor Corp. 4,892 226,010
=============================================================================
SYSTEMS SOFTWARE-4.86%
CA Inc. 24,161 447,703
- -----------------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(b) 38,645 733,869
- -----------------------------------------------------------------------------
McAfee Inc.(b) 24,411 843,888
=============================================================================
2,025,460
=============================================================================
TRADING COMPANIES & DISTRIBUTORS-0.24%
Fastenal Co. 2,893 100,821
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. DYNAMICS FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
TRUCKING-3.76%
Con-way Inc. 14,513 $ 386,046
- -----------------------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc. 16,735 439,628
- -----------------------------------------------------------------------------
Landstar System, Inc. 19,328 742,775
=============================================================================
1,568,449
=============================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.08%
American Tower Corp.-Class A(b) 22,775 667,763
- -----------------------------------------------------------------------------
Crown Castle International Corp.(b) 11,329 199,164
=============================================================================
866,927
=============================================================================
Total Common Stocks & Other Equity Interests
(Cost $56,569,971) 41,157,512
=============================================================================
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------
U.S. TREASURY BILLS-0.18%
1.82%, 03/05/09(d) (Cost $74,761) $ 75,000 $ 74,986
=============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-0.90%
Liquid Assets Portfolio-Institutional Class(e) 187,524 187,524
- -----------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 187,524 187,524
=============================================================================
Total Money Market Funds (Cost $375,048) 375,048
=============================================================================
TOTAL INVESTMENTS-99.85% (Cost $57,019,780) 41,607,546
=============================================================================
OTHER ASSETS LESS LIABILITIES-0.15% 61,293
=============================================================================
NET ASSETS-100.00% $41,668,839
_____________________________________________________________________________
=============================================================================
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically to
qualified institutional buyers. The aggregate value of these securities at
December 31, 2008 was $1,061,820, which represented 2.55% of the Fund's Net
Assets.
(d) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$56,644,732) $ 41,232,498
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 375,048
======================================================
Total investments (Cost
$57,019,780) 41,607,546
======================================================
Receivables for:
Investments sold 83,539
- ------------------------------------------------------
Fund shares sold 54,324
- ------------------------------------------------------
Dividends 15,016
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 12,659
======================================================
Total assets 41,773,084
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 13,718
- ------------------------------------------------------
Accrued fees to affiliates 28,593
- ------------------------------------------------------
Accrued other operating expenses 39,949
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 21,985
======================================================
Total liabilities 104,245
======================================================
Net assets applicable to shares
outstanding $ 41,668,839
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $133,419,944
- ------------------------------------------------------
Undistributed net investment income
(loss) (31,157)
- ------------------------------------------------------
Undistributed net realized gain (loss) (76,307,728)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (15,412,220)
======================================================
$ 41,668,839
______________________________________________________
======================================================
NET ASSETS:
Series I $ 41,663,813
______________________________________________________
======================================================
Series II $ 5,026
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 4,170,093
______________________________________________________
======================================================
Series II 508.7
______________________________________________________
======================================================
Series I:
Net asset value per share $ 9.99
______________________________________________________
======================================================
Series II:
Net asset value per share $ 9.88
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $3,181) $ 386,955
- -----------------------------------------------------------
Dividends from affiliated money
market funds (includes securities
lending income of $37,658) 92,672
===========================================================
Total investment income 479,627
===========================================================
EXPENSES:
Advisory fees 594,079
- -----------------------------------------------------------
Administrative services fees 248,735
- -----------------------------------------------------------
Custodian fees 22,937
- -----------------------------------------------------------
Distribution fees -- Series II 19
- -----------------------------------------------------------
Transfer agent fees 16,894
- -----------------------------------------------------------
Trustees' and officers' fees and
benefits 18,527
- -----------------------------------------------------------
Other 76,329
===========================================================
Total expenses 977,520
===========================================================
Less: Fees waived (2,884)
===========================================================
Net expenses 974,636
===========================================================
Net investment income (loss) (495,009)
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of $(340,610) (20,897,851)
- -----------------------------------------------------------
Foreign currencies 13,213
- -----------------------------------------------------------
Futures contracts (75,266)
===========================================================
(20,959,904)
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (25,826,254)
- -----------------------------------------------------------
Foreign currencies 68
===========================================================
(25,826,186)
===========================================================
Net realized and unrealized gain
(loss) (46,786,090)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(47,281,099)
___________________________________________________________
===========================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (495,009) $ (759,274)
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (20,959,904) 17,222,780
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (25,826,186) (2,752,289)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (47,281,099) 13,711,217
========================================================================================================
Share transactions-net:
Series I (33,243,831) (12,316,934)
- --------------------------------------------------------------------------------------------------------
Series II -- (6,500)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (33,243,831) (12,323,434)
========================================================================================================
Net increase (decrease) in net assets (80,524,930) 1,387,783
________________________________________________________________________________________________________
========================================================================================================
NET ASSETS:
Beginning of year 122,193,769 120,805,986
========================================================================================================
End of year (includes undistributed net investment income (loss) of
$(31,157) and $(21,136), respectively) $ 41,668,839 $122,193,769
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term capital growth.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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. DYNAMICS FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. DYNAMICS FUND
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.
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
recalculating the value of the contracts on a daily basis. 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. PUT OPTIONS PURCHASED -- The Fund may purchase put options including
options on securities indexes and/or futures contracts. By purchasing a
put option, the Fund obtains the right (but not the obligation) to sell
the option's underlying instrument at a fixed strike price. In return for
this right, the Fund pays an option premium. The option's underlying
instrument may be a security, securities index, or a futures contract. Put
options may be used by the Fund to hedge securities it owns by locking in
a minimum price at which the Fund can sell. If security prices fall, the
put option could be exercised to offset all or a portion of the Fund's
resulting losses. At the same time, because the maximum the Fund has at
risk is the cost of the option, purchasing put options does not eliminate
the potential for the Fund to profit from an increase in the value of the
securities hedged. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations. A risk in buying an
option is that the Fund pays a premium whether or not the option is
exercised. In addition, there can be no assurance that a liquid secondary
market will exist for any option purchased.
N. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.745%
- -------------------------------------------------------------------
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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 V.I. DYNAMICS FUND
Also, the Advisor has contractually agreed, through at least April 30, 2010,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$2,882 and class level expenses of $2 for Series II shares.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $198,735 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $39,725,732
- --------------------------------------
Level 2 819,994
- --------------------------------------
Level 3 1,061,820
======================================
$41,607,546
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $613,334 and securities sales of $665,416,
which resulted in net realized gains (losses) of $(340,610).
AIM V.I. DYNAMICS FUND
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,342
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
There were no ordinary income or long-term capital gain distributions paid
during the years ended December 31, 2008 and 2007.
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments $(15,618,241)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 13
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (24,216)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (70,866,355)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (5,242,306)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 133,419,944
================================================================================================
Total net assets $ 41,668,839
________________________________________________________________________________________________
================================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2010 $55,297,523
- -----------------------------------------------------------------------------------------------
December 31, 2016 15,568,832
===============================================================================================
Total capital loss carryforward $70,866,355
_______________________________________________________________________________________________
===============================================================================================
</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. DYNAMICS FUND
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $83,534,290 and
$113,627,828, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,050,205
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (16,668,446)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(15,618,241)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $57,225,787.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses,
on December 31, 2008, undistributed net investment income (loss) was increased
by $484,988, undistributed net realized gain (loss) was decreased by $43,749 and
shares of beneficial interest decreased by $441,239. This reclassification had
no effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 972,706 $ 15,255,323 2,185,271 $ 41,876,286
========================================================================================================================
Reacquired:
Series I (3,154,261) (48,499,154) (2,876,008) (54,193,220)
- ------------------------------------------------------------------------------------------------------------------------
Series II -- -- (329) (6,500)
========================================================================================================================
Net increase (decrease) in share activity (2,181,555) $(33,243,831) (691,066) $(12,323,434)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. DYNAMICS FUND
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM NET ASSET NET ASSETS,
BEGINNING INCOME REALIZED AND INVESTMENT VALUE, END TOTAL END OF PERIOD
OF PERIOD (LOSS) UNREALIZED) OPERATIONS OF PERIOD RETURN(a) (000S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $19.24 $(0.10)(c) $(9.15) $(9.25) $ 9.99 (48.08)% $ 41,664
Year ended 12/31/07 17.15 (0.11)(c) 2.20 2.09 19.24 12.19 122,184
Year ended 12/31/06 14.77 (0.09) 2.47 2.38 17.15 16.11 120,792
Year ended 12/31/05 13.34 (0.04) 1.47 1.43 14.77 10.72 111,655
Year ended 12/31/04 11.77 (0.09) 1.66 1.57 13.34 13.34 123,609
- -----------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 19.06 (0.12)(c) (9.06) (9.18) 9.88 (48.16) 5
Year ended 12/31/07 17.04 (0.15)(c) 2.17 2.02 19.06 11.85 10
Year ended 12/31/06 14.71 (0.12) 2.45 2.33 17.04 15.84 14
Year ended 12/31/05 13.32 (0.07) 1.46 1.39 14.71 10.44 12
Year ended 12/31/04(e) 11.94 (0.07) 1.45 1.38 13.32 11.56 11
_______________________________________________________________________________________________________________________
=======================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
ABSORBED ABSORBED NET ASSETS TURNOVER(b)
- ---------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 1.22%(d) 1.22%(d) (0.62)%(d) 106%
Year ended 12/31/07 1.11 1.11 (0.58) 115
Year ended 12/31/06 1.12 1.13 (0.51) 142
Year ended 12/31/05 1.16 1.17 (0.29) 110
Year ended 12/31/04 1.14 1.14 (0.62) 64
- ---------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 1.45(d) 1.47(d) (0.85)(d) 106
Year ended 12/31/07 1.36 1.36 (0.83) 115
Year ended 12/31/06 1.37 1.38 (0.76) 142
Year ended 12/31/05 1.41 1.42 (0.54) 110
Year ended 12/31/04(e) 1.40(f) 1.40(f) (0.88)(f) 64
___________________________________________________________________________________________________
===================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns are not annualized for periods less than one
year, if applicable and do not reflect charges assessed in connection with
a variable product, which if included would reduce total returns.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $79,735 and
$8 for Series I and Series II shares, respectively.
(e) Commencement date of April 30, 2004.
(f) Annualized.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $589.00 $4.99 $1,018.85 $6.34 1.25%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 588.80 5.79 1,017.85 7.35 1.45
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. DYNAMICS FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. DYNAMICS FUND
[INVESCO AIM LOGO] AIM V.I. FINANCIAL SERVICES FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. FINANCIAL SERVICES FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Additionally, we strive to understand a
PERFORMANCE SUMMARY company's ability and willingness to grow
capital returned to shareholders in the
For the year ended December 31, 2008, Series I shares of AIM V.I. Financial Services future. Finally, we focus on quality,
Fund, excluding variable product issuer charges, underperformed the S&P 500 Index, the including competitive position, management
S&P 500 Financials Index and the Lipper VUF Financial Services Funds Category Average. and financial strength.
(triangle)
The result is normally a 35- to
Given the mandate of the Fund -- to invest in the financials sector -- the Fund's 50-stock portfolio of investments that we
performance relative to its broad market index was heavily influenced by the believe are attractive from a valuation
performance of the financials sector, which underperformed the broad market.(triangle) and/or capital discipline perspective. In
Specific stocks such as CITIGROUP and FANNIE MAE contributed to the Fund's constructing a portfolio, we attempt to
underperformance versus its style-specific and peer group indexes. mitigate risk in multiple ways, including
by diversifying holdings across industries
Your Fund's long-term performance appears later in this report. and businesses that react in different
ways to changes in interest rates and
FUND VS. INDEXES economic cycles.
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. We believe a portfolio of undervalued
If variable product issuer charges were included, returns would be lower. and capital-disciplined quality financial
companies that profitably grow cash flows
Series I Shares -59.44% over time provides the best opportunity
Series II Shares -59.56 for superior long-term investment results.
S&P 500 Index(triangle) (Broad Market Index) -36.99
S&P 500 Financials Index(triangle) (Style-Specific Index) -55.32 MARKET CONDITIONS AND YOUR FUND
Lipper VUF Financial Services Funds Category Average(triangle) (Peer Group) -48.49
Financial stocks broadly declined by more
(triangle) Lipper Inc. than 50%,(1) making 2008 one of the worst
======================================================================================= years on record.(2) Losses on mortgage
loans, originally resulting from years of
HOW WE INVEST o Reasonably valued financial companies loose lending standards, worsened as home
that demonstrate superior capital prices continued to decline. Houses are
We seek to create wealth for our discipline by returning excess capital the largest asset of most consumers and
shareholders by maintaining a long-term to shareholders in the form of mortgage loans are the largest asset held
investment horizon and investing in two dividends and share repurchases. by banks. Thus, the decline in their value
primary opportunities we believe have created a huge problem for the financial
historically resulted in superior We maintain a proprietary database of system and the economy. In addition, the
investment returns within the financials intrinsic value estimates and screen increased complexity in the capital
sector: financial companies for those we deem to markets made it difficult for investors to
be of acceptable quality. Purchase ascertain which financial institutions
o Financial companies trading at a candidates are subject to exhaustive were most exposed to losses. As a result,
significant discount to our estimate of fundamental analysis. We focus on the trust in the system collapsed, eroding
intrinsic value because of excessive drivers of estimated intrinsic value such confidence in a number of large,
short-term investor pessimism. as normalized earnings power, marginal high-profile financial companies.
Estimated intrinsic value is a measure returns on economic equity (which adjusts
based primarily on the estimated future for distortions present in accounting In response, the government, led by the
cash flows generated by the businesses. numbers) and sustainable growth. U.S. Treasury Department, placed Fannie
Mae and FREDDIE MAC into U.S. government
========================================== ========================================== conservatorship and provided assistance
with the sale or restructuring of several
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* other financial companies, all at
By industry substantial losses to equity investors of
1. JPMorgan Chase & Co. 7.1% those companies. Also, Lehman Brothers
Consumer Finance 15.6% 2. Capital One Financial Corp. 6.6 (not a Fund holding) went bankrupt and did
Regional Banks 14.1 3. Zions Bancorp. 4.5 not receive a financial lifeline from the
Investment Banking & Brokerage 12.4 4. Moody's Corp. 4.5 government. In our view, these government
Other Diversified Financial 5. Citigroup Inc. 4.4 actions had the unintended consequence of
Services 12.1 6. Automatic Data Processing, Inc. 4.1 scaring private capital away from
Asset Management & Custody Banks 9.1 7. Merrill Lynch & Co., Inc. 3.9 financial companies at the precise time
Specialized Finance 7.3 8. Fifth Third Bancorp 3.9 that attracting capital was crucial to the
Data Processing & Outsourced 9. Marsh & McLennan Cos., Inc. 3.9 stability of the overall system.
Services 5.2 10. State Street Corp. 3.8
Insurance Brokers 4.6 ========================================== The U.S. Federal Reserve (the Fed) and
Managed Health Care 4.4 the Treasury mounted a coordinated
Life & Health Insurance 4.2 ========================================== response to stabilize the financial system
Diversified Capital Markets 3.0 Total Net Assets $43.3 million by cutting interest rate targets to
Specialized Consumer Services 2.5 all-time
Property & Casualty Insurance 2.2 Total Number of Holdings* 37
Diversified Banks 0.3
Real Estate Services 0.2
Money Market Funds Plus
Other Assets Less Liabilities 2.8
========================================== ==========================================
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. FINANCIAL SERVICES FUND
low levels(3), recapitalizing banks concerns. We believe the company is MICHAEL J. SIMON
(through the Troubled Asset Relief undervalued given its equity base and Chartered Financial
Program) and guaranteeing various global reinsurance business. The Fund [SIMON Analyst, senior
financial instruments in an attempt to continued to own shares of both companies PHOTO] portfolio manager, is
restore liquidity. Despite this, the at year end. lead manager of AIM V.I.
economy plunged into recession. The wealth Financial Services Fund.
destruction from falling home prices On a favorable note, investments in H&R He began his investment career in 1989 and
caused consumers to reduce spending. BLOCK and HUDSON CITY BANCORP were among joined Invesco Aim in 2001. Mr. Simon
Falling revenues and a lack of credit the largest positive contributors to earned his B.B.A. in finance from Texas
availability forced businesses to performance. Both companies had limited Christian University and his M.B.A. from
retrench. Economic weakness caused exposure to credit risk or capital markets the University of Chicago.
unemployment to rise and loan losses to activity. Prior to the end of the year, we
spread beyond home mortgages into credit sold our Hudson City Bancorp holdings to MEGGAN M. WALSH
cards and business lending. As the year take advantage of more attractive Chartered Financial
ended, the liquidity crisis exhibited valuation opportunities. [WALSH Analyst, senior
signs of stabilizing but the economy PHOTO] portfolio manager, is
continued to weaken. As expected, the exposure of the credit manager of AIM V.I.
cycle has driven greater dispersion of Financial Services Fund.
In this incredibly difficult investment valuation within the sector. We believe She began her investment career in 1987
backdrop for financial stocks, we were financial stocks will remain volatile as and joined Invesco Aim in 1991. Ms. Walsh
very disappointed with the Fund's the economy goes through a recession and earned a B.S. in finance from the
performance. credit losses peak, the timing of which is University of Maryland and her M.B.A. from
impossible to pinpoint. Financial stocks Loyola College.
Significant detractors from performance fell significantly in 2008, credit
included CITIGROUP, XL CAPITAL, MERRILL concerns are widespread, stressed Assisted by the Financial Services Team
LYNCH and Fannie Mae. We understood the companies are raising capital and risks
negative impact of credit losses on Fannie are spreading beyond the financials
Mae and believed the company had adequate sector. Historically, all of these have
financial resources to absorb substantial been hallmarks of a forming bottom.
losses. Ironically, the credit losses at
Fannie Mae remained within the range of Fund turnover increased during 2008 as
our expectations; however, the public we took advantage of opportunities created
policy decision to place the company into by the current bear market in financial
U.S. government conservatorship surprised stocks. Investors in the Fund should
us. We sold our positions in Fannie Mae expect additional turnover as we continue
and Freddie Mac at substantial losses. to capitalize on this opportunity, which
is among the broadest we have seen in our
Merrill Lynch also experienced losses careers.
and detracted from Fund performance. We
increased the Fund's stake in Merrill Regardless of the macroeconomic
Lynch during the year, participating in a environment, we remain focused on
capital raise that coincided with the sale identifying financial companies that we
of most of the firm's problem assets. We believe are undervalued and that exhibit
believed Merrill Lynch had the capital capital discipline.
strength to allow its durable franchise to
weather the financial maelstrom. In the Thank you for your investment in AIM
end, the company sold itself to BANK OF V.I. Financial Services Fund and for
AMERICA, a stock the Fund continued to sharing our long-term investment horizon.
hold at year end.
(1) Lipper Inc.
The largest single detractor from Fund (2) Wall Street Journal
performance during the year was CITIGROUP. (3) U.S. Federal Reserve
Citigroup struggled with credit-related
losses during the year and lacked an The views and opinions expressed in
excess capital cushion to absorb the management's discussion of Fund
sizable losses. In an effort to restore performance are those of Invesco Aim
market confidence, the company received Advisors, Inc. These views and opinions
capital infusions under government are subject to change at any time based on
programs twice during the year, both times factors such as market and economic
at reasonable terms. While investor conditions. These views and opinions may
concerns about credit exposure and capital not be relied upon as investment advice or
adequacy remain, we believe the new CEO recommendations, or as an offer for a
and CFO have taken aggressive steps to particular security. The information is
strengthen the company. We also believe not a complete analysis of every aspect of
the value of Citigroup's global banking any market, country, industry, security or
operations is significantly the Fund. Statements of fact are from
under-appreciated by investors. XL Capital sources considered reliable, but Invesco
also suffered from credit-related Aim 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.
See important Fund and index disclosures
later in this report.
AIM V.I. FINANCIAL SERVICES FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT THROUGH INSURANCE COMPANIES ISSUING
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE VARIABLE PRODUCTS. YOU CANNOT PURCHASE
COMPARABLE FUTURE RESULTS; CURRENT SHARES OF THE FUND DIRECTLY. PERFORMANCE
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE FIGURES GIVEN REPRESENT THE FUND AND ARE
Inception (9/20/99) -5.67% CONTACT YOUR VARIABLE PRODUCT ISSUER OR NOT INTENDED TO REFLECT ACTUAL VARIABLE
5 Years -15.82 FINANCIAL ADVISOR FOR THE MOST RECENT PRODUCT VALUES. THEY DO NOT REFLECT SALES
1 Year -59.44 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
Inception -5.90% NET ASSET VALUE. INVESTMENT RETURN AND DETERMINED BY THE VARIABLE PRODUCT
5 Years -16.02 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU ISSUERS, WILL VARY AND WILL LOWER THE
1 Year -59.56 MAY HAVE A GAIN OR LOSS WHEN YOU SELL TOTAL RETURN.
========================================== SHARES.
THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARES' INCEPTION DATE IS APRIL THE TOTAL ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
30, 2004. RETURNS SINCE THAT DATE ARE RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THE
HISTORICAL. ALL OTHER RETURNS ARE THE PROSPECTUS AS OF THE DATE OF THIS REPORT INVESCO AIM AUTOMATED INFORMATION LINE,
BLENDED RETURNS OF THE HISTORICAL FOR SERIES I AND SERIES II SHARES WAS 866 702 4402. AS MENTIONED ABOVE, FOR THE
PERFORMANCE OF SERIES II SHARES SINCE 1.11% AND 1.36%, RESPECTIVELY. THE EXPENSE MOST RECENT MONTH-END PERFORMANCE
THEIR INCEPTION AND THE RESTATED RATIOS PRESENTED ABOVE MAY VARY FROM THE INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
HISTORICAL PERFORMANCE OF SERIES I SHARES EXPENSE RATIOS PRESENTED IN OTHER SECTIONS CONTACT YOUR VARIABLE PRODUCT ISSUER OR
(FOR PERIODS PRIOR TO INCEPTION OF SERIES OF THIS REPORT THAT ARE BASED ON EXPENSES FINANCIAL ADVISOR.
II SHARES) ADJUSTED TO REFLECT THE RULE INCURRED DURING THE PERIOD COVERED BY THIS
12B-1 FEES APPLICABLE TO SERIES II SHARES. REPORT.
THE INCEPTION DATE OF SERIES I SHARES IS
SEPTEMBER 20, 1999. AIM V.I. FINANCIAL SERVICES FUND, A
SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
THE PERFORMANCE OF THE FUND'S SERIES I FUNDS, IS CURRENTLY OFFERED
AND SERIES II SHARE CLASSES WILL DIFFER
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Fund data from 9/20/99, index data from 9/30/99
AIM V.I. Financial S&P 500 Lipper VUF
Services Fund- S&P 500 Financials Financial Services Funds
Date Series I Shares Index(1) Index(1) Category Average(1)
9/20/99 $10000
9/99 9950 $10000 $10000 $10000
10/99 11150 10633 11669 11317
11/99 11009 10849 11097 10869
12/99 11100 11487 10877 10860
1/00 10640 10910 10533 10451
2/00 9560 10703 9392 9584
3/00 10990 11750 11135 11220
4/00 10781 11396 10785 10924
5/00 11391 11163 11508 11376
6/00 11081 11438 10810 11227
7/00 12062 11259 11927 12157
8/00 13012 11958 13073 13374
9/00 13532 11327 13383 13696
10/00 13523 11279 13325 13576
11/00 12583 10390 12539 12611
12/00 13855 10441 13672 13885
1/01 13505 10811 13635 13641
2/01 12815 9826 12739 12832
3/01 12414 9204 12355 12401
4/01 12764 9919 12815 12907
5/01 13365 9985 13332 13417
6/01 13275 9742 13327 13268
7/01 13015 9646 13111 13085
8/01 12275 9043 12312 12386
9/01 11603 8313 11585 11577
10/01 11333 8472 11370 11298
11/01 12235 9121 12182 12133
12/01 12487 9201 12449 12463
1/02 12356 9067 12254 12299
2/02 12205 8892 12076 12194
3/02 12950 9227 12879 12916
4/02 12538 8667 12535 12767
5/02 12558 8604 12514 12789
6/02 12015 7991 11920 12118
7/02 11100 7368 10975 11174
8/02 11271 7417 11199 11406
9/02 10145 6611 9890 10123
10/02 10869 7193 10784 10829
11/02 11151 7616 11228 11321
12/02 10628 7168 10626 10841
1/03 10455 6981 10449 10680
2/03 10121 6876 10122 10406
3/03 10121 6943 10083 10266
4/03 11163 7514 11318 11385
5/03 11771 7910 11916 12102
6/03 11811 8011 11946 12216
7/03 12398 8152 12494 12668
8/03 12266 8311 12368 12702
9/03 12316 8223 12451 12816
10/03 13166 8688 13308 13699
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
11/03 13106 8764 13271 13886
12/03 13769 9223 13923 14498
1/04 14267 9393 14367 14988
2/04 14644 9523 14748 15409
3/04 14440 9380 14602 15241
4/04 13729 9233 13928 14523
5/04 13892 9359 14184 14844
6/04 13984 9541 14255 14896
7/04 13586 9225 13963 14542
8/04 13972 9262 14432 14934
9/04 13932 9362 14309 15009
10/04 13882 9506 14381 15207
11/04 14329 9890 14807 15828
12/04 14963 10226 15440 16466
1/05 14543 9977 15106 16046
2/05 14523 10187 15026 16079
3/05 13990 10007 14455 15571
4/05 13907 9817 14471 15391
5/05 14327 10129 14867 15703
6/05 14532 10144 15080 15995
7/05 14798 10521 15318 16373
8/05 14460 10425 15050 16173
9/05 14501 10509 15190 16301
10/05 15106 10334 15669 16596
11/05 15802 10724 16404 17407
12/05 15846 10728 16439 17534
1/06 16189 11012 16587 17878
2/06 16386 11042 16923 18173
3/06 16355 11180 16973 18396
4/06 16957 11330 17708 18945
5/06 16221 11004 17056 18251
6/06 16025 11018 16951 18160
7/06 16335 11086 17371 18354
8/06 16605 11350 17573 18709
9/06 17176 11642 18305 19414
10/06 17643 12021 18750 19857
11/06 17695 12249 18866 20093
12/06 18454 12421 19595 20742
1/07 18527 12609 19768 20982
2/07 18029 12363 19179 20439
3/07 17912 12501 19038 20339
4/07 18781 13055 19825 21073
5/07 19246 13510 20281 21636
6/07 18505 13285 19440 20937
7/07 16969 12874 17925 19534
8/07 17054 13067 18201 19649
9/07 17308 13555 18612 20274
10/07 16874 13770 18276 20307
11/07 15146 13195 16861 18800
12/07 14354 13103 15945 17928
1/08 14506 12317 15890 17610
2/08 12749 11918 14103 16036
3/08 12375 11866 13719 15659
4/08 13288 12444 14615 16636
5/08 12445 12605 13726 16026
6/08 9811 11543 11205 13564
7/08 10314 11446 12005 14183
8/08 10502 11612 11876 14122
9/08 9437 10578 11295 13256
10/08 7224 8802 8755 10423
11/08 5994 8170 7145 8851
12/08 5820 8256 7125 8886
====================================================================================================================================
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. FINANCIAL SERVICES FUND'S INVESTMENT OBJECTIVE IS CAPITAL GROWTH.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND subject to greater investment and credit A direct investment cannot be made in
risk than if it invested more broadly. an index. Unless otherwise indicated,
Since a large percentage of the Fund's index results include reinvested
assets may be invested in securities of a The Fund's investments are concentrated dividends, and they do not reflect sales
limited number of companies, each in a comparatively narrow segment of the charges. Performance of an index of funds
investment has a greater effect on the economy. Consequently, the Fund may tend reflects fund expenses; performance of a
Fund's overall performance, and any to be more volatile than other mutual market index does not.
change in the value of those securities funds, and the value of the Fund's
could significantly affect the value of investments may tend to rise and fall more OTHER INFORMATION
your investment in the Fund. rapidly.
The Chartered Financial
Prices of equity securities change in ABOUT INDEXES USED IN THIS REPORT The S&P Analyst--REGISTERED TRADEMARK--
response to many factors, including the 500--REGISTERED TRADEMARK-- INDEX is a (CFA--REGISTERED TRADEMARK--) designation
historical and prospective earnings of the market capitalization-weighted index is a globally recognized standard for
issuer, the value of its assets, general covering all major areas of the U.S. measuring the competence and integrity of
economic conditions, interest rates, economy. It is not the 500 largest investment professionals.
investor perceptions and market liquidity. companies, but rather the most widely held
500 companies chosen with respect to The returns shown in management's
The financial services sector is market size, liquidity, and their discussion of Fund performance are based
subject to extensive government industry. on net asset values calculated for
regulation, which may change frequently. shareholder transactions. Generally
The profitability of businesses in this The S&P 500 FINANCIALS INDEX is a accepted accounting principles require
sector depends heavily on the availability market capitalization-weighted index of adjustments to be made to the net assets
and cost of money and may fluctuate companies involved in activities such as of the Fund at period end for financial
significantly in response to changes to banking, consumer finance, investment reporting purposes, and as such, the net
interest rates and general economic banking and brokerage, asset management, asset values for shareholder transactions
conditions. insurance and investment, and real estate, and the returns based on those net asset
including REITs. values may differ from the net asset
Foreign securities have additional values and returns reported in the
risks, including exchange rate changes, The LIPPER VUF FINANCIAL SERVICES FUNDS Financial Highlights. Additionally, the
political and economic upheaval, relative CATEGORY AVERAGE represents an average of returns and net asset values shown
lack of information, relatively low market all of the variable insurance underlying throughout this report are at the Fund
liquidity, and the potential lack of funds in the Lipper Financial Services level only and do not include variable
strict financial and accounting controls Funds category. These funds invest at product issuer charges. If such charges
and standards. least 65% of their portfolios in equity were included, the total returns would be
securities of companies engaged in lower.
There is no guarantee that the providing financial services.
investment techniques and risk analysis Industry classifications used in this
used by the Fund's portfolio managers will The Fund is not managed to track the report are generally according to the
produce the desired results. performance of any particular index, Global Industry Classification Standard,
including the indexes defined here, and which was developed by and is the
The prices of securities held by the consequently, the performance of the Fund exclusive property and a service mark of
Fund may decline in response to market may deviate significantly from the MSCI Inc. and Standard & Poor's.
risks. performance of the indexes.
Nondiversification increases the risk
that the value of the Fund's shares may
vary more widely, and the Fund may be
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS-97.21%
ASSET MANAGEMENT & CUSTODY BANKS-9.11%
Blackstone Group L.P. (The) 39,265 $ 256,400
- ---------------------------------------------------------------------------
Federated Investors, Inc.-Class B 56,584 959,665
- ---------------------------------------------------------------------------
Legg Mason, Inc. 48,983 1,073,217
- ---------------------------------------------------------------------------
State Street Corp. 42,066 1,654,456
===========================================================================
3,943,738
===========================================================================
CONSUMER FINANCE-15.59%
American Express Co. 87,791 1,628,523
- ---------------------------------------------------------------------------
AmeriCredit Corp.(b) 102,370 782,107
- ---------------------------------------------------------------------------
Capital One Financial Corp. 89,213 2,845,002
- ---------------------------------------------------------------------------
SLM Corp.(b) 167,802 1,493,438
===========================================================================
6,749,070
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-5.17%
Automatic Data Processing, Inc. 44,806 1,762,668
- ---------------------------------------------------------------------------
VeriFone Holdings, Inc.(b) 53,455 261,930
- ---------------------------------------------------------------------------
Western Union Co. 14,933 214,139
===========================================================================
2,238,737
===========================================================================
DIVERSIFIED BANKS-0.27%
U.S. Bancorp 4,627 115,721
===========================================================================
DIVERSIFIED CAPITAL MARKETS-3.05%
UBS AG-(Switzerland)(b) 92,311 1,320,047
===========================================================================
INSURANCE BROKERS-4.60%
Marsh & McLennan Cos., Inc. 69,255 1,680,819
- ---------------------------------------------------------------------------
National Financial Partners Corp.(b) 102,595 311,889
===========================================================================
1,992,708
===========================================================================
INVESTMENT BANKING & BROKERAGE-12.40%
FBR Capital Markets Corp.(b) 258,478 1,256,203
- ---------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 9,547 805,671
- ---------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 144,702 1,684,331
- ---------------------------------------------------------------------------
Morgan Stanley 101,138 1,622,254
===========================================================================
5,368,459
===========================================================================
LIFE & HEALTH INSURANCE-4.21%
Prudential Financial, Inc. 7,493 226,738
- ---------------------------------------------------------------------------
StanCorp Financial Group, Inc. 38,214 1,596,199
===========================================================================
1,822,937
===========================================================================
MANAGED HEALTH CARE-4.37%
Coventry Health Care, Inc.(b) 28,099 418,113
- ---------------------------------------------------------------------------
UnitedHealth Group Inc. 55,330 1,471,778
===========================================================================
1,889,891
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-12.12%
Bank of America Corp. 20,507 288,739
- ---------------------------------------------------------------------------
Citigroup Inc. 281,986 1,892,126
- ---------------------------------------------------------------------------
JPMorgan Chase & Co. 97,238 3,065,914
===========================================================================
5,246,779
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.24%
Allstate Corp. (The) 7,538 246,945
- ---------------------------------------------------------------------------
XL Capital Ltd.-Class A 194,795 720,741
===========================================================================
967,686
===========================================================================
REAL ESTATE SERVICES-0.20%
Jones Lang LaSalle Inc. 3,158 87,477
===========================================================================
REGIONAL BANKS-14.15%
Fifth Third Bancorp 203,708 1,682,628
- ---------------------------------------------------------------------------
First Horizon National Corp. 8,265 87,361
- ---------------------------------------------------------------------------
Popular, Inc. (Puerto Rico) 156,864 809,418
- ---------------------------------------------------------------------------
SunTrust Banks, Inc. 53,964 1,594,097
- ---------------------------------------------------------------------------
Zions Bancorp. 79,541 1,949,550
===========================================================================
6,123,054
===========================================================================
SPECIALIZED CONSUMER SERVICES-2.48%
H&R Block, Inc. 47,334 1,075,429
===========================================================================
SPECIALIZED FINANCE-7.25%
CIT Group, Inc. 264,896 1,202,628
- ---------------------------------------------------------------------------
Moody's Corp. 96,421 1,937,098
===========================================================================
3,139,726
===========================================================================
Total Common Stocks (Cost $81,126,701) 42,081,459
===========================================================================
MONEY MARKET FUNDS-2.72%
Liquid Assets Portfolio-Institutional Class(c) 588,892 588,892
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 588,892 588,892
===========================================================================
Total Money Market Funds (Cost $1,177,784) 1,177,784
===========================================================================
TOTAL INVESTMENTS-99.93% (Cost $82,304,485) 43,259,243
===========================================================================
OTHER ASSETS LESS LIABILITIES-0.07% 30,510
===========================================================================
NET ASSETS-100.00% $43,289,753
___________________________________________________________________________
===========================================================================
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$81,126,701) $ 42,081,459
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 1,177,784
======================================================
Total investments (Cost
$82,304,485) 43,259,243
======================================================
Receivables for:
Fund shares sold 263,551
- ------------------------------------------------------
Dividends 60,733
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 13,232
======================================================
Total assets 43,596,759
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 162,172
- ------------------------------------------------------
Fund shares reacquired 52,059
- ------------------------------------------------------
Accrued fees to affiliates 32,119
- ------------------------------------------------------
Accrued other operating expenses 35,954
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 24,702
======================================================
Total liabilities 307,006
======================================================
Net assets applicable to shares
outstanding $ 43,289,753
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $106,778,471
- ------------------------------------------------------
Undistributed net investment income 1,835,351
- ------------------------------------------------------
Undistributed net realized gain (loss) (26,278,827)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (39,045,242)
======================================================
$ 43,289,753
______________________________________________________
======================================================
NET ASSETS:
Series I $ 39,420,846
______________________________________________________
======================================================
Series II $ 3,868,907
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 9,567,842
______________________________________________________
======================================================
Series II 948,035
______________________________________________________
======================================================
Series I:
Net asset value per share $ 4.12
______________________________________________________
======================================================
Series II:
Net asset value per share $ 4.08
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $6,769) $ 2,554,074
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $70,425) 169,258
======================================================
Total investment income 2,723,332
======================================================
EXPENSES:
Advisory fees 520,305
- ------------------------------------------------------
Administrative services fees 223,375
- ------------------------------------------------------
Custodian fees 8,555
- ------------------------------------------------------
Distribution fees -- Series II 10,855
- ------------------------------------------------------
Transfer agent fees 17,360
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 17,838
- ------------------------------------------------------
Other 67,129
======================================================
Total expenses 865,417
======================================================
Less: Fees waived and expense offset
arrangement(s) (7,281)
======================================================
Net expenses 858,136
======================================================
Net investment income 1,865,196
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from
investment securities (includes net
gains (losses) from securities sold
to affiliates of $(156,171)) (25,097,989)
- ------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment
securities (35,661,911)
- ------------------------------------------------------
Net realized and unrealized gain (loss) (60,759,900)
======================================================
Net increase (decrease) in net assets
resulting from operations $(58,894,704)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,865,196 $ 1,980,686
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (25,097,989) 5,642,587
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (35,661,911) (34,537,586)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (58,894,704) (26,914,313)
========================================================================================================
Distributions to shareholders from net investment income:
Series I (1,840,747) (1,843,313)
- --------------------------------------------------------------------------------------------------------
Series II (162,993) (73,636)
========================================================================================================
Total distributions from net investment income (2,003,740) (1,916,949)
========================================================================================================
Distributions to shareholders from net realized gains:
Series I (5,303,718) (6,958,807)
- --------------------------------------------------------------------------------------------------------
Series II (492,299) (281,396)
========================================================================================================
Total distributions from net realized gains (5,796,017) (7,240,203)
========================================================================================================
Share transactions-net:
Series I 16,386,023 (26,100,103)
- --------------------------------------------------------------------------------------------------------
Series II 4,765,984 3,247,596
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions 21,152,007 (22,852,507)
========================================================================================================
Net increase (decrease) in net assets (45,542,454) (58,923,972)
________________________________________________________________________________________________________
========================================================================================================
NET ASSETS:
Beginning of year 88,832,207 147,756,179
========================================================================================================
End of year (includes undistributed net investment income of $1,835,351
and $1,983,468, respectively) $ 43,289,753 $ 88,832,207
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is capital growth.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. FINANCIAL SERVICES FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. OTHER RISKS -- 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.
The financial services sector is subject to extensive government
regulation, which may change frequently. The profitability of businesses
in this sector depends heavily on the availability and cost of money and
may fluctuate significantly in response to changes to interest rates and
general economic conditions.
J. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
AIM V.I. FINANCIAL SERVICES FUND
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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 approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash in such affiliated money
market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$4,543 and reimbursed class level expenses of $1,308 of Series II shares.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $173,375 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
AIM V.I. FINANCIAL SERVICES FUND
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $43,259,243
- --------------------------------------
Level 2 --
- --------------------------------------
Level 3 --
======================================
$43,259,243
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $385,668 and securities sales of $76,250,
which resulted in net realized gains (losses) of $(156,171).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $1,430.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,296
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
AIM V.I. FINANCIAL SERVICES FUND
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $2,252,871 $2,161,740
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 5,546,886 6,995,412
=======================================================================================================
Total distributions $7,799,757 $9,157,152
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 1,867,027
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (40,097,165)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (26,792)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (22,454,636)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (2,777,152)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 106,778,471
================================================================================================
Total net assets $ 43,289,753
________________________________________________________________________________________________
================================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $22,454,636
_______________________________________________________________________________________________
===============================================================================================
</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 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, 2008 was $48,566,330 and
$31,389,905, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 707,935
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (40,805,100)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(40,097,165)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $83,356,408.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of partnership investments
and proxy costs, on December 31, 2008, undistributed net investment income was
decreased by $9,573, undistributed net realized gain (loss) was increased by
$12,595 and shares of beneficial interest decreased by $3,022. This
reclassification had no effect on the net assets of the Fund.
AIM V.I. FINANCIAL SERVICES FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 4,741,184 $ 41,508,337 1,170,982 $ 19,006,293
- ------------------------------------------------------------------------------------------------------------------------
Series II 635,748 5,276,073 251,992 4,101,308
========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,609,114 7,144,465 666,827 8,802,120
- ------------------------------------------------------------------------------------------------------------------------
Series II 148,930 655,292 27,101 355,032
========================================================================================================================
Reacquired:
Series I (3,725,544) (32,266,779) (3,284,263) (53,908,516)
- ------------------------------------------------------------------------------------------------------------------------
Series II (139,755) (1,165,381) (72,050) (1,208,744)
========================================================================================================================
Net increase (decrease) in share activity 3,269,677 $ 21,152,007 (1,239,411) $(22,852,507)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco 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--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, NET (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $12.26 $0.24(c) $(7.46) $(7.22) $(0.24) $(0.68) $(0.92)
Year ended 12/31/07 17.41 0.27(c) (4.04) (3.77) (0.29) (1.09) (1.38)
Year ended 12/31/06 15.26 0.23(c) 2.28 2.51 (0.26) (0.10) (0.36)
Year ended 12/31/05 14.61 0.19(c) 0.66 0.85 (0.20) -- (0.20)
Year ended 12/31/04 13.54 0.15 1.02 1.17 (0.10) -- (0.10)
- --------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 12.17 0.21(c) (7.39) (7.18) (0.23) (0.68) (0.91)
Year ended 12/31/07 17.33 0.22(c) (4.00) (3.78) (0.29) (1.09) (1.38)
Year ended 12/31/06 15.23 0.20(c) 2.26 2.46 (0.26) (0.10) (0.36)
Year ended 12/31/05 14.59 0.15(c) 0.67 0.82 (0.18) -- (0.18)
Year ended 12/31/04(f) 13.50 0.12 1.07 1.19 (0.10) -- (0.10)
__________________________________________________________________________________________________________________________
==========================================================================================================================
<Caption>
RATIO OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME TO
VALUE, END TOTAL END OF PERIOD TO AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(a) (000S OMITTED) NET ASSETS ASSETS TURNOVER(b)
- ------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $ 4.12 (59.44)% $ 39,421 1.22%(d)(e) 2.71%(d) 47%
Year ended 12/31/07 12.26 (22.22) 85,144 1.11 1.61 9
Year ended 12/31/06 17.41 16.52 146,092 1.12 1.44 14
Year ended 12/31/05 15.26 5.84 141,241 1.12 1.30 22
Year ended 12/31/04 14.61 8.68 203,879 1.12 0.89 67
- ------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 4.08 (59.56) 3,869 1.44(d)(e) 2.49(d) 47
Year ended 12/31/07 12.17 (22.39) 3,688 1.36 1.36 9
Year ended 12/31/06 17.33 16.22 1,664 1.37 1.19 14
Year ended 12/31/05 15.23 5.61 11 1.37 1.05 22
Year ended 12/31/04(f) 14.59 8.85 11 1.38(g) 0.63(g) 67
____________________________________________________________________________________________________________
============================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns are not annualized for periods less than on
year and do not reflect charges assessed in connection with a variable
product, which if included would reduce total returns, if applicable.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $65,032 and
$4,342 for Series I and Series II shares, respectively.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.23% and 1.48% for Series I and Series II shares, respectively.
(f) Commencement date of April 30, 2004.
(g) Annualized.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by correspondence with the custodian and broker, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $593.40 $4.97 $1,018.90 $6.29 1.24%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 592.30 5.76 1,017.90 7.30 1.44
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $5,546,886
Corporate Dividends Received Deduction* 100%
</Table>
* The above percentages are 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. FINANCIAL SERVICES FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. FINANCIAL SERVICES FUND
[INVESCO AIM LOGO] AIM V.I. GLOBAL HEALTH CARE FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. GLOBAL HEALTH CARE FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY was the ongoing subprime loan crisis and
its far reaching effects on overall credit
While the health care sector was not immune from the widespread stock market losses of availability. Although inflation weighed
the last year, the sector was one of the better performers.(triangle) Consequently, the heavily on the minds of consumers and
Fund fared better than the broader market, as measured by the MSCI World Index, for the investors in the first half of 2008,
year ended December 31, 2008.(triangle) However, the Fund underperformed its falling home values and commodity prices
style-specific index, the MSCI World Health Care Index, primarily due to security alleviated short-term inflationary
selection and an underweight position in pharmaceuticals.(triangle) Additionally, an pressures beginning mid-year. However,
overweight position in life science tools and services and the cumulative effect of our this concern was eclipsed, as unemployment
foreign currency hedges detracted from relative performance during the year. and global economic instability took
center stage later in the year.
Your Fund's long-term performance appears later in this report.
The U.S. Federal Reserve Board (the
FUND VS. INDEXES Fed) continued the monetary easing policy
it began in 2007. Since December 2007, the
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. federal funds target rate has been lowered
If variable product issuer charges were included, returns would be lower. from 4.25% to a range of zero to 0.25% in
an effort to inject liquidity into
Series I Shares -28.62% weakening credit markets.(2) Real gross
Series II Shares -28.78 domestic product (GDP) decreased to an
MSCI World Index(triangle) (Broad Market Index) -40.71 annual rate of -0.5% in the third quarter
MSCI World Health Care Index(triangle) (Style-Specific Index) -21.50 of 2008.(3) The decrease in production was
Lipper VUF Health/Biotechnology Funds Category Average(triangle) (Peer Group) -25.05 primarily the result of a decrease in
personal consumption and residential
(triangle) Lipper Inc. investment. Inflation, as measured by a
======================================================================================= seasonally-adjusted Consumer Price Index,
virtually ground to a halt following sharp
HOW WE INVEST o Limiting the size of investment in any declines in energy prices in the second
single position according to its risk half of the year.(4) However, unemployment
We seek health care stocks of all market profile. trended higher during the year and
capitalizations from around the world that ultimately reached a seasonally adjusted
we believe are attractively priced and o Investing in international companies, rate of 7.2% by the end of December.(4)
have the potential to benefit from which have lower correlations to the
long-term earnings and cash flow growth. U.S. stock market. Against this backdrop, consumer
staples, health care and utilities were
We invest primarily in four segments of We reassess our holdings when: among the best performing sectors of the
the health care sector: pharmaceuticals, MSCI World Index. Conversely, financial
biotechnology, medical technology and o We identify a more attractive services, materials and information
health services. Suitable investments in investment opportunity. technology were the worst performing
this universe exhibit strong fundamentals sectors.
and earnings, coupled with healthy growth o We foresee a deterioration of a
prospects. We assess the long-term company's fundamentals. Security selection in pharmaceuticals,
commercial potential of each company's as well as an underweight position in
current and prospective products, o A company fails to execute according to pharmaceuticals and an overweight position
particularly those that fill unaddressed plan. in life sciences tools and services, drove
market needs. the Fund's underperformance relative to
o A decline in management team quality the MSCI World Health Care
We manage risk by: occurs.
o Maintaining exposure to all health care o A stock's price target has been met.
subsectors.
MARKET CONDITIONS AND YOUR FUND
o Diversifying the portfolio across 70 to
110 holdings. Several factors contributed to the
negative performance of most major market
indexes for the fiscal year ended December
31, 2008.(1) The chief catalyst
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By country
United States 77.2% 1. Pharmaceuticals 27.4% 1. Gilead Sciences, Inc. 4.2%
Switzerland 5.3 2. Biotechnology 24.5 2. Wyeth 4.1
Germany 3.5 3. Health Care Equipment 14.6 3. Genentech, Inc. 4.0
Countries Each 4. Life Sciences Tools & Services 6.7 4. Johnson & Johnson 3.9
Less Than 2.0% of Portfolio 7.8 5. Health Care Services 6.2 5. Amgen Inc. 3.5
Money Market Funds ========================================== 6. Celgene Corp. 3.3
Plus Other Assets Less Liabilities 6.2 7. Roche Holding AG 3.2
========================================== 8. Genzyme Corp. 2.9
Total Net Assets $148.4 million 9. Bristol-Myers Squibb Co. 2.7
Total Number of Holdings* 83 10. Medtronic, Inc. 2.5
========================================== ========================================== ==========================================
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
Index. Conversely, security selection in offerings and services should continue to DEREK TANER
health care services and health care deliver above average earnings growth, Chartered Financial Analyst,
technology, an overweight position in despite the potential for more economic [TANER portfolio manager, is lead
health care services and biotechnology, uncertainty. PHOTO] manager of AIM V.I. Global
and a lack of diversified chemical Health Care Fund. Mr. Taner
holdings benefited the Fund's performance. Health care was among the best began his investment career in
The Fund also benefited from holding performing sectors in the market for the 1993 as a fixed income analyst, assistant
higher levels of cash during the rapid year. This was consistent with our portfolio manager and manager of a health
market deterioration in September. It is expectations given the fundamental demand care fund. Mr. Taner joined Invesco Aim in
important to note that the style specific for health care against the decelerating 2005. He earned a B.S. in accounting and
benchmark is more than 60% weighted in earnings growth in the broader market. an M.B.A. from the Haas School of Business
large-cap pharmaceuticals while the Fund at the University of California at
is more diversified. In general, however, As always, we thank you for your Berkeley.
we emphasized companies with defensive continued investment in the AIM V.I.
growth characteristics which we believe Global Health Care Fund. DEAN DILLARD
should be less susceptible to the Chartered Financial Analyst,
uncertain economic environment. (1) Lipper Inc. [DILLARD portfolio manager is manager
(2) U.S. Federal Reserve PHOTO] of AIM V.I. Global Health Care
As part of our policy to manage risk, (3) Bureau of Economic Analysis Fund. Mr. Dillard joined
the Fund also held currency forward (4) Bureau of Labor Statistics Invesco Aim in 2000. He earned
contracts to hedge our European currency B.S. in corporate finance from the
exposure. Currency forward contracts are a The views and opinions expressed in University of Alabama and an M.B.A. from
type of derivative used to buy or sell a management's discussion of Fund Vanderbilt University. He joined the team
foreign currency at a fixed rate for performance are those of Invesco Aim on Jan. 23, 2009, after the close of the
delivery at a specified future date. While Advisors, Inc. These views and opinions reporting period.
we benefited from the strengthening of the are subject to change at any time based on
U.S. dollar relative to European factors such as market and economic Assisted by the Global Health Care Team
currencies later in the year, the net conditions. These views and opinions may
result of our currency hedges was an not be relied upon as investment advice or
overall relative detractor for the full recommendations, or as an offer for a
year. particular security. The information is
not a complete analysis of every aspect of
Managed care organizations struggled any market, country, industry, security or
during the year as concerns regarding the the Fund. Statements of fact are from
pricing cycle within the insurance sources considered reliable, but Invesco
business mounted. As a result, Aim Advisors, Inc. makes no representation
UNITED-HEALTH GROUP and HEALTH NET were or warranty as to their completeness or
among our largest detractors from Fund accuracy. Although historical performance
performance during the year. Additionally, is no guarantee of future results, these
UnitedHealth Group suffered from lowered insights may help you understand our
earnings guidance and ongoing concerns investment management philosophy.
regarding overall service quality levels.
We maintained a position in the company See important Fund and index disclosures
given its attractive stock valuation and later in this report.
its free cash flow generating
capabilities.
Large-cap biotechnology companies
performed relatively well during the
period, as the sector's defensive growth
characteristics in a deteriorating
economic environment drew interest from
investors. GILEAD SCIENCES and AMGEN were
contributors to performance, and the
acquisition of IMCLONE SYSTEMS by Eli
Lilly (not a fund holding) also aided
performance. Imclone Systems was sold at
the end of the year.
During the market turbulence of this
year, we took the opportunity to trade up
to what we believed were higher quality
health care stocks that had been oversold.
We continued to focus on companies with
new product cycles, less reimbursement
risk and little competition. Our opinion
was that diversified high quality
companies with unique product
AIM V.I. GLOBAL HEALTH CARE FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. GLOBAL HEALTH CARE FUND, A
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/21/97) 5.09% CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 1.22 FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years -0.45 MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
1 Year -28.62 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years 0.96% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years -0.72 MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year -28.78 SHARES. DETERMINED BY THE VARIABLE PRODUCT
========================================== ISSUERS, WILL VARY AND WILL LOWER THE
THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS APRIL RATIO SET FORTH IN THE MOST RECENT FUND
30, 2004. RETURNS SINCE THAT DATE ARE PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
HISTORICAL. ALL OTHER RETURNS ARE THE FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
BLENDED RETURNS OF THE HISTORICAL 1.07% AND 1.32%, RESPECTIVELY.(1) THE PRODUCT CHARGES, IS AVAILABLE ON THE
PERFORMANCE OF SERIES II SHARES SINCE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO INVESCO AIM AUTOMATED INFORMATION LINE,
THEIR INCEPTION AND THE RESTATED SET FORTH IN THE MOST RECENT FUND 866 702 4402. AS MENTIONED ABOVE, FOR THE
HISTORICAL PERFORMANCE OF SERIES I SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT MOST RECENT MONTH-END PERFORMANCE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES FOR SERIES I AND SERIES II SHARES WAS INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
II SHARES) ADJUSTED TO REFLECT THE RULE 1.08% AND 1.33%, RESPECTIVELY. THE EXPENSE CONTACT YOUR VARIABLE PRODUCT ISSUER OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. RATIOS PRESENTED ABOVE MAY VARY FROM THE FINANCIAL ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS EXPENSE RATIOS PRESENTED IN OTHER SECTIONS
MAY 21, 1997. OF THIS REPORT THAT ARE BASED ON EXPENSES (1) Total annual operating expenses less
INCURRED DURING THE PERIOD COVERED BY THIS contractual advisory fee waivers by
THE PERFORMANCE OF THE FUND'S SERIES I REPORT. the advisor in effect through at least
AND SERIES II SHARE CLASSES WILL DIFFER April 30, 2010. See current prospectus
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. for more information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Fund data from 5/21/97, index data from 5/31/97
Lipper VUF
Health/
AIM V.I. Global Biotechnology
Health Care Fund- Funds Category
Date Series I Shares MSCI World Index(1) Average(1)
- ------- ----------------- ------------------- --------------
5/21/97 $10000
5/97 10000 $10000 $10000
6/97 10000 10497 10000
7/97 9930 10979 9930
8/97 10250 10243 10250
9/97 10610 10797 10610
10/97 10610 10227 10610
11/97 10910 10407 10910
12/97 11040 10532 11040
1/98 11589 10823 11589
2/98 12049 11554 12049
3/98 12699 12040 12699
4/98 12999 12156 12999
5/98 12909 12002 12718
6/98 13629 12285 13269
7/98 13639 12263 13096
8/98 12289 10626 11452
9/98 13618 10812 12719
10/98 14068 11788 13182
11/98 14798 12487 13756
12/98 15768 13095 14723
1/99 15871 13380 14718
2/99 15623 13022 14335
3/99 15984 13562 14337
4/99 15108 14095 13521
5/99 14531 13578 13262
6/99 15108 14209 13850
7/99 14830 14165 13716
8/99 15367 14138 13916
9/99 14428 13999 13120
10/99 15171 14724 13565
11/99 15514 15137 14094
12/99 16536 16360 14445
1/00 17507 15421 15368
2/00 21068 15461 18382
3/00 17187 16528 15635
4/00 16309 15827 14722
5/00 16433 15424 14898
6/00 19664 15942 16871
7/00 18435 15491 16475
8/00 21056 15993 17783
9/00 22180 15141 18813
10/00 21892 14885 18766
11/00 20386 13980 18216
12/00 21587 14204 19101
1/01 19385 14478 17649
2/01 19301 13252 17206
3/01 16956 12380 15236
4/01 18279 13292 16388
5/01 18941 13119 17004
6/01 18961 12706 17220
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
7/01 18620 12536 16845
8/01 18454 11933 16614
9/01 17803 10880 15940
10/01 18547 11088 16560
11/01 19415 11742 17409
12/01 18868 11814 17265
1/02 17934 11455 16414
2/02 17571 11355 16016
3/02 17821 11877 16410
4/02 17229 11452 15542
5/02 17064 11471 15028
6/02 16059 10773 13788
7/02 15156 9864 13365
8/02 15062 9881 13196
9/02 15031 8793 12664
10/02 15092 9441 13175
11/02 14553 9948 13391
12/02 14252 9465 12917
1/03 14160 9177 12907
2/03 13932 9016 12688
3/03 14553 8986 13193
4/03 15227 9783 13840
5/03 15807 10339 14939
6/03 16532 10517 15421
7/03 16605 10729 15785
8/03 16212 10960 15525
9/03 16346 11026 15554
10/03 16855 11679 15757
11/03 17497 11856 16198
12/03 18212 12598 16889
1/04 18886 12801 17573
2/04 19156 13015 17812
3/04 18938 12929 17643
4/04 18855 12664 17964
5/04 18834 12770 17885
6/04 18949 13042 17898
7/04 17715 12616 16682
8/04 17882 12671 16876
9/04 18078 12911 17185
10/04 17975 13227 16870
11/04 18182 13922 17390
12/04 19591 14453 18545
1/05 18896 14128 17918
2/05 18875 14575 17805
3/05 18397 14294 17484
4/05 18728 13981 17932
5/05 19215 14229 18393
6/05 19360 14352 18614
7/05 20345 14854 19671
8/05 20717 14966 19927
9/05 20883 15354 20136
10/05 20376 14982 19634
11/05 20812 15481 20137
12/05 21184 15824 20558
1/06 22065 16531 21206
2/06 22365 16506 21577
3/06 22263 16869 21402
4/06 21619 17381 20706
5/06 20914 16787 20106
6/06 20810 16783 20100
7/06 21049 16887 20542
8/06 21765 17326 21132
9/06 21795 17532 21176
10/06 22107 18176 21699
11/06 22242 18621 21710
12/06 22293 18999 21784
1/07 22832 19224 22424
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
2/07 22584 19124 22097
3/07 22800 19474 22185
4/07 23920 20332 23487
5/07 24271 20902 23790
6/07 23640 20741 23074
7/07 23028 20282 22394
8/07 23505 20266 23072
9/07 24356 21230 23965
10/07 25082 21881 24693
11/07 25300 20987 24602
12/07 24938 20716 24140
1/08 23621 19133 22969
2/08 23227 19022 22406
3/08 22511 18840 21534
4/08 22926 19830 22157
5/08 23547 20132 22722
6/08 22593 18527 21945
7/08 23506 18074 23294
8/08 23931 17820 23429
9/08 21931 15701 21672
10/08 18417 12724 18346
11/08 16821 11900 16887
12/08 17808 12282 18105
====================================================================================================================================
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. GLOBAL HEALTH CARE FUND'S INVESTMENT OBJECTIVE IS CAPITAL GROWTH.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND The Fund invests in synthetic The Fund is not managed to track the
instruments, the value of which may not performance of any particular index,
The values of convertible securities in correlate perfectly with the overall including the indexes defined here, and
which the Fund invests may be affected by securities markets. Rising interest rates consequently, the performance of the Fund
market interest rates, the risk that the and market price fluctuations will affect may deviate significantly from the
issuer may default on interest or the performance of the Fund's investments performance of the indexes.
principal payments, and the value of the in synthetic instruments.
underlying common stock into which these A direct investment cannot be made in
securities may be converted. The value of the Fund's shares is an index. Unless otherwise indicated,
particularly vulnerable to factors index results include reinvested
Investing in developing countries can affecting the health care industry, such dividends, and they do not reflect sales
add additional risk, such as high rates of as substantial government regulation that charges or fund expenses.
inflation or sharply devalued currencies may affect the demand for products and
against the U.S. dollar. Transaction costs services offered by health care companies. OTHER INFORMATION
are often higher, and there may be delays Also, the products and services offered by
in settlement procedures. health care companies may be subject to The Chartered Financial
rapid obsolescence caused by scientific Analyst--REGISTERED TRADEMARK--
Prices of equity securities change in advances and technological innovations, (CFA--REGISTERED TRADEMARK--) designation
response to many factors, including the which can cause Fund shares to rise and is a globally recognized standard for
historical and prospective earnings of the fall more than the value of shares of measuring the competence and integrity of
issuer, the value of its assets, general funds that invest more broadly. investment professionals.
economic conditions, interest rates,
investor perceptions and market liquidity. ABOUT INDEXES USED IN THIS REPORT The returns shown in management's
discussion of Fund performance are based
There is no guarantee that the The MSCI WORLD INDEX--SERVICE MARK-- is a on net asset values calculated for
investment techniques and risk analysis free float-adjusted market capitalization shareholder transactions. Generally
used by the Fund's portfolio managers will index that is designed to measure global accepted accounting principles require
produce the desired results. developed market equity performance. adjustments to be made to the net assets
of the Fund at period end for financial
The prices of securities held by the The MSCI WORLD HEALTH CARE INDEX is a reporting purposes, and as such, the net
Fund may decline in response to market free float-adjusted market capitalization asset values for shareholder transactions
risks. index that represents the health care and the returns based on those net asset
segment in global developed market equity values may differ from the net asset
The Fund's investments are concentrated performance. values and returns reported in the
in a comparatively narrow segment of the Financial Highlights. Additionally, the
economy. Consequently, the Fund may tend LIPPER VUF HEALTH/BIOTECHNOLOGY FUNDS returns and net asset values shown
to be more volatile than other mutual CATEGORY AVERAGE represents an average of throughout this report are at the Fund
funds, and the value of the Fund's all of the variable insurance underlying level only and do not include variable
investments may tend to rise and fall more funds in the Lipper Health/ Biotechnology product issuer charges. If such charges
rapidly. Funds category. These funds invest at were included, the total returns would be
least 65% of their portfolios in equity lower.
Foreign securities have additional securities of companies engaged in
risks, including exchange rate changes, healthcare, medicine, and biotechnology. Industry classifications used in this
political and economic upheaval, relative report are generally according to the
lack of information, relatively low market Global Industry Classification Standard,
liquidity, and the potential lack of which was developed by and is the
strict financial and accounting controls exclusive property and a service mark of
and standards. MSCI Inc. and Standard & Poor's.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY
INTERESTS-93.80%
BIOTECHNOLOGY-24.45%
Amgen Inc.(b)(c) 91,197 $ 5,266,627
- -------------------------------------------------------------------------------
Array BioPharma Inc.(b)(c) 86,657 350,961
- -------------------------------------------------------------------------------
Biogen Idec Inc.(c) 30,129 1,435,044
- -------------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(b)(c) 96,918 1,725,140
- -------------------------------------------------------------------------------
Celgene Corp.(b)(c) 87,420 4,832,578
- -------------------------------------------------------------------------------
CSL Ltd. (Australia) 68,902 1,659,165
- -------------------------------------------------------------------------------
Genentech, Inc.(c) 72,562 6,016,115
- -------------------------------------------------------------------------------
Genzyme Corp.(c) 65,059 4,317,966
- -------------------------------------------------------------------------------
Gilead Sciences, Inc.(b)(c) 121,665 6,221,948
- -------------------------------------------------------------------------------
Incyte Corp.(b)(c) 78,315 296,814
- -------------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc.(b)(c) 22,841 780,248
- -------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(b)(c) 32,045 1,251,357
- -------------------------------------------------------------------------------
Pharmasset, Inc.(b)(c) 20,400 267,444
- -------------------------------------------------------------------------------
Rigel Pharmaceuticals, Inc.(b)(c) 51,742 413,936
- -------------------------------------------------------------------------------
United Therapeutics Corp.(b)(c) 23,292 1,456,915
===============================================================================
36,292,258
===============================================================================
DRUG RETAIL-2.68%
CVS Caremark Corp.(b) 116,383 3,344,847
- -------------------------------------------------------------------------------
Drogasil S.A. (Brazil) 146,520 633,053
===============================================================================
3,977,900
===============================================================================
HEALTH CARE DISTRIBUTORS-1.07%
Animal Health International, Inc.(b)(c) 120,033 255,670
- -------------------------------------------------------------------------------
Cardinal Health, Inc. 38,700 1,333,989
===============================================================================
1,589,659
===============================================================================
HEALTH CARE EQUIPMENT-14.56%
American Medical Systems Holdings, Inc.(b)(c) 111,178 999,490
- -------------------------------------------------------------------------------
Baxter International Inc. 40,700 2,181,113
- -------------------------------------------------------------------------------
Becton, Dickinson and Co. 44,900 3,070,711
- -------------------------------------------------------------------------------
Covidien Ltd.(b) 70,493 2,554,666
- -------------------------------------------------------------------------------
Dexcom Inc.(b)(c) 124,531 343,706
- -------------------------------------------------------------------------------
Hologic, Inc.(b)(c) 93,331 1,219,836
- -------------------------------------------------------------------------------
Insulet Corp.(b)(c) 74,004 571,311
- -------------------------------------------------------------------------------
Medtronic, Inc.(b) 117,342 3,686,886
- -------------------------------------------------------------------------------
Nobel Biocare Holding AG (Switzerland)(b) 24,515 501,169
- -------------------------------------------------------------------------------
ResMed Inc.(c) 37,778 1,415,920
- -------------------------------------------------------------------------------
Smith & Nephew PLC (United Kingdom) 179,482 1,155,508
- -------------------------------------------------------------------------------
Stryker Corp.(b) 26,500 1,058,675
- -------------------------------------------------------------------------------
Wright Medical Group, Inc.(b)(c) 74,280 1,517,540
- -------------------------------------------------------------------------------
Zimmer Holdings, Inc.(c) 33,084 1,337,255
===============================================================================
21,613,786
===============================================================================
HEALTH CARE FACILITIES-2.20%
Assisted Living Concepts Inc.-Class A(b)(c) 157,302 652,803
- -------------------------------------------------------------------------------
Rhoen-Klinikum AG (Germany) 108,036 2,609,121
===============================================================================
3,261,924
===============================================================================
HEALTH CARE SERVICES-6.22%
DaVita, Inc.(c) 48,928 2,425,361
- -------------------------------------------------------------------------------
Express Scripts, Inc.(b)(c) 19,422 1,067,821
- -------------------------------------------------------------------------------
HMS Holdings Corp.(b)(c) 30,414 958,649
- -------------------------------------------------------------------------------
Medco Health Solutions, Inc.(b)(c) 68,348 2,864,465
- -------------------------------------------------------------------------------
MEDNAX, Inc.(b)(c) 12,577 398,691
- -------------------------------------------------------------------------------
Quest Diagnostics Inc.(b) 29,326 1,522,313
===============================================================================
9,237,300
===============================================================================
HEALTH CARE SUPPLIES-2.04%
Alcon, Inc. 13,000 1,159,470
- -------------------------------------------------------------------------------
Align Technology, Inc.(b)(c) 51,636 451,815
- -------------------------------------------------------------------------------
DENTSPLY International Inc.(b) 49,965 1,411,012
===============================================================================
3,022,297
===============================================================================
HEALTH CARE TECHNOLOGY-0.51%
Allscripts-Misys Healthcare Solutions, Inc.(b) 76,756 761,420
===============================================================================
LIFE & HEALTH INSURANCE-0.49%
Amil Participacoes S.A. (Brazil)(d) 230,700 728,035
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-6.69%
AMAG Pharmaceuticals, Inc.(b)(c) 10,728 384,599
- -------------------------------------------------------------------------------
Charles River Laboratories International,
Inc.(b)(c) 34,274 897,979
- -------------------------------------------------------------------------------
Life Technologies Corp.(b)(c) 44,534 1,038,088
- -------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc.(b) 81,031 2,350,709
- -------------------------------------------------------------------------------
Pharmanet Development Group, Inc.(b)(c) 185,464 168,772
- -------------------------------------------------------------------------------
Sequenom Inc.(b)(c) 28,984 575,043
- -------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(b)(c) 96,688 3,294,160
- -------------------------------------------------------------------------------
Varian Inc.(c) 19,991 669,898
- -------------------------------------------------------------------------------
Waters Corp.(b)(c) 14,906 546,305
===============================================================================
9,925,553
===============================================================================
MANAGED HEALTH CARE-5.14%
Aetna Inc.(b) 54,251 1,546,153
- -------------------------------------------------------------------------------
AMERIGROUP Corp.(b)(c) 39,686 1,171,531
- -------------------------------------------------------------------------------
Aveta, Inc. (Acquired 12/21/05; Cost
$1,655,802)(c)(d) 122,652 183,978
- -------------------------------------------------------------------------------
CIGNA Corp.(b) 37,775 636,509
- -------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. GLOBAL HEALTH CARE FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
MANAGED HEALTH CARE-(CONTINUED)
Health Net Inc.(c) 125,940 $ 1,371,487
- -------------------------------------------------------------------------------
UnitedHealth Group Inc.(b) 102,570 2,728,362
===============================================================================
7,638,020
===============================================================================
PERSONAL PRODUCTS-0.32%
Herbalife Ltd.(b) 21,884 474,445
===============================================================================
PHARMACEUTICALS-27.43%
Allergan, Inc.(b) 60,853 2,453,593
- -------------------------------------------------------------------------------
ARYx Therapeutics, Inc.(b)(c) 82,292 246,876
- -------------------------------------------------------------------------------
Auxilium Pharmaceuticals Inc.(b)(c) 29,259 832,126
- -------------------------------------------------------------------------------
Bayer AG (Germany)(b) 23,675 1,397,536
- -------------------------------------------------------------------------------
Bristol-Myers Squibb Co.(b) 170,352 3,960,684
- -------------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc.(b)(c) 113,233 818,675
- -------------------------------------------------------------------------------
EastPharma Ltd.-GDR (Turkey)(c)(d) 114,132 216,851
- -------------------------------------------------------------------------------
Hikma Pharmaceuticals PLC (United Kingdom) 119,052 610,588
- -------------------------------------------------------------------------------
Ipsen S.A. (France) 33,959 1,332,389
- -------------------------------------------------------------------------------
Johnson & Johnson 96,438 5,769,886
- -------------------------------------------------------------------------------
MAP Pharmaceuticals Inc.(b)(c) 40,310 281,364
- -------------------------------------------------------------------------------
Merck KGaA (Germany) 13,065 1,193,606
- -------------------------------------------------------------------------------
Novartis AG-ADR (Switzerland) 53,971 2,685,597
- -------------------------------------------------------------------------------
Pfizer Inc. 163,914 2,902,917
- -------------------------------------------------------------------------------
Pharmstandard-GDR (Russia)(c)(d) 23,450 248,570
- -------------------------------------------------------------------------------
Roche Holding AG (Switzerland) 30,892 4,745,849
- -------------------------------------------------------------------------------
Sanofi-Aventis-ADR (France) 24,078 774,348
- -------------------------------------------------------------------------------
Shire PLC-ADR (United Kingdom)(b) 25,635 1,147,935
- -------------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd. (Japan) 30,700 1,591,167
- -------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel)(b) 33,100 1,409,067
- -------------------------------------------------------------------------------
Wyeth 162,719 6,103,590
===============================================================================
40,723,214
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $177,835,743) 139,245,811
===============================================================================
MONEY MARKET FUNDS-6.67%
Liquid Assets Portfolio-Institutional Class(e) 4,950,197 4,950,197
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 4,950,197 4,950,197
===============================================================================
Total Money Market Funds (Cost $9,900,394) 9,900,394
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-100.47% (Cost $187,736,137) 149,146,205
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-18.67%
Liquid Assets Portfolio-Institutional Class (Cost
$27,718,718)(e)(f) 27,718,718 27,718,718
===============================================================================
TOTAL INVESTMENTS-119.14% (Cost $215,454,855) 176,864,923
===============================================================================
OTHER ASSETS LESS LIABILITIES-(19.14)% (28,415,240)
===============================================================================
NET ASSETS-100.00% $148,449,683
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at December 31, 2008 was $1,377,434, which represented 0.93% of the Fund's
Net Assets.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1J.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost $177,835,743)* $139,245,811
- --------------------------------------------------------------------------------
Investments in affiliated money market funds, at value and cost 37,619,112
================================================================================
Total investments (Cost $215,454,855) 176,864,923
================================================================================
Foreign currencies, at value (Cost $16,033) 11,311
- --------------------------------------------------------------------------------
Receivables for:
Fund shares sold 73,560
- --------------------------------------------------------------------------------
Dividends 163,370
- --------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans 17,323
================================================================================
Total assets 177,130,487
________________________________________________________________________________
================================================================================
LIABILITIES:
Payables for:
Fund shares reacquired 196,448
- --------------------------------------------------------------------------------
Foreign currency contracts outstanding 562,413
- --------------------------------------------------------------------------------
Collateral upon return of securities loaned 27,718,718
- --------------------------------------------------------------------------------
Accrued fees to affiliates 109,644
- --------------------------------------------------------------------------------
Accrued other operating expenses 53,270
- --------------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 40,311
================================================================================
Total liabilities 28,680,804
================================================================================
Net assets applicable to shares outstanding $148,449,683
________________________________________________________________________________
================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $200,994,167
- --------------------------------------------------------------------------------
Undistributed net investment income 415,204
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) (14,049,863)
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) (38,909,825)
================================================================================
$148,449,683
________________________________________________________________________________
================================================================================
NET ASSETS:
Series I $128,563,444
________________________________________________________________________________
================================================================================
Series II $ 19,886,239
________________________________________________________________________________
================================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 10,311,522
________________________________________________________________________________
================================================================================
Series II 1,622,125
________________________________________________________________________________
================================================================================
Series I:
Net asset value per share $ 12.47
________________________________________________________________________________
================================================================================
Series II:
Net asset value per share $ 12.26
________________________________________________________________________________
================================================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $27,433,360 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $108,243) $ 2,388,654
- -----------------------------------------------------------
Dividends from affiliated money
market funds (includes securities
lending income of $281,642) 528,635
===========================================================
Total investment income 2,917,289
===========================================================
EXPENSES:
Advisory fees 1,500,178
- -----------------------------------------------------------
Administrative services fees 547,937
- -----------------------------------------------------------
Custodian fees 36,717
- -----------------------------------------------------------
Distribution fees -- Series II 54,847
- -----------------------------------------------------------
Transfer agent fees 38,872
- -----------------------------------------------------------
Trustees' and officers' fees and
benefits 21,919
- -----------------------------------------------------------
Other 104,260
===========================================================
Total expenses 2,304,730
===========================================================
Less: Fees waived and expense offset
arrangement(s) (11,458)
===========================================================
Net expenses 2,293,272
===========================================================
Net investment income 624,017
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of $(8,778)) (14,328,820)
- -----------------------------------------------------------
Foreign currencies (160,241)
- -----------------------------------------------------------
Foreign currency contracts 580,951
===========================================================
(13,908,110)
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (53,473,723)
- -----------------------------------------------------------
Foreign currencies (11,221)
- -----------------------------------------------------------
Foreign currency contracts (469,719)
===========================================================
(53,954,663)
===========================================================
Net realized and unrealized gain
(loss) (67,862,773)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(67,238,756)
___________________________________________________________
===========================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 624,017 $ (387,523)
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (13,908,110) 50,032,609
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (53,954,663) (15,481,212)
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (67,238,756) 34,163,874
==========================================================================================================
Distributions to shareholders from net realized gains:
Series I (33,925,325) --
- ----------------------------------------------------------------------------------------------------------
Series II (5,201,268) --
==========================================================================================================
Total distributions from net realized gains (39,126,593) --
==========================================================================================================
Share transactions-net:
Series I (970,476) (37,376,785)
- ----------------------------------------------------------------------------------------------------------
Series II 11,520,859 (85,677,899)
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions 10,550,383 (123,054,684)
==========================================================================================================
Net increase (decrease) in net assets (95,814,966) (88,890,810)
__________________________________________________________________________________________________________
==========================================================================================================
NET ASSETS:
Beginning of year 244,264,649 333,155,459
==========================================================================================================
End of year (includes undistributed net investment income (loss) of
$415,204 and $(48,349), respectively) $148,449,683 $ 244,264,649
__________________________________________________________________________________________________________
==========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is capital growth.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. GLOBAL HEALTH CARE FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. OTHER RISKS -- The Fund may invest a large percentage of assets in
securities of a limited number of companies, such that each investment may
have a greater effect on the Fund's overall performance, and any change in
the value of those securities could significantly affect the value of your
investment in the Fund.
J. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. GLOBAL HEALTH CARE FUND
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.
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. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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 approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The
Advisor did not waive fees and/or reimburse expenses during the period under
this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$11,143.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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'
AIM V.I. GLOBAL HEALTH CARE FUND
accounts. Pursuant to such agreement, for the year ended December 31, 2008,
Invesco Aim was paid $50,000 for accounting and fund administrative services and
reimbursed $497,937 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES OTHER INVESTMENTS*
- ----------------------------------------------------------------------------------------------------------
Level 1 $159,884,846 $ --
- ----------------------------------------------------------------------------------------------------------
Level 2 16,796,099 (309,778)
- ----------------------------------------------------------------------------------------------------------
Level 3 183,978 --
==========================================================================================================
$176,864,923 $(309,778)
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
* Other investments include foreign currencies contracts, which are included at
unrealized appreciation/(depreciation).
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, 2008, the Fund
engaged in securities purchases of $1,425,201 and securities sales of $86,442,
which resulted in net realized gains (losses) of $(8,778).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $315.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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
AIM V.I. GLOBAL HEALTH CARE FUND
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 Officers' 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, 2008, the Fund paid legal fees of $3,632
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--FOREIGN CURRENCY CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS
- -----------------------------------------------------------------------------------------------------------------
CONTRACT TO UNREALIZED
SETTLEMENT ---------------------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------
02/10/09 CHF 2,505,000 USD 2,141,904 $2,350,216 $(208,312)
- -----------------------------------------------------------------------------------------------------------------
02/10/09 EUR 1,470,000 USD 1,876,427 2,049,951 (173,524)
- -----------------------------------------------------------------------------------------------------------------
02/10/09 GBP 557,000 USD 883,809 811,751 72,058
=================================================================================================================
Total open foreign
currency contracts $(309,778)
=================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS
- -----------------------------------------------------------------------------------------------------------------
CONTRACT TO
CLOSED ---------------------------------------- REALIZED GAIN
DATE DELIVER RECEIVE VALUE (LOSS)
- -----------------------------------------------------------------------------------------------------------------
11/24/08 USD 549,475 EUR 430,000 $ 548,886 $ (589)
- -----------------------------------------------------------------------------------------------------------------
12/17/08 USD 1,286,127 EUR 900,000 1,148,832 (137,295)
- -----------------------------------------------------------------------------------------------------------------
12/17/08 USD 556,089 GBP 360,000 571,223 15,134
- -----------------------------------------------------------------------------------------------------------------
12/17/08 USD 1,754,483 CHF 1,900,000 1,624,598 (129,885)
=================================================================================================================
Total closed foreign
currency contracts $ (252,635)
=================================================================================================================
Total foreign currency
contracts $ (562,413)
=================================================================================================================
</Table>
<Table>
Currency Abbreviations:
CHF - Swiss Franc
EUR - Euro
GBP - British Pound Sterling
USD - U.S. Dollar
</Table>
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------
Ordinary income $ 8,773,314 $--
- ---------------------------------------------------------------------------------------------------
Long-term capital gain 30,353,279 --
===================================================================================================
Total distributions $39,126,593 $--
___________________________________________________________________________________________________
===================================================================================================
</Table>
AIM V.I. GLOBAL HEALTH CARE FUND
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 475,194
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (39,436,071)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (10,115)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (41,800)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (1,295,874)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (12,235,818)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 200,994,167
================================================================================================
Total net assets $148,449,683
________________________________________________________________________________________________
================================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $12,235,818
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $130,252,877 and
$151,843,936, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 4,439,115
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (43,875,186)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(39,436,071)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $216,300,994.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, proxy costs and distributions, on December 31, 2008, undistributed
net investment income was decreased by $160,464, undistributed net realized gain
(loss) was increased by $168,291 and shares of beneficial interest decreased by
$7,827. This reclassification had no effect on the net assets of the Fund.
AIM V.I. GLOBAL HEALTH CARE FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2008(a) 2007
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,216,216 $ 47,385,882 1,565,542 $ 36,237,613
- -------------------------------------------------------------------------------------------------------------------------
Series II 477,003 9,789,685 2,076,812 46,171,584
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 2,846,084 33,925,325 -- --
- -------------------------------------------------------------------------------------------------------------------------
Series II 443,795 5,201,268 -- --
=========================================================================================================================
Reacquired:
Series I (4,039,623) (82,281,683) (3,226,676) (73,614,398)
- -------------------------------------------------------------------------------------------------------------------------
Series II (172,689) (3,470,094) (5,774,963) (131,849,483)
=========================================================================================================================
Net increase (decrease) in share activity 1,770,786 $ 10,550,383 (5,359,285) $(123,054,684)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
NOTE 13--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008. Management is
currently in the process of determining the impact of the standard on the Fund's
disclosures in the financial statements.
AIM V.I. GLOBAL HEALTH CARE FUND
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET NET (LOSSES)ON DISTRIBUTIONS
VALUE, INVESTMENT SECURITIES (BOTH TOTAL FROM FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT REALIZED VALUE, END TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS GAINS OF PERIOD RETURN(a)
- -------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $24.06 $ 0.07(c)(d) $(7.16) $(7.09) $(4.50) $12.47 (28.62)%
Year ended 12/31/07 21.51 (0.01)(c) 2.56 2.55 -- 24.06 11.85
Year ended 12/31/06 20.44 (0.04)(c) 1.11 1.07 -- 21.51 5.24
Year ended 12/31/05 18.90 (0.06) 1.60 1.54 -- 20.44 8.15
Year ended 12/31/04 17.57 (0.03) 1.36 1.33 -- 18.90 7.57
- -------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 23.82 0.02(c)(d) (7.08) (7.06) (4.50) 12.26 (28.78)
Year ended 12/31/07 21.36 (0.07)(c) 2.53 2.46 -- 23.82 11.52
Year ended 12/31/06 20.34 (0.09)(c) 1.11 1.02 -- 21.36 5.01
Year ended 12/31/05 18.86 (0.09) 1.57 1.48 -- 20.34 7.85
Year ended 12/31/04(f) 18.19 (0.05) 0.72 0.67 -- 18.86 3.68
_________________________________________________________________________________________________________________________
=========================================================================================================================
<Caption>
RATIO OF RATIO OF RATIO OF
EXPENSES EXPENSES NET
TO AVERAGE TO AVERAGE NET INVESTMENT
NET ASSETS ASSETS WITHOUT INCOME
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS (LOSS) TO
END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES AVERAGE NET PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED ASSETS TURNOVER(b)
- -----------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $128,563 1.12%(e) 1.13%(e) 0.34%(d)(e) 67%
Year ended 12/31/07 223,448 1.06 1.07 (0.06) 66
Year ended 12/31/06 235,509 1.10 1.10 (0.19) 79
Year ended 12/31/05 257,736 1.08 1.09 (0.24) 82
Year ended 12/31/04 354,889 1.11 1.11 (0.17) 175
- -----------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 19,886 1.37(e) 1.38(e) 0.09(d)(e) 67
Year ended 12/31/07 20,817 1.31 1.32 (0.31) 66
Year ended 12/31/06 97,646 1.35 1.35 (0.44) 79
Year ended 12/31/05 11 1.33 1.34 (0.49) 82
Year ended 12/31/04(f) 10 1.36(g) 1.36(g) (0.42)(g) 175
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns are not annualized for periods less than one
year and do not reflect charges assessed in connection with a variable
product, which if included would reduce total returns.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) 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 $5.23 per share owned of All-scripts-Misys Healthcare
Solutions, Inc. on October 13, 2008. Net investment income (loss) per share
and the ratio of net investment income (loss) to average net assets
excluding the special dividend are $0.02 and 0.08% and $(0.03) and (0.17)%
for Series I and Series II shares, respectively.
(e) Ratios are based on average daily net assets (000's omitted) of $178,085
and $21,939 for Series I and Series II shares, respectively.
(f) Commencement date of April 30, 2004.
(g) Annualized.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $787.80 $5.08 $1,019.46 $5.74 1.13%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 787.20 6.20 1,018.20 7.00 1.38
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 to reflect the most recent fiscal half year.
AIM V.I. GLOBAL HEALTH CARE 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $30,353,279
Corporate Dividends Received Deduction* 10.96%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. GLOBAL HEALTH CARE FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. GLOBAL HEALTH CARE FUND
[INVESCO AIM LOGO] AIM V.I. GLOBAL REAL ESTATE FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. GLOBAL REAL ESTATE FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Although inflation weighed heavily on the
PERFORMANCE SUMMARY minds of consumers and investors in the
first half of 2008, falling home values
Global real estate securities suffered a volatile year as the effects of the credit and commodity prices alleviated short-term
crisis spread throughout the globe. The Fund's Series I shares, excluding variable inflationary pressuresbeginning mid-year
product issuer charges, trailed the Fund's broad market index, the MSCI World Index, as unemployment and global economic
because real estate-related equities were among the weakest performing during the year instability took center stage.
ended December 31, 2008. Conversely, the Fund's Series I shares, excluding variable
product issuer charges, outperformed the FTSE EPRA/NAREIT Global Real Estate Index, the Strained credit markets materially
Fund's style-specific index, due primarily to security selection within the United affected real estate markets during the
States and Australia. year with the effects being slowing
property sales and lower property
Your Fund's long-term performance can be found later in this report. valuations. We believed listed property
prices appeared to more than discount real
FUND VS. INDEXES asset value declines to date.
Fundamentally, real estate tends to be
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. more stable than the overall economy,
If variable product issuer charges were included, returns would be lower. owing to a general characteristic of
multi-year, contractual lease agreements.
Series I Shares -44.65% The current recession, however, affected
Series II Shares -44.72 real estate demand and rental rates which
MSCI World Index(triangle) (Broad Market Index) -40.71 declined in many markets. Accordingly,
FTSE EPRA/NAREIT Global Real Estate Index(square) (Style-Specific Index) -47.72 earnings growth estimates and expectations
Lipper VUF Real Estate Funds Category Average(triangle) (Peer Group) -40.08 also declined.
(triangle)Lipper Inc.; (square)Invesco Aim, Bloomberg L.P. Additionally, in response to reduced
======================================================================================= access to capital, many listed property
companies chose to cut their dividend
HOW WE INVEST We attempt to control risk by payouts to retain capital for investment
diversifying property types and geographic in the credit-constrained environment. The
Your Fund holds primarily real estate location as well as limiting the size of dividend cuts were not generally
investment trusts (REITs) and other any one holding. reflective of operating challenges, but
property-related securities from the U.S. rather reflective of reduced access to
and abroad whose value is driven by We consider selling a holding when: historical channels of investment capital.
tangible assets. Our goal is to create a
global Fund focused on total return that o Relative valuation falls below desired On an absolute basis, property
will perform at or above index levels with levels. companies in Germany benefited Fund
comparable levels of risk. Our investment performance during the year, while
strategy focuses on identifying U.S. and o Risk/return relationships change holdings in the U.S., Hong Kong and
non-U.S. property types we believe will significantly. Australia detracted from performance.
benefit from long-term sector trends. We Additionally, our cash holdings, while
use a fundamentals-driven investment o Company fundamentals change (property minimal, also benefited Fund performance
process, including property market cycle type, geography or management changes). during the year. It is normal and
analysis, property evaluation and customary for the Fund to hold a small
management and structure review to o A more attractive investment percentage of assets in cash in order to
identify securities with: opportunity is identified. accommodate shareholder flows. At various
times, this may have a positive or
o Quality underlying properties MARKET CONDITIONS AND YOUR FUND negative effect on relative performance.
o Solid management teams and flexible Several factors contributed to the
balance sheets. negative performance of most major market
indexes for the fiscal year ended December
o Attractive valuations relative to peer 31, 2008.(1) The chief catalyst was the
investment alternatives. ongoing subprime loan crisis and its far
reaching effects on overall credit
availability.
========================================== ==========================================
==========================================
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS*
By property type Total Net Assets $86.8 million
1. Westfield Group 5.4% Total Number of Holdings* 91
Diversified 36.7% 2. Mitsubishi Estate Co. Ltd. 5.1 ==========================================
Retail 22.2 3. Unibail-Rodamco 4.6
Office 13.0 4. Sun Hung Kai Properties Ltd. 4.3
Residential 9.3 5. Mitsui Fudosan Co., Ltd. 4.3
Healthcare 8.0 6. Simon Property Group, Inc. 3.3
Industrial 3.5 7. Public Storage 2.8
Self Storage 2.8 8. Federal Realty Investment Trust 2.3
Lodging-Resorts 1.5 9. Equity Residential 2.1
Specialty 1.3 10. Hang Lung Properties Ltd. 2.1
Money Market Funds
Plus Other Assets Less Liabilities 1.7
========================================== ==========================================
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
Strong stock selection within the U.S. periods of slower economic growth. JOE RODRIGUEZ, JR.
and Australia, as well as underweight Companies operating in supply-constrained [RODRIGUEZ Senior portfolio
exposure in the U.S., benefited markets with sufficient access to PHOTO] manager, is lead manager
performance relative to the FTSE liquidity and less near-term debt of AIM V.I. Global Real
EPRA/NAREIT Global Real Estate Index. On maturities also were favored in the Fund. Estate Fund. He is head
the other hand, security selection in Hong of real estate
Kong, the U.K. and the Netherlands, as As always, we thank you for your securities for Invesco
well as underweight exposure to continued investment in AIM V.I. Global Real Estate, where he oversees all phases
Switzerland and overweight exposure to the Real Estate Fund. of the unit, including securities research
U.K., hurt our relative performance. and administration. Mr. Rodriguez began
(1) Lipper Inc. his investment career in 1983 and joined
Select U.S. REITs were top contributors Invesco in 1990. He earned his B.B.A. in
during the year. In particular, PUBLIC The views and opinions expressed in economics and finance and his M.B.A. in
STORAGE benefited from the acquisition of management's discussion of Fund finance from Baylor University.
a competitor, Shurgard (not a Fund performance are those of Invesco Aim
holding), which helped not only to Advisors, Inc. These views and opinions MARK BLACKBURN
solidify its domestic position but also are subject to change at any time based on [BLACKBURN Chartered Financial
helped Public Storage to further diversify factors such as market and economic PHOTO] Analyst, portfolio
globally and achieve economies of scale. conditions. These views and opinions may manager, is manager of
Additionally, the company's relatively not be relied upon as investment advice or AIM V.I. Global Real
lower leverage is a comparative advantage recommendations, or as an offer for a Estate Fund. He earned a
in the current environment. particular security. The information is B.S. in accounting from Louisiana State
not a complete analysis of every aspect of University and an M.B.A. from Southern
In general, health care REITs also any market, country, industry, security or Methodist University. Mr. Blackburn is a
drove strong performance within the U.S., the Fund. Statements of fact are from Certified Public Accountant.
as health care is a defensive sector less sources considered reliable, but Invesco
directly linked to the overall economy. Aim Advisors, Inc. makes no representation JAMES COWEN
HCP, a REIT with exposure to senior or warranty as to their completeness or [COWEN Portfolio manager, is
housing, medical offices and hospitals, accuracy. Although historical performance PHOTO] manager of AIM V.I.
was among the top contributors to Fund is no guarantee of future results, these Global Real Estate Fund.
performance for the year. insights may help you understand our Mr. Cowen has worked in the real estate
investment management philosophy. industry since 1997 and joined Invesco in
Australian Listed Property Trusts 2001. He earned a Master of Town and
(LPTs) suffered in 2008 as LPTs generally See important Fund and index disclosures Country Planning degree from the
fell out of favor with many investors as later in this report. University of Manchester and a Master of
the credit market crisis adversely Philosophy degree in land economy from
affected several property companies and Cambridge University.
cast a shadow of doubt over the entire
sector. In fact, the largest detractor PAUL CURBO
from Fund performance was WESTFIELD GROUP, [CURBO Chartered Financial
one of the largest PHOTO] Analyst, portfolio
geographically-diversified retail property manager, is manager of
groups in the world. Despite the AIM V.I. Global Real
difficulties in the marketplace, property Estate Fund. He joined
fundamentals in Australia remained Invesco in 1998. Mr. Curbo earned a B.B.A.
relatively stable. in finance from the University of Texas at
Dallas.
As a group, Hong Kong property stocks
reversed their world-leading performance JAMES TROWBRIDGE
of 2007 and underperformed in 2008. SUN [TROWBRIDGE Portfolio manager, is
HUNG KAI PROPERTIES, which specializes in PHOTO] manager of AIM V.I.
high quality residential and commercial Global Real Estate Fund.
projects in Hong Kong, was among the top He joined Invesco in 1989. Mr. Trowbridge
detractors from Fund performance. earned his B.A. in finance from Indiana
University.
We continued to seek to manage risk by
holding a portfolio diversified by PING-YING WANG
property type and geographic location. [WANG Chartered Financial
Regardless of country, it's important to PHOTO] Analyst, portfolio
note that we continued to emphasize manager, is manager of
companies with lower leverage levels and a AIM V.I. Global Real Estate Fund. She
higher degree of internally driven earned a B.S. in international finance
earnings growth. We continued to from the People's University of China and
de-emphasize companies that rely on new a Ph.D. in finance from the University of
development to drive future earnings Texas at Dallas.
growth because development can become a
risky proposition during Assisted by the Real Estate Team
AIM V.I. GLOBAL REAL ESTATE FUND
YOUR FUND's Long-Term Performance
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS DIFFER PRIMARILY DUE TO DIFFERENT CLASS AIM V.I. GLOBAL REAL ESTATE FUND, A
As of 12/31/08 EXPENSES. SERIES PORTFOLIO OF AIM VARIABLE INSUR-
ANCE FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES THE PERFORMANCE DATA QUOTED REPRESENT INSURANCE COMPANIES ISSUING VARIABLE
Inception(3/31/98) 5.89% PAST PERFORMANCE AND CANNOT GUARANTEE PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 8.21 COMPARABLE FUTURE RESULTS; CURRENT THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years 3.07 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE GIVEN REPRESENT THE FUND AND ARE NOT
1 Year -44.65 CONTACT YOUR VARIABLE PRODUCT ISSUER OR INTENDED TO REFLECT ACTUAL VARIABLE
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 7.96% PERFORMANCE FIGURES REFLECT FUND EXPENSES, CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years 2.86 REINVESTED DISTRIBUTIONS AND CHANGES IN CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year -44.72 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 THE
PERFORMANCE OF SERIES II SHARES SINCE PROSPECTUS AS OF THE DATE OF THIS REPORT INVESCO AIM AUTOMATED INFORMATION LINE,
THEIR INCEPTION AND THE RESTATED FOR SERIES I AND SERIES II SHARES WAS 866 702 4402. AS MENTIONED ABOVE, FOR THE
HISTORICAL PERFORMANCE OF SERIES I SHARES 1.13% AND 1.38%, RESPECTIVELY. THE EXPENSE MOST RECENT MONTH-END PERFORMANCE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES RATIOS PRESENTED ABOVE MAY VARY FROM THE INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
II SHARES) ADJUSTED TO REFLECT THE RULE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS CONTACT YOUR VARIABLE PRODUCT ISSUER OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. OF THIS REPORT THAT ARE BASED ON EXPENSES FINANCIAL ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS INCURRED DURING THE PERIOD COVERED BY THIS
MARCH 31, 1998. REPORT. HAD THE ADVISOR NOT WAIVED FEES AND/OR
REIMBURSED EXPENSES IN THE PAST,
THE PERFORMANCE OF THE FUND's Series I PERFORMANCE WOULD HAVE BEEN LOWER.
AND SERIES II SHARE CLASSES WILL
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Fund and index data from 3/31/98
FTSE Lipper VUF
AIM V.I. Global EPRA/NAREIT Real Estate
Real Estate Fund- MSCI World Global Real Funds Category
Date Series I Shares Index(2) Estate Index(1) Average(2)
3/31/1998 $10000 $10000 $10000 $10000
4/98 9710 10096 9690 9691
5/98 9610 9968 9227 9590
6/98 9500 10203 8966 9527
7/98 8920 10185 8456 8915
8/98 7830 8826 7557 8034
9/98 8180 8980 8004 8454
10/98 8090 9790 8765 8327
11/98 8400 10371 9027 8493
12/98 8412 10876 8899 8454
1/99 8207 11113 8665 8246
2/99 8074 10816 8619 8142
3/99 7972 11264 8875 8058
4/99 8892 11707 9750 8901
5/99 9087 11277 9530 9099
6/99 8974 11802 9743 8951
7/99 8565 11765 9617 8593
8/99 8565 11742 9521 8487
9/99 8228 11627 9121 8151
10/99 8043 12230 8998 7944
11/99 7972 12572 9238 7830
12/99 8441 13588 9688 8170
1/00 8473 12808 9282 8144
2/00 8538 12841 8915 8015
3/00 9029 13727 9448 8389
4/00 9423 13145 9448 8863
5/00 9135 12811 9140 8953
6/00 9764 13241 9789 9301
7/00 10587 12867 10233 10022
8/00 10448 13284 10507 9734
9/00 10587 12576 10522 10076
10/00 10245 12363 9984 9680
11/00 10213 11611 10137 9851
12/00 10859 11797 11029 10489
1/01 10934 12025 11195 10458
2/01 10538 11007 11181 10269
3/01 10077 10282 10472 10211
4/01 10559 11040 10732 10460
5/01 10527 10896 10829 10625
6/01 10891 10553 11102 11177
7/01 10570 10412 10902 10966
8/01 10591 9911 11170 11292
9/01 10163 9036 10011 10807
10/01 9960 9209 9906 10449
11/01 10452 9752 10403 11006
12/01 10775 9813 10609 11298
1/02 10732 9514 10499 11282
2/02 10970 9431 10628 11486
3/02 11619 9865 11179 12173
4/02 11813 9511 11506 12275
5/02 12018 9527 11852 12452
====================================================================================================================================
(1) Invesco Aim, Bloomberg L.P.
(2) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
6/02 12256 8948 11787 12707
7/02 11759 8193 11197 12022
8/02 11867 8207 11044 12029
9/02 11380 7303 10600 11571
10/02 11121 7841 10459 11034
11/02 11446 8263 10855 11501
12/02 11463 7861 10908 11639
1/03 11135 7622 10676 11326
2/03 11299 7488 10729 11524
3/03 11582 7464 10719 11804
4/03 12008 8125 11166 12272
5/03 12752 8588 12012 12950
6/03 13221 8735 12266 13225
7/03 13833 8912 12744 13920
8/03 13964 9103 13109 14064
9/03 14413 9158 13720 14518
10/03 14620 9700 14132 14753
11/03 15419 9847 14643 15408
12/03 15913 10464 15347 15904
1/04 16513 10632 16050 16504
2/04 16868 10810 16614 16867
3/04 17889 10738 17417 17832
4/04 15492 10518 15515 15403
5/04 16513 10606 16296 16421
6/04 17101 10832 16698 16935
7/04 17278 10478 16832 17072
8/04 18466 10524 17771 18295
9/04 18554 10723 17963 18313
10/04 19686 10986 18757 19295
11/04 20595 11563 20073 20209
12/04 21734 12004 21173 21361
1/05 20020 11734 20205 19672
2/05 20554 12106 20637 20199
3/05 20145 11872 20131 19898
4/05 21362 11612 20787 20851
5/05 21986 11818 21181 21539
6/05 22918 11921 22000 22584
7/05 24600 12337 23088 24164
8/05 23702 12430 22859 23275
9/05 23873 12753 23337 23399
10/05 23362 12444 22640 22891
11/05 24476 12858 23450 23921
12/05 24831 13143 24423 24158
1/06 26445 13730 26042 25757
2/06 26916 13709 26630 26244
3/06 28402 14011 27839 27643
4/06 27706 14436 27706 26808
5/06 26974 13943 26766 26054
6/06 28283 13939 27736 27336
7/06 29120 14026 28731 28055
8/06 30191 14390 29816 29046
9/06 30886 14562 30487 29621
10/06 32594 15096 32217 31383
11/06 34373 15466 33842 32952
12/06 35401 15780 34767 32794
1/07 37214 15967 36439 35309
2/07 37522 15884 36701 34695
3/07 37571 16174 36931 33987
4/07 37646 16888 37210 34045
5/07 38091 17361 37514 34127
6/07 35062 17227 34770 31144
7/07 33558 16845 33046 28958
8/07 34914 16833 34009 30382
9/07 37180 17633 36041 31771
10/07 38411 18174 36971 32362
11/07 35491 17431 34119 29430
12/07 33443 17206 32348 27941
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
1/08 32527 15891 30971 27589
2/08 31226 15799 30408 26607
3/08 31897 15648 30527 27937
4/08 33610 16470 32436 29577
5/08 32615 16721 31641 29367
6/08 28656 15388 27914 26113
7/08 28762 15012 28142 26627
8/08 28043 14801 27559 26918
9/08 26164 13040 25008 26110
10/08 19929 10568 18038 18611
11/08 17163 9884 15421 14924
12/08 18510 10201 16911 16776
====================================================================================================================================
AIM V.I. GLOBAL REAL ESTATE FUND
AIM V.I. GLOBAL REAL ESTATE FUND'S INVESTMENT OBJECTIVE IS HIGH TOTAL RETURN THROUGH GROWTH OF CAPITAL and CURRENT INCOME.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND The Fund may use enhanced investment OTHER INFORMATION
techniques such as short sales. Short
Since a large percentage of the Fund's sales carry the risk of buying a security CPA--REGISTERED TRADEMARK-- and Certified
assets may be invested in securities of a back at a higher price at which the Fund's Public Accountant--REGISTERED TRADEMARK--
limited number of companies, each exposure is unlimited. are trademarks owned by the American
investment has a greater effect on the Institute of Certified Public Accountants.
Fund's overall performance, and any change The Fund may invest in obligations
in the value of those securities could issued by agencies and instrumentalities The Chartered Financial Analyst
significantly affect the value of your of the U.S. government that may vary in --REGISTERED TRADEMARK-- (CFA--REGISTERED
investment in the Fund. the level of support they receive from the TRADEMARK--) designation is a globally
U.S. government. The U.S. government may recognized standard for measuring the
The Fund may invest in debt securities, choose not to provide financial support to competence and integrity of investment
such as notes and bonds, which carry U.S.-government-sponsored agencies or professionals.
interest rate and credit risk. instrumentalities if it is not legally
obligated to do so. In this case, if the The returns shown in management's
The Fund could conceivably hold real issuer defaulted, the underlying fund discussion of Fund performance are based
estate directly if a company defaults on holding securities of such an issuer might on net asset values calculated for
debt securities. In that event, an not be able to recover its investment from shareholder transactions. Generally
investment in the Fund may have additional the U.S. government. accepted accounting principles require
risks relating to direct ownership of real adjustments to be made to the net assets
estate. ABOUT INDEXES USED IN THIS REPORT of the Fund at period end for financial
reporting purposes, and as such, the net
Prices of equity securities change in The MSCI WORLD INDEX--SERVICE MARK-- is a asset values for shareholder transactions
response to many factors, including the free float-adjusted market capitalization and the returns based on those net asset
historical and prospective earnings of the index that is designed to measure global values may differ from the net asset
issuer, the value of its assets, general developed market equity performance. values and returns reported in the
economic conditions, interest rates, Financial Highlights. Additionally, the
investor perceptions and market liquidity. The FTSE EPRA/NAREIT GLOBAL REAL ESTATE returns and net asset values shown
INDEX is designed to track the performance throughout this report are at the Fund
Foreign securities have additional of listed real estate companies and REITs level only and do not include variable
risks, including exchange rate changes, worldwide. It is compiled by FTSE Group product issuer charges. If such charges
political and economic upheaval, relative (an independent company, originally a were included, the total returns would be
lack of information, relatively low market joint venture of the Financial Times and lower.
liquidity, and the potential lack of the London Stock Exchange, whose sole
strict financial and accounting controls business is the creation and management of Property type classifications used in
and standards. indexes and associated data services), this report are generally according to
National Association of Real Estate FTSE EPRA/NAREIT Global Real Estate Index,
The Fund may invest in lower quality Investment Trusts, and European Public which is exclusively owned by the FTSE
debt securities, commonly known as "junk Real Estate Association. Group, the European Public Real Estate
bonds." Compared to higher quality debt Association (EPRA), the National
securities, junk bonds involve greater The LIPPER VUF REAL ESTATE FUNDS Association of Real Estate Investment
risk of default or price changes due to CATEGORY AVERAGE represents an average of Trusts (NAREIT) and Euronext Indices BV.
changes in credit quality of the issuer all of the variable insurance underlying
because they are generally unsecured and funds in the Lipper Real Estate Funds
may be subordinated to other creditors' category. These funds invest at least 65%
claims. Credit ratings on junk bonds do of their portfolio in equity securities of
not necessarily reflect their actual domestic and foreign companies engaged in
market risk. the real estate industry.
There is no guarantee that the The Fund is not managed to track the
investment techniques and risk analysis performance of any particular index,
used by the Fund's portfolio managers will including the indexes defined here, and
produce the desired results. consequently, the performance of the Fund
may deviate significantly from the
The prices of securities held by the performance of the indexes.
Fund may decline in response to market
risks. A direct investment cannot be made in
an index. Unless otherwise indicated,
Because the fund focuses its index results include reinvested
investments in real estate investment dividends, and they do not reflect sales
trusts (REITs), real estate operating charges. Performance of an index of funds
companies and other companies related to reflects fund expenses; performance of a
the real estate industry, the value of market index does not.
shares may rise and fall more than the
value of shares of a fund that invests in
a broader range of companies.
SCHEDULE OF INVESTMENTS
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
FOREIGN REAL ESTATE INVESTMENT TRUSTS, COMMON STOCKS & OTHER
EQUITY INTERESTS-98.26%
AUSTRALIA-9.06%
CFS Retail Property Trust(a) 820,896 $ 1,098,039
- -------------------------------------------------------------------------------
Commonwealth Property Office Fund(a) 373,581 315,760
- -------------------------------------------------------------------------------
Dexus Property Group(a) 644,409 381,877
- -------------------------------------------------------------------------------
Stockland(a) 467,174 1,378,455
- -------------------------------------------------------------------------------
Westfield Group 498,740 4,686,042
===============================================================================
7,860,173
===============================================================================
AUSTRIA-0.14%
Conwert Immobilien Invest S.E.(b) 27,620 124,602
===============================================================================
BELGIUM-0.26%
Cofinimmo 1,710 226,532
===============================================================================
CANADA-2.64%
Canadian Real Estate Investment Trust 19,000 352,936
- -------------------------------------------------------------------------------
Cominar Real Estate Investment Trust 15,500 205,622
- -------------------------------------------------------------------------------
Primaris Retail Real Estate Investment Trust 32,500 275,675
- -------------------------------------------------------------------------------
RioCan Real Estate Investment Trust 128,900 1,456,767
===============================================================================
2,291,000
===============================================================================
FINLAND-0.26%
Citycon Oyj 94,281 222,227
===============================================================================
FRANCE-5.64%
Gecina S.A. 3,767 262,890
- -------------------------------------------------------------------------------
Mercialys 7,698 243,546
- -------------------------------------------------------------------------------
Societe Immobiliere de Location pour I'Industrie
et le Commerce(a) 4,307 402,368
- -------------------------------------------------------------------------------
Unibail-Rodamco 26,649 3,988,406
===============================================================================
4,897,210
===============================================================================
GERMANY-0.29%
Deutsche Euroshop AG(a) 7,270 250,459
===============================================================================
HONG KONG-13.14%
China Overseas Land & Investment Ltd. 1,071,444 1,506,193
- -------------------------------------------------------------------------------
China Overseas Land & Investment Ltd. Rts.(b) 42,858 15,373
- -------------------------------------------------------------------------------
China Resources Land Ltd. 683,800 846,582
- -------------------------------------------------------------------------------
Hang Lung Properties Ltd. 841,000 1,844,802
- -------------------------------------------------------------------------------
Henderson Land Development Co. Ltd. 213,000 795,689
- -------------------------------------------------------------------------------
Hongkong Land Holdings Ltd. 231,000 578,740
- -------------------------------------------------------------------------------
Hysan Development Co. Ltd. 229,000 371,885
- -------------------------------------------------------------------------------
Kerry Properties Ltd. 120,400 324,066
- -------------------------------------------------------------------------------
Link REIT (The) 626,500 1,041,418
- -------------------------------------------------------------------------------
Sino Land Co. Ltd. 310,000 323,995
- -------------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. 447,000 3,758,524
===============================================================================
11,407,267
===============================================================================
JAPAN-16.24%
AEON Mall Co., Ltd. 19,400 374,223
- -------------------------------------------------------------------------------
Japan Prime Realty Investment Corp. 55 131,007
- -------------------------------------------------------------------------------
Japan Real Estate Investment Corp. 135 1,212,290
- -------------------------------------------------------------------------------
Mitsubishi Estate Co. Ltd. 266,000 4,383,034
- -------------------------------------------------------------------------------
Mitsui Fudosan Co., Ltd. 226,000 3,752,547
- -------------------------------------------------------------------------------
Nippon Building Fund Inc. 167 1,831,458
- -------------------------------------------------------------------------------
Nomura Real Estate Office Fund, Inc. 58 378,888
- -------------------------------------------------------------------------------
NTT Urban Development Corp. 512 551,958
- -------------------------------------------------------------------------------
ORIX JREIT Inc. 55 262,166
- -------------------------------------------------------------------------------
Sumitomo Realty & Development Co., Ltd. 71,000 1,056,959
- -------------------------------------------------------------------------------
TOKYU REIT, Inc. 25 155,521
===============================================================================
14,090,051
===============================================================================
NETHERLANDS-2.55%
Corio N.V.(a) 19,147 879,628
- -------------------------------------------------------------------------------
Eurocommercial Properties N.V.(a)(b) 12,476 421,579
- -------------------------------------------------------------------------------
Wereldhave N.V. 10,265 911,122
===============================================================================
2,212,329
===============================================================================
NEW ZEALAND-0.25%
Goodman Property Trust(a) 383,286 214,404
===============================================================================
SINGAPORE-1.72%
Ascendas Real Estate Investment Trust 343,106 334,502
- -------------------------------------------------------------------------------
Capitaland Ltd. 338,000 748,373
- -------------------------------------------------------------------------------
CapitaMall Trust 368,550 413,546
===============================================================================
1,496,421
===============================================================================
SWEDEN-0.54%
Hufvudstaden A.B.(a) 65,671 467,052
===============================================================================
SWITZERLAND-0.65%
PSP Swiss Property AG 11,286 561,550
===============================================================================
UNITED KINGDOM-5.66%
British Land Co. PLC(a) 115,513 939,575
- -------------------------------------------------------------------------------
Derwent London PLC(a) 37,570 400,506
- -------------------------------------------------------------------------------
Hammerson PLC(a) 66,632 523,743
- -------------------------------------------------------------------------------
Land Securities Group PLC 128,159 1,733,303
- -------------------------------------------------------------------------------
Liberty International PLC(a) 31,813 223,693
- -------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. GLOBAL REAL ESTATE FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Segro PLC 185,821 $ 674,488
- -------------------------------------------------------------------------------
Shaftesbury PLC 78,293 414,681
===============================================================================
4,909,989
===============================================================================
UNITED STATES-39.22%
Acadia Realty Trust(a) 21,800 311,086
- -------------------------------------------------------------------------------
Alexandria Real Estate Equities, Inc.(a) 10,300 621,502
- -------------------------------------------------------------------------------
AMB Property Corp.(b) 19,300 452,006
- -------------------------------------------------------------------------------
AvalonBay Communities, Inc.(a) 14,000 848,120
- -------------------------------------------------------------------------------
Boston Properties, Inc.(a) 32,800 1,804,000
- -------------------------------------------------------------------------------
BRE Properties, Inc.(a) 16,219 453,808
- -------------------------------------------------------------------------------
Camden Property Trust(a) 32,500 1,018,550
- -------------------------------------------------------------------------------
DCT Industrial Trust Inc.(a) 105,900 535,854
- -------------------------------------------------------------------------------
Digital Realty Trust, Inc.(a) 33,000 1,084,050
- -------------------------------------------------------------------------------
Douglas Emmett, Inc. 18,000 235,080
- -------------------------------------------------------------------------------
EastGroup Properties, Inc.(a) 5,800 206,364
- -------------------------------------------------------------------------------
Equity Residential 61,877 1,845,172
- -------------------------------------------------------------------------------
Essex Property Trust, Inc.(a) 10,200 782,850
- -------------------------------------------------------------------------------
Federal Realty Investment Trust(a) 32,500 2,017,600
- -------------------------------------------------------------------------------
HCP, Inc. 48,100 1,335,737
- -------------------------------------------------------------------------------
Health Care REIT, Inc. 31,567 1,332,127
- -------------------------------------------------------------------------------
Home Properties, Inc.(a) 5,000 203,000
- -------------------------------------------------------------------------------
Host Hotels & Resorts Inc.(a) 167,089 1,264,864
- -------------------------------------------------------------------------------
Kimco Realty Corp.(a) 56,800 1,038,304
- -------------------------------------------------------------------------------
Liberty Property Trust 28,500 650,655
- -------------------------------------------------------------------------------
Macerich Co. (The)(a) 14,000 254,240
- -------------------------------------------------------------------------------
Mack-Cali Realty Corp. 26,800 656,600
- -------------------------------------------------------------------------------
Mid-America Apartment Communities, Inc. 12,000 445,920
- -------------------------------------------------------------------------------
Nationwide Health Properties, Inc.(a) 50,600 1,453,232
- -------------------------------------------------------------------------------
OMEGA Healthcare Investors, Inc. 17,300 276,281
- -------------------------------------------------------------------------------
ProLogis(a) 60,514 840,539
- -------------------------------------------------------------------------------
PS Business Parks, Inc. 5,000 223,300
- -------------------------------------------------------------------------------
Public Storage(a) 31,000 2,464,500
- -------------------------------------------------------------------------------
Regency Centers Corp.(a) 9,000 420,300
- -------------------------------------------------------------------------------
Senior Housing Properties Trust(a) 55,600 996,352
- -------------------------------------------------------------------------------
Simon Property Group, Inc.(a) 53,100 2,821,203
- -------------------------------------------------------------------------------
SL Green Realty Corp.(a) 25,000 647,500
- -------------------------------------------------------------------------------
Tanger Factory Outlet Centers, Inc.(a) 7,000 263,340
- -------------------------------------------------------------------------------
Ventas, Inc. 45,800 1,537,506
- -------------------------------------------------------------------------------
Vornado Realty Trust(a) 28,800 1,738,080
- -------------------------------------------------------------------------------
Washington Real Estate Investment Trust(a) 34,000 962,200
===============================================================================
34,041,822
===============================================================================
Total Foreign Real Estate Investment Trusts,
Common Stocks & Other Equity Interests
(Cost $112,702,393) 85,273,088
===============================================================================
MONEY MARKET FUNDS-1.59%
Liquid Assets Portfolio-Institutional Class(c) 687,790 687,790
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 687,790 687,790
===============================================================================
Total Money Market Funds (Cost $1,375,580) 1,375,580
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.85% (Cost $114,077,973) 86,648,668
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-18.34%
Liquid Assets Portfolio-Institutional Class (Cost
$15,920,352)(c)(d) 15,920,352 15,920,352
===============================================================================
TOTAL INVESTMENTS-118.19% (Cost $129,998,325) 102,569,020
===============================================================================
OTHER ASSETS LESS LIABILITIES-(18.19)% (15,783,089)
===============================================================================
NET ASSETS-100.00% $ 86,785,931
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
Rts. - Rights
</Table>
Notes to Schedule of Investments:
(a) All or a portion of this security was out on loan at December 31, 2008.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
(d) 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 1J.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$112,702,393)* $ 85,273,088
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 17,295,932
======================================================
Total investments (Cost
$129,998,325) 102,569,020
======================================================
Foreign currencies, at value (Cost
$1,417) 1,400
- ------------------------------------------------------
Receivables for:
Fund shares sold 81,326
- ------------------------------------------------------
Dividends 502,792
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 9,992
======================================================
Total assets 103,164,530
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 327,031
- ------------------------------------------------------
Collateral upon return of securities
loaned 15,920,352
- ------------------------------------------------------
Accrued fees to affiliates 53,898
- ------------------------------------------------------
Accrued other operating expenses 59,294
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 18,024
======================================================
Total liabilities 16,378,599
======================================================
Net assets applicable to shares
outstanding $ 86,785,931
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $143,255,089
- ------------------------------------------------------
Undistributed net investment income (321,137)
- ------------------------------------------------------
Undistributed net realized gain (loss) (28,718,361)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (27,429,660)
======================================================
$ 86,785,931
______________________________________________________
======================================================
NET ASSETS:
Series I $ 82,582,432
______________________________________________________
======================================================
Series II $ 4,203,499
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 8,943,840
______________________________________________________
======================================================
Series II 462,058
______________________________________________________
======================================================
Series I:
Net asset value per share $ 9.23
______________________________________________________
======================================================
Series II:
Net asset value per share $ 9.10
______________________________________________________
======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $15,869,957 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $343,040) $ 4,211,545
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $226,071) 295,400
======================================================
Total investment income 4,506,945
======================================================
EXPENSES:
Advisory fees 916,726
- ------------------------------------------------------
Administrative services fees 340,368
- ------------------------------------------------------
Custodian fees 72,429
- ------------------------------------------------------
Distribution fees -- Series II 8,339
- ------------------------------------------------------
Transfer agent fees 18,230
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 19,274
- ------------------------------------------------------
Other 70,954
======================================================
Total expenses 1,446,320
======================================================
Less: Fees waived and expense offset
arrangement(s) (3,601)
======================================================
Net expenses 1,442,719
======================================================
Net investment income 3,064,226
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (27,324,845)
- ------------------------------------------------------
Foreign currencies (127,929)
======================================================
(27,452,774)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (45,613,119)
- ------------------------------------------------------
Foreign currencies (3,333)
======================================================
(45,616,452)
======================================================
Net realized and unrealized gain (loss) (73,069,226)
======================================================
Net increase (decrease) in net assets
resulting from operations $(70,005,000)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,064,226 $ 2,427,957
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (27,452,774) 15,127,356
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (45,616,452) (26,948,462)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (70,005,000) (9,393,149)
========================================================================================================
Distributions to shareholders from net investment income:
Series I (7,313,873) (9,098,630)
- --------------------------------------------------------------------------------------------------------
Series II (346,827) (158,255)
========================================================================================================
Total distributions from net investment income (7,660,700) (9,256,885)
========================================================================================================
Distributions to shareholders from net realized gains:
Series I (11,303,629) (21,716,323)
- --------------------------------------------------------------------------------------------------------
Series II (540,744) (378,839)
========================================================================================================
Total distributions from net realized gains (11,844,373) (22,095,162)
========================================================================================================
Share transactions-net:
Series I 25,400,434 (8,779,766)
- --------------------------------------------------------------------------------------------------------
Series II 4,476,456 3,015,866
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions 29,876,890 (5,763,900)
========================================================================================================
Net increase (decrease) in net assets (59,633,183) (46,509,096)
========================================================================================================
NET ASSETS:
Beginning of year 146,419,114 192,928,210
========================================================================================================
End of year (includes undistributed net investment income of $(321,137)
and $(245,443), respectively) $ 86,785,931 $146,419,114
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is high total return through growth of capital
and current income.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. GLOBAL REAL ESTATE FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
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, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. OTHER RISKS -- 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.
The Fund concentrates its assets in the real estate industry, an
investment in the fund will be closely linked to the performance of the
real estate markets. Property values may fall due to increasing vacancies
or declining rents resulting from economic, legal, cultural or
technological developments.
J. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is
AIM V.I. GLOBAL REAL ESTATE FUND
included in Dividends from affiliates on the Statement of Operations. The
aggregate value of securities out on loan is shown as a footnote on the
Statement of Assets and Liabilities, if any.
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.
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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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 approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
Previously, under the terms of a master sub-advisory agreement between Invesco
Aim and Invesco Institutional (N.A.), Inc. ("Invesco Real Estate"), Invesco Aim
paid Invesco Real Estate 40% of the amount of Invesco Aim's compensation on the
sub advised assets. This agreement terminated on May 1, 2008.
The Advisor 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, 2010. 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. The Advisor did not waive fees and/or
reimburse expenses during the period under this expense limitation.
Also, the Advisor has contractually agreed, through at least April 30, 2010,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$3,408.
AIM V.I. GLOBAL REAL ESTATE 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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $290,368 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $ 55,328,851
- --------------------------------------
Level 2 47,240,169
- --------------------------------------
Level 3 --
======================================
$102,569,020
______________________________________
======================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the year ended
December 31, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $193.
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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
AIM V.I. GLOBAL REAL ESTATE FUND
and receive benefits under such plan. "Trustees' and Officers' 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, 2008, the Fund paid legal fees of $3,433
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $ 9,179,502 $11,622,307
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 10,325,571 19,729,740
========================================================================================================
Total distributions $19,505,073 $31,352,047
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (30,693,256)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- (depreciation) -- other investments (354)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (21,053)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (7,021,670)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (18,732,825)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 143,255,089
================================================================================================
Total net assets $ 86,785,931
________________________________________________________________________________________________
================================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $18,732,825
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $89,243,814 and
$74,889,395, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,926,814
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (32,620,070)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(30,693,256)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $133,262,276.
</Table>
AIM V.I. GLOBAL REAL ESTATE FUND
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses,
on December 31, 2008, undistributed net investment income was increased by
$4,520,780, undistributed net realized gain (loss) was decreased by $190,153 and
shares of beneficial interest decreased by $4,330,627. This reclassification had
no effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2008(a) 2007
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 2,881,953 $ 52,755,460 2,348,323 $ 69,998,283
- -------------------------------------------------------------------------------------------------------------------------
Series II 287,801 4,439,666 99,437 2,780,132
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 2,120,444 18,617,502 1,296,380 30,814,953
- -------------------------------------------------------------------------------------------------------------------------
Series II 102,609 887,571 22,826 537,094
=========================================================================================================================
Reacquired:
Series I (2,630,426) (45,972,528) (3,775,973) (109,593,002)
- -------------------------------------------------------------------------------------------------------------------------
Series II (50,546) (850,781) (10,949) (301,360)
=========================================================================================================================
Net increase (decrease) in share activity 2,711,835 $ 29,876,890 (19,956) $ (5,763,900)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 66% 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. GLOBAL REAL ESTATE FUND
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET (LOSSES) DIVIDENDS DISTRIBUTIONS
VALUE, NET ON SECURITIES (BOTH TOTAL FROM FROM NET FROM NET NET ASSET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD INCOME(a) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended
12/31/08 $21.88 $0.44 $(10.35) $(9.91) $(1.08) $(1.66) $(2.74) $ 9.23
Year ended
12/31/07 28.74 0.38 (1.52) (1.14) (1.69) (4.03) (5.72) 21.88
Year ended
12/31/06 21.06 0.33 8.61 8.94 (0.28) (0.98) (1.26) 28.74
Year ended
12/31/05 19.13 0.38 2.34 2.72 (0.22) (0.57) (0.79) 21.06
Year ended
12/31/04 14.34 0.32 4.92 5.24 (0.14) (0.31) (0.45) 19.13
- --------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended
12/31/08 21.66 0.36 (10.19) (9.83) (1.07) (1.66) (2.73) 9.10
Year ended
12/31/07 28.57 0.29 (1.49) (1.20) (1.68) (4.03) (5.71) 21.66
Year ended
12/31/06 20.98 0.27 8.58 8.85 (0.28) (0.98) (1.26) 28.57
Year ended
12/31/05 19.12 0.34 2.31 2.65 (0.22) (0.57) (0.79) 20.98
Year ended
12/31/04(e) 13.96 0.20 5.41 5.61 (0.14) (0.31) (0.45) 19.12
________________________________________________________________________________________________________________________________
================================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME
TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
RETURN(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- -----------------------------------------------------------------------------------------------------------
SERIES I
Year ended
12/31/08 (44.65)% $ 82,582 1.17%(d) 1.17%(d) 2.51%(d) 62%
Year ended
12/31/07 (5.54) 143,773 1.13 1.22 1.31 57
Year ended
12/31/06 42.60 192,617 1.15 1.30 1.32 84
Year ended
12/31/05 14.24 99,977 1.21 1.36 1.91 51
Year ended
12/31/04 36.58 79,391 1.31 1.42 1.96 34
- -----------------------------------------------------------------------------------------------------------
SERIES II
Year ended
12/31/08 (44.72) 4,203 1.42(d) 1.42(d) 2.26(d) 62
Year ended
12/31/07 (5.76) 2,646 1.38 1.47 1.06 57
Year ended
12/31/06 42.30 311 1.40 1.55 1.07 84
Year ended
12/31/05 13.85 62 1.45 1.61 1.67 51
Year ended
12/31/04(e) 40.23 14 1.45(f) 1.66(f) 1.82(f) 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, if applicable and do not reflect charges assessed in connection with
a variable product, which if included would reduce total returns.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios are based on average daily net assets (000's omitted) of $118,894
and $3,336 for Series I and Series II shares, respectively.
(e) Commencement date of April 30, 2004.
(f) Annualized.
AIM V.I. GLOBAL REAL ESTATE FUND
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by correspondence with the custodian and broker, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $645.90 $4.84 $1,019.25 $5.94 1.17%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 645.80 5.87 1,018.00 7.20 1.42
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $10,325,571
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. 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. GLOBAL REAL ESTATE FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. GLOBAL REAL ESTATE FUND
[INVESCO AIM LOGO] AIM V.I. GOVERNMENT SECURITIES FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site, invescoaim.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, 2008, is available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim
Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Private Asset Management, Inc. and
Invesco Global Asset Management (N.A.), Inc. -- will be combined into Invesco Institutional (N.A.),
Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. GOVERNMENT SECURITIES FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
o The need to limit or reduce exposure to
PERFORMANCE SUMMARY a particular sector or issuer.
For the year ended December 31, 2008, Series I shares of AIM V.I. Government Securities o Realignment of a valuation target.
Fund, excluding variable product issuer charges, outperformed the Fund's broad market
index and performed in line with its style-specific index.(triangle) Our active duration o Presentation of a better relative value
management strategy was a detractor from performance relative to the style-specific opportunity.
index. Excluding variable product issuer charges, the Fund's Series I shares
outperformed the Fund's broad market index due to the Fund's exposure to agency MARKET CONDITIONS AND YOUR FUND
mortgage-backed securities (MBS) and other government-backed bonds. These securities
benefited from various forms of government support. Financial markets across the globe faced
severe challenges throughout 2008. Credit
Your Fund's long-term performance appears later in this report. and money markets were under unusual
stress and experienced high levels of
FUND VS. INDEXES volatility, which was magnified by
uncertainties about the future of the U.S.
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. economy. By the end of the year, economic
If variable product issuer charges were included, returns would be lower. activity around the world decelerated
sharply, the outlook for corporate profits
Series I Shares 12.31% declined and the U.S. economy was
Series II Shares 11.98 officially declared to be in a recession.
Barclays Capital U.S. Aggregate Index(triangle)* (Broad Market Index) 5.24
Barclays Capital U.S. Government Index(triangle)* (Style-Specific Index) 12.39 During the year, as the housing market
Lipper VUF General U.S. Government Funds Index(triangle) (Peer Group Index) 2.64 continued to worsen and mortgage defaults
began to reach high levels,(1) the two
(triangle) Lipper Inc. largest providers of U.S. mortgages,
Fannie Mae and Freddie Mac (not Fund
* Effective 11/03/08, Lehman Brothers indexes were rebranded as Barclays Capital holdings), were placed into U.S.
indexes. government conservatorship in an effort
======================================================================================= to inject stability into the financial
and housing markets. In addition, large
HOW WE INVEST nomic analysis as well as bottom-up financial institutions that were highly
analysis on individual securities. leveraged or under-capitalized, such as
We invest primarily in debt securities Recommendations are communicated to Lehman Brothers, AIG, Merrill Lynch,
issued, guaranteed or backed by the U.S. portfolio managers through proprietary Washington Mutual and Wachovia (not Fund
government or its agencies and technology that allows all investment holdings) became insolvent, causing
instrumentalities. These securities professionals to communicate in a timely significant market disruptions.
include: U.S. Treasury obligations and manner.
obligations issued or guaranteed by U.S. Since the middle of 2007, the U.S.
government agencies and instrumentalities. Portfolio construction begins with a Federal Reserve (the Fed) deployed a range
We may also invest in derivative well-defined portfolio design that of policy tools to deal with a combination
instruments such as Treasury futures and establishes the target investment vehicles of economic weakness and financial market
options on Treasury futures. for generating the desired alpha (the distress. Since December 2007, the Fed
extra return above a specific benchmark) lowered the federal funds target rate from
We believe dynamic and complex as well as the risk-parameters for the 4.25% to a range of zero to 0.25%.(2) The
fixed-income markets may create Fund. Investment vehicles are evaluated central bank in conjunction with the U.S.
opportunities for investors that are best for liquidity and risk versus relative Treasury Department sought to enhance
captured by independent specialist value. Working closely with sector market liquidity by introducing a large
decision makers interconnected as a global specialists and traders, we determine the number of programs, including the Primary
team. We use this philosophy to seek a timing and amount of each alpha decision Dealer Credit Facility and the Troubled
high level of current income consistent to use in the portfolio. Asset
with concern for safety of principal.
Sell decisions are based on:
Our security selection is supported by
a team of independent specialists. Team o A conscious decision to alter the
members conduct top-down macroeco- Fund's macro risk exposure (e.g.,
duration, yield curve positioning,
sector exposure).
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 FIXED INCOME ISSUERS* Total Net Assets $1.6 billion
By security type
1. Freddie Mac REMICS 30.8% Total Number of Holdings* 887
U.S. Government Sponsored 2. Federal National Mortgage ==========================================
Mortgage-Backed Securities 74.9% Association 12.9
U.S. Government Sponsored 3. Fannie Mae REMICS 12.3 The Fund's holdings are subject to change,
Agency Securities 22.6 4. Federal Home Loan Bank 9.1 and there is no assurance that the Fund
U.S. Treasury Securities 1.1 5. Federal Farm Credit Bank 8.1 will continue to hold any particular
Foreign Sovereign Debt 0.3 6. Federal Agricultural Mortgage security.
Money Market Funds Corp. 7.0
Plus Other Assets Less Liabilities 1.1 7. Federal Home Loan Mortgage Corp. 6.5 * Excluding money market fund holdings.
========================================== 8. Government National Mortgage
Association REMICS 5.3
9. Government National Mortgage
Association 4.6
10. U.S. Treasury Securities 1.1
==========================================
AIM V.I. GOVERNMENT SECURITIES FUND
Relief Program (TARP). In addition, During the year, we maintained an CLINT DUDLEY
governments around the globe acted overweight exposure to MBS, preferring Chartered Financial
urgently to prevent further disruption in higher coupon mortgage bonds. We favored [DUDLEY Analyst, portfolio
the financial system. this type of MBS for their attractive PHOTO] manager, is manager of
yields and relatively small prepayment AIM V.I. Government
Most fixed-income securities lost risk in an environment of tight lending Securities Fund. He
ground along with other financial assets conditions. However, in response to the joined Invesco Aim in 1998. Mr. Dudley
during the year as the crisis in the decline of residential mortgage rates and earned a B.B.A. and an M.B.A. from Baylor
financial system deepened. Interest rates soaring refinancing activity over the last University. He joined the team on Jan. 14,
fell, risk premiums (the additional yield three months of 2008, we shifted toward 2009, after the close of the reporting
over Treasuries) increased significantly current- and lower-coupon mortgage pools. period.
to all time wide levels,(1) and the yield While the MBS market underperformed the
curve steepened as investors fled to the U.S. Treasury market due to the general BRIAN SCHNEIDER
safety of government bonds, especially flight-to-safety, agency MBS benefited Chartered Financial
those with short maturities. While credit from the explicit support of the [SCHNEIDER Analyst, senior
and yield spreads widened substantially government in various forms over the last PHOTO] portfolio manager, is
throughout 2008, default rates lagged, but four months of the year. Consequently, the manager of AIM V.I.
picked up in the latter half of the year. Fund's positioning in MBS was slightly Government Securities
positive for relative performance. Fund. He joined Invesco in 1987. Mr.
The Fund began the year with a Schneider earned a B.A. in economics and
long-to-neutral duration positioning As a part of our sector diversification an M.B.A. from Bellarmine College. He
versus its style-specific index. Duration strategy, we maintained small positions in joined the team on Jan. 14, 2009, after
is a measure of a bond's sensitivity to the U.S. Treasury and the U.S. agency the close of the reporting period.
interest rate changes. In response to the markets. In an environment of uncertainty
deepening turmoil in the credit markets concerning the health of financial BRENDAN GAU left the team on Jan. 14,
and rising concerns about the slowing institutions, U.S. Treasury securities 2009, after the close of the reporting
economy, bond yields had declined by the outperformed other major sectors of the period.
middle of March 2008. As market liquidity fixed-income market and contributed
improved and a less pessimistic economic positively to the Fund's performance. SCOT JOHNSON left the team on Jan. 14,
outlook emerged, yields rose considerably 2009, after the close of the reporting
through the end of May. As a result, our We thank you for your investment in AIM period.
long-to-neutral duration structure over V.I. Government Securities Fund.
the first few months of the year
negatively affected Fund performance. (1) Barclays Capital
(2) U.S. Federal Reserve
During the summer of 2008, we shifted
to a short-to-neutral duration stance. As The views and opinions expressed in
credit markets came under renewed pressure management's discussion of Fund
and concerns about financial stability performance are those of Invesco Aim
increased in the second half of the year, Advisors, Inc. These views and opinions
credit spreads surged to record high are subject to change at any time based on
levels1 and government bond yields factors such as market and economic
declined sharply. Consequently, the Fund's conditions. These views and opinions may
positioning with short-to-neutral duration not be relied upon as investment advice or
detracted from relative performance. recommendations, or as an offer for a
particular security. The information is
We used U.S. Treasury notes and U.S. not a complete analysis of every aspect of
Treasury bond futures contracts to manage any market, country, industry, security or
the Fund's duration. In our view, gaining the Fund. Statements of fact are from
exposure to the U.S. Treasury market sources considered reliable, but Invesco
through U.S. Treasury futures is a more Aim Advisors, Inc. makes no representation
effective way to employ the Fund's cash or warranty as to their completeness or
for duration management purposes than accuracy. Although historical performance
buying actual bonds. is no guarantee of future results, these
insights may help you understand our
The Fund was positioned for a investment management philosophy.
steepening of the yield curve throughout
2008. As long term bond yields fell less See important Fund and index disclosures
than short term rates, the yield curve later in this report.
steepened, which benefited relative
performance.
AIM V.I. GOVERNMENT SECURITIES FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. GOVERNMENT SECURITIES FUND, A
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/5/93) 5.37% CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 5.15 FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years 5.22 MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
1 Year 12.31 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years 4.88% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years 4.94 MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year 11.98 SHARES. DETERMINED BY THE VARIABLE PRODUCT
========================================== ISSUERS, WILL VARY AND WILL LOWER THE
THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS RATIO SET FORTH IN THE MOST RECENT FUND
SEPTEMBER 19, 2001. RETURNS SINCE THAT PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
DATE ARE HISTORICAL. ALL OTHER RETURNS ARE FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
THE BLENDED RETURNS OF THE HISTORICAL 0.73% AND 0.98%, RESPECTIVELY. (1) THE PRODUCT CHARGES, IS AVAILABLE ON THE
PERFORMANCE OF SERIES II SHARES SINCE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO INVESCO AIM AUTOMATED INFORMATION LINE,
THEIR INCEPTION AND THE RESTATED SET FORTH IN THE MOST RECENT FUND 866 702 4402. AS MENTIONED ABOVE, FOR THE
HISTORICAL PERFORMANCE OF SERIES I SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT MOST RECENT MONTH-END PERFORMANCE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES FOR SERIES I AND SERIES II SHARES WAS INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
II SHARES) ADJUSTED TO REFLECT THE RULE 0.76% AND 1.01%, RESPECTIVELY. THE EXPENSE CONTACT YOUR VARIABLE PRODUCT ISSUER OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. RATIOS PRESENTED ABOVE MAY VARY FROM THE FINANCIAL ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS EXPENSE RATIOS PRESENTED IN OTHER SECTIONS
MAY 5, 1993. INCURRED DURING OF THIS REPORT THAT ARE (1) Total annual operating expenses less
BASED ON EXPENSES THE PERIOD COVERED BY any contractual fee waivers and/or
THE PERFORMANCE OF THE FUND'S SERIES I THIS REPORT. expense reimbursements by the advisor
AND SERIES II SHARE CLASSES WILL DIFFER in effect through at least April 30,
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. 2010. See current prospectus for more
information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/93, Fund data from 5/5/93
AIM V.I. Lipper VUF
Government Barclays Barclays General U.S.
Securities Fund- Capital U.S. Capital U.S. Government
Date Series I Shares Government Index(1) Aggregate Index(1) Funds Index(1)
4/30/93 $10000 $10000 $10000
5/93 $ 9990 9989 10013 10005
6/93 10150 10211 10194 10223
7/93 10180 10273 10252 10268
8/93 10330 10502 10432 10436
9/93 10363 10542 10460 10470
10/93 10393 10582 10499 10506
11/93 10312 10466 10410 10402
12/93 10355 10507 10466 10496
1/94 10479 10650 10608 10629
2/94 10274 10425 10423 10424
3/94 10064 10191 10166 10125
4/94 9940 10110 10085 10036
5/94 9950 10097 10084 10035
6/94 9923 10074 10062 9985
7/94 10070 10259 10261 10159
8/94 10080 10261 10274 10176
9/94 9969 10117 10123 10028
10/94 9948 10109 10114 10000
11/94 9916 10091 10091 9985
12/94 9970 10152 10161 10069
1/95 10120 10341 10362 10254
2/95 10325 10564 10609 10481
3/95 10367 10630 10674 10545
4/95 10487 10769 10823 10685
5/95 10858 11203 11242 11107
6/95 10935 11289 11324 11189
7/95 10869 11248 11299 11147
8/95 10990 11380 11435 11285
9/95 11077 11489 11546 11381
10/95 11219 11664 11696 11539
11/95 11383 11846 11872 11709
12/95 11520 12014 12038 11869
1/96 11599 12088 12118 11940
2/96 11373 11842 11908 11705
3/96 11293 11743 11825 11616
4/96 11226 11668 11758 11539
5/96 11181 11648 11735 11507
6/96 11317 11798 11892 11652
7/96 11351 11828 11925 11686
8/96 11328 11801 11905 11668
9/96 11498 11997 12112 11868
10/96 11713 12261 12380 12114
11/96 11883 12474 12592 12316
12/96 11784 12347 12475 12207
1/97 11820 12361 12514 12245
2/97 11832 12378 12545 12264
3/97 11736 12247 12406 12142
4/97 11891 12423 12591 12317
5/97 11974 12531 12710 12420
6/97 12094 12671 12861 12555
7/97 12368 13031 13208 12887
8/97 12273 12902 13095 12769
9/97 12428 13096 13289 12956
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
10/97 12571 13323 13481 13148
11/97 12607 13391 13543 13197
12/97 12744 13531 13680 13334
1/98 12887 13733 13855 13513
2/98 12876 13696 13845 13488
3/98 12923 13735 13893 13528
4/98 12983 13797 13965 13585
5/98 13102 13938 14098 13715
6/98 13210 14097 14217 13840
7/98 13245 14119 14247 13865
8/98 13460 14486 14479 14154
9/98 13734 14876 14818 14511
10/98 13663 14826 14740 14429
11/98 13698 14831 14824 14440
12/98 13729 14864 14868 14489
1/99 13815 14950 14974 14563
2/99 13544 14595 14713 14278
3/99 13617 14652 14794 14370
4/99 13654 14685 14841 14413
5/99 13507 14556 14711 14268
6/99 13446 14527 14664 14214
7/99 13410 14506 14602 14151
8/99 13410 14505 14595 14134
9/99 13545 14623 14764 14306
10/99 13594 14647 14818 14335
11/99 13594 14626 14817 14340
12/99 13548 14532 14746 14270
1/00 13496 14552 14698 14227
2/00 13649 14759 14875 14385
3/00 13789 15018 15071 14586
4/00 13777 14977 15028 14557
5/00 13789 14986 15021 14564
6/00 14018 15254 15334 14839
7/00 14095 15401 15473 14944
8/00 14262 15629 15697 15167
9/00 14376 15674 15796 15258
10/00 14465 15824 15901 15381
11/00 14682 16135 16160 15660
12/00 14920 16456 16460 15949
1/01 15067 16622 16729 16137
2/01 15188 16811 16875 16285
3/01 15215 16870 16960 16359
4/01 15148 16698 16890 16266
5/01 15201 16753 16991 16353
6/01 15241 16830 17056 16400
7/01 15535 17234 17437 16736
8/01 15656 17448 17637 16879
9/01 15936 17752 17842 17140
10/01 16257 18210 18215 17487
11/01 16042 17801 17964 17191
12/01 15875 17646 17850 17078
1/02 15985 17761 17995 17206
2/02 16137 17925 18169 17374
3/02 15916 17535 17867 17101
4/02 16205 17953 18213 17472
5/02 16302 18060 18368 17598
6/02 16426 18313 18527 17810
7/02 16674 18715 18750 18113
8/02 16923 19086 19067 18406
9/02 17266 19533 19376 18723
10/02 17170 19376 19288 18599
11/02 17060 19209 19282 18511
12/02 17399 19675 19681 18894
1/03 17344 19626 19698 18894
2/03 17526 19942 19970 19170
3/03 17428 19885 19955 19098
4/03 17511 19977 20119 19169
5/03 17735 20496 20495 19549
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
6/03 17679 20389 20454 19473
7/03 17173 19546 19766 18765
8/03 17159 19655 19897 18892
9/03 17538 20227 20424 19376
10/03 17384 19939 20234 19213
11/03 17454 19962 20282 19257
12/03 17585 20138 20489 19402
1/04 17685 20305 20653 19544
2/04 17800 20548 20877 19751
3/04 17871 20729 21033 19897
4/04 17583 20106 20486 19438
5/04 17511 20031 20404 19405
6/04 17611 20112 20519 19484
7/04 17711 20300 20723 19623
8/04 17927 20695 21118 19913
9/04 17927 20737 21175 19925
10/04 18013 20902 21353 20052
11/04 17956 20654 21183 19947
12/04 18033 20839 21377 20094
1/05 18064 20969 21512 20157
2/05 18004 20821 21385 20070
3/05 17973 20752 21275 20035
4/05 18108 21085 21563 20261
5/05 18197 21329 21796 20397
6/05 18243 21449 21915 20466
7/05 18197 21190 21715 20282
8/05 18286 21503 21994 20525
9/05 18226 21249 21767 20413
10/05 18180 21099 21595 20288
11/05 18226 21195 21690 20338
12/05 18331 21391 21897 20492
1/06 18362 21355 21898 20520
2/06 18394 21388 21971 20553
3/06 18302 21196 21755 20342
4/06 18302 21137 21716 20298
5/06 18302 21141 21692 20317
6/06 18316 21200 21738 20347
7/06 18501 21453 22032 20609
8/06 18640 21756 22370 20896
9/06 18748 21950 22566 21031
10/06 18857 22065 22715 21105
11/06 18964 22289 22979 21310
12/06 18982 22135 22846 21150
1/07 19029 22107 22836 21121
2/07 19221 22448 23188 21439
3/07 19285 22454 23189 21464
4/07 19381 22565 23314 21566
5/07 19220 22388 23137 21354
6/07 19205 22379 23069 21276
7/07 19381 22698 23261 21506
8/07 19542 23041 23546 21692
9/07 19607 23186 23725 21882
10/07 19817 23356 23938 22083
11/07 20090 23998 24369 22612
12/07 20183 24051 24437 22608
1/08 20602 24627 24848 23185
2/08 20736 24860 24882 23344
3/08 20819 25025 24967 23196
4/08 20686 24674 24915 22973
5/08 20603 24404 24732 22857
6/08 20805 24546 24712 22961
7/08 20905 24653 24692 22857
8/08 21106 24905 24926 23002
9/08 21106 25017 24592 22665
10/08 20987 24949 24011 21865
11/08 21942 26131 24793 22296
12/08 22679 27031 25718 23206
====================================================================================================================================
AIM V.I. GOVERNMENT SECURITIES FUND
AIM V.I. GOVERNMENT SECURITIES FUND'S INVESTMENT OBJECTIVE IS A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH REASONABLE CONCERN FOR
SAFETY OF PRINCIPAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING Reverse repurchase agreements and OTHER INFORMATION
IN THE FUND dollar-roll transactions involve the risk
that the market value of securities to be The Chartered Financial
The Fund may engage in active and frequent purchased by the Fund may decline below Analyst--REGISTERED TRADEMARK--
trading of portfolio securities to achieve the price at which the Fund is obligated (CFA--REGISTERED TRADEMARK--) designation
its investment objective. If a fund does to repurchase them, or that the other is a globally recognized standard for
trade in this way, it may incur increased party may default on its obligation such measuring the competence and integrity of
costs, which can lower the actual return that the Fund is delayed or prevented from investment professionals.
of the fund. Active trading may also completing the transaction.
increase short term gains and losses, The returns shown in management's
which may affect taxes that must be paid. The Fund may invest in obligations discussion of Fund performance are based
issued by agencies and instrumentalities on net asset values calculated for
Since a large percentage of the Fund's of the U.S. government that may vary in shareholder transactions. Generally
assets may be invested in securities of a the level of support they receive from the accepted accounting principles require
limited number of companies, each U.S. government. The U.S. government may adjustments to be made to the net assets
investment has a greater effect on the choose not to provide financial support to of the Fund at period end for financial
Fund's overall performance, and any change U.S.-government-sponsored agencies or reporting purposes, and as such, the net
in the value of those securities could instrumentalities if it is not legally asset values for shareholder transactions
significantly affect the value of your obligated to do so. In this case, if the and the returns based on those net asset
investment in the Fund. issuer defaulted, the underlying fund values may differ from the net asset
holding securities of such an issuer might values and returns reported in the
Dollar-roll transactions involve the not be able to recover its investment from Financial Highlights. Additionally, the
risk that the market value of securities the U.S. government. returns and net asset values shown
to be purchased by the Fund may decline throughout this report are at the Fund
below the price at which the Fund is ABOUT INDEXES USED IN THIS REPORT level only and do not include variable
obligated to repurchase them, or that the product issuer charges. If such charges
other party may default on its obligation The BARCLAYS CAPITAL U.S. AGGREGATE INDEX were included, the total returns would be
such that the Fund is delayed or prevented covers U.S. investment-grade fixed-rate lower.
from completing the transaction. bonds with components for government and
corporate securities, mortgage
High-coupon, U.S. government agency pass-throughs, and asset-backed
mortgage-backed securities provide a securities.
higher coupon than current prevailing
market interest rates, and the Fund may The unmanaged BARCLAYS CAPITAL U.S.
purchase such securities at a premium. If GOVERNMENT INDEX consists of securities
these securities experience a issued by the U.S. government including
faster-than-expected principal prepayment public obligations of the U.S. Treasury
rate, both the market value and income with a remaining maturity of one year or
from such securities will decrease. more or publicly issued debt of U.S.
government agencies, quasi-federal
Interest rate risk refers to the risk corporations and corporate or foreign debt
that bond prices generally fall as guaranteed by the U.S. government.
interest rates rise and vice versa.
The LIPPER VUF GENERAL U.S. GOVERNMENT
The Fund may use enhanced investment FUNDS INDEX is an equally weighted
techniques such as leveraging and representation of the largest variable
derivatives. Leveraging entails risks such insurance underlying funds in the Lipper
as magnifying changes in the value of the General U.S. Government Funds category.
portfolio's securities. Derivatives are These funds invest at least 65% of their
subject to counterparty risk--the risk assets in U.S. government and agency
that the other party will not complete the issues.
transaction with the Fund.
The Fund is not managed to track the
There is no guarantee that the performance of any particular index,
investment techniques and risk analysis including the indexes defined here, and
used by the Fund's portfolio managers will consequently, the performance of the Fund
produce the desired results. may deviate significantly from the
performance of the indexes.
The prices of securities held by the
Fund may decline in response to market A direct investment cannot be made in
risks. an index. Unless otherwise indicated,
index results include reinvested
Reinvestment risk is the risk that a dividends, and they do not reflect sales
bond's cash flows will be reinvested at an charges. Performance of an index of funds
interest rate below that of the original reflects fund expenses; performance of a
bond. market index does not.
SCHEDULE OF INVESTMENTS
December 31, 2008
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
U.S. GOVERNMENT SPONSORED MORTGAGE-BACKED SECURITIES-74.95%
COLLATERALIZED MORTGAGE OBLIGATIONS-51.44%
Fannie Mae REMICS,
4.50%, 11/25/14 to 07/25/28 $ 35,345,684 $ 35,613,182
- -----------------------------------------------------------------------------------
5.00%, 12/25/15 to 03/25/25 24,398,890 24,728,756
- -----------------------------------------------------------------------------------
4.00%, 03/25/16 370,396 371,203
- -----------------------------------------------------------------------------------
3.50%, 09/25/16 64,980 64,867
- -----------------------------------------------------------------------------------
6.50%, 06/25/20 148,314 149,004
- -----------------------------------------------------------------------------------
6.00%, 02/25/21 to 10/25/33 89,602,797 91,170,451
- -----------------------------------------------------------------------------------
5.50%, 02/25/24 to 03/01/38 46,195,258 46,756,786
- -----------------------------------------------------------------------------------
Fannie Mae Whole Loans,
5.50%, 07/25/34 3,172,131 3,112,477
- -----------------------------------------------------------------------------------
Federal Home Loan Bank,
4.75%, 10/25/10 43,899,382 44,568,847
- -----------------------------------------------------------------------------------
Freddie Mac REMICS,
5.50%, 07/15/10 to 02/15/28 194,536,866 198,515,409
- -----------------------------------------------------------------------------------
6.75%, 06/15/11 623,867 640,125
- -----------------------------------------------------------------------------------
5.25%, 08/15/11 6,680,112 6,812,212
- -----------------------------------------------------------------------------------
5.38%, 08/15/11 to 09/15/11 8,655,512 8,840,408
- -----------------------------------------------------------------------------------
4.50%, 03/15/14 to 08/15/27 20,468,672 20,701,081
- -----------------------------------------------------------------------------------
5.00%, 06/15/14 to 09/15/27 69,161,112 69,934,892
- -----------------------------------------------------------------------------------
5.13%, 10/15/15 876,152 876,329
- -----------------------------------------------------------------------------------
7.50%, 01/15/16 2,408,938 2,493,145
- -----------------------------------------------------------------------------------
4.25%, 04/15/16 1,759,152 1,758,979
- -----------------------------------------------------------------------------------
6.00%, 09/15/16 to 06/15/31 149,739,893 152,914,224
- -----------------------------------------------------------------------------------
5.75%, 12/15/18 29,630,503 30,173,411
- -----------------------------------------------------------------------------------
4.00%, 11/15/26 2,906,536 2,913,315
- -----------------------------------------------------------------------------------
Government National Mortgage Association (GNMA)
REMICS,
3.13%, 04/16/16 5,596,683 5,627,057
- -----------------------------------------------------------------------------------
5.14%, 06/16/23 4,977,060 5,029,168
- -----------------------------------------------------------------------------------
5.87%, 10/16/23 607,443 615,673
- -----------------------------------------------------------------------------------
2.17%, 02/16/24 23,919,288 23,212,245
- -----------------------------------------------------------------------------------
5.00%, 09/16/27 to 02/20/29 14,848,189 15,024,897
- -----------------------------------------------------------------------------------
4.21%, 01/16/28 11,382,636 11,476,374
- -----------------------------------------------------------------------------------
4.75%, 10/16/29 to 12/20/29 23,554,918 23,701,020
- -----------------------------------------------------------------------------------
4.50%, 08/20/35 1,463,758 1,483,378
===================================================================================
829,278,915
===================================================================================
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-6.48%
Pass Through Ctfs.,
6.00%, 08/01/10 to 02/01/34 6,618,260 6,862,252
- -----------------------------------------------------------------------------------
7.00%, 11/01/10 to 12/01/37 11,292,945 11,823,409
- -----------------------------------------------------------------------------------
8.00%, 09/01/11 to 09/01/36 18,810,503 20,102,509
- -----------------------------------------------------------------------------------
6.50%, 10/01/12 to 12/01/35 10,939,064 11,400,732
- -----------------------------------------------------------------------------------
7.50%, 03/01/16 to 08/01/36 7,797,093 8,196,619
- -----------------------------------------------------------------------------------
10.50%, 08/01/19 7,366 8,320
- -----------------------------------------------------------------------------------
8.50%, 09/01/20 to 08/01/31 1,402,839 1,510,316
- -----------------------------------------------------------------------------------
10.00%, 03/01/21 118,878 135,236
- -----------------------------------------------------------------------------------
9.00%, 06/01/21 to 06/01/22 957,775 1,044,401
- -----------------------------------------------------------------------------------
7.05%, 05/20/27 389,997 406,415
- -----------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 01/01/38(a) 22,000,000 22,484,682
- -----------------------------------------------------------------------------------
5.50%, 01/01/39(a) 20,000,000 20,471,880
===================================================================================
104,446,771
===================================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-12.43%
Pass Through Ctfs.,
6.00%, 05/01/09 to 03/01/37 7,227,167 7,493,022
- -----------------------------------------------------------------------------------
6.50%, 10/01/10 to 11/01/37 13,276,401 13,835,013
- -----------------------------------------------------------------------------------
7.00%, 12/01/10 to 06/01/36 37,826,758 39,743,988
- -----------------------------------------------------------------------------------
7.50%, 08/01/11 to 07/01/37 24,373,821 25,805,544
- -----------------------------------------------------------------------------------
8.00%, 06/01/12 to 11/01/37 26,816,268 28,376,925
- -----------------------------------------------------------------------------------
8.50%, 06/01/12 to 08/01/37 9,743,588 10,510,683
- -----------------------------------------------------------------------------------
10.00%, 09/01/13 to 03/01/16 56,161 61,351
- -----------------------------------------------------------------------------------
5.00%, 11/01/17 to 12/01/33 1,902,113 1,963,194
- -----------------------------------------------------------------------------------
5.50%, 03/01/21 899 927
- -----------------------------------------------------------------------------------
6.75%, 07/01/24 1,555,946 1,639,635
- -----------------------------------------------------------------------------------
6.95%, 10/01/25 to 09/01/26 207,658 219,987
- -----------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 01/01/39(a) 58,000,000 59,459,048
- -----------------------------------------------------------------------------------
5.00%, 02/01/39(a) 11,000,000 11,197,659
===================================================================================
200,306,976
===================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. GOVERNMENT SECURITIES FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)-4.60%
Pass Through Ctfs.,
6.50%, 03/20/09 to 01/15/37 $ 31,487,708 $ 33,172,808
- -----------------------------------------------------------------------------------
9.38%, 06/15/09 to 12/15/09 82,172 84,352
- -----------------------------------------------------------------------------------
7.50%, 07/15/09 to 05/15/37 12,639,898 13,307,101
- -----------------------------------------------------------------------------------
8.00%, 07/15/12 to 01/15/37 6,308,116 6,721,640
- -----------------------------------------------------------------------------------
6.75%, 08/15/13 62,612 65,727
- -----------------------------------------------------------------------------------
11.00%, 10/15/15 2,400 2,710
- -----------------------------------------------------------------------------------
9.50%, 09/15/16 3,366 3,657
- -----------------------------------------------------------------------------------
9.00%, 10/20/16 to 12/20/16 113,426 120,943
- -----------------------------------------------------------------------------------
7.00%, 04/15/17 to 03/15/37 10,807,182 11,395,891
- -----------------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 4,294 4,596
- -----------------------------------------------------------------------------------
8.50%, 12/15/17 to 01/15/37 1,596,680 1,706,982
- -----------------------------------------------------------------------------------
10.00%, 06/15/19 51,736 57,556
- -----------------------------------------------------------------------------------
6.00%, 06/20/20 to 08/15/33 4,610,179 4,803,423
- -----------------------------------------------------------------------------------
6.95%, 08/20/25 to 08/20/27 1,415,062 1,490,805
- -----------------------------------------------------------------------------------
6.25%, 06/15/27 193,113 201,602
- -----------------------------------------------------------------------------------
6.38%, 10/20/27 to 09/20/28 1,016,199 1,066,751
===================================================================================
74,206,544
===================================================================================
Total U.S. Government Sponsored Mortgage-
Backed Securities (Cost $1,205,336,343) 1,208,239,206
===================================================================================
U.S. GOVERNMENT SPONSORED AGENCY SECURITIES-22.61%
FEDERAL AGRICULTURAL MORTGAGE CORP.-7.00%
Bonds,
3.01%, 08/06/09 100,000,000 101,340,197
- -----------------------------------------------------------------------------------
Medium-Term Notes,
5.60%, 01/10/17 11,000,000 11,458,907
===================================================================================
112,799,104
===================================================================================
FEDERAL FARM CREDIT BANK (FFCB)-8.05%
Bonds,
3.10%, 09/17/10 10,935,000 11,096,849
- -----------------------------------------------------------------------------------
3.49%, 09/29/10 47,220,000 48,065,756
- -----------------------------------------------------------------------------------
3.55%, 10/06/10 50,000,000 50,936,427
- -----------------------------------------------------------------------------------
5.75%, 01/18/11 2,000,000 2,169,823
- -----------------------------------------------------------------------------------
5.59%, 10/04/21 10,075,000 10,693,518
- -----------------------------------------------------------------------------------
5.75%, 01/18/22 2,775,000 2,948,096
- -----------------------------------------------------------------------------------
Medium-Term Notes,
5.75%, 12/07/28 3,100,000 3,929,402
===================================================================================
129,839,871
===================================================================================
FEDERAL HOME LOAN BANK (FHLB)-6.35%
Unsec. Bonds,
3.06%, 07/22/09 100,000,000 100,205,085
- -----------------------------------------------------------------------------------
5.60%, 06/09/20 2,150,000 2,161,875
===================================================================================
102,366,960
===================================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-0.43%
Sr. Unsec. Global Notes,
5.25%, 01/15/09 23,000 23,042
- -----------------------------------------------------------------------------------
Sr. Unsec. Global Bonds,
6.63%, 11/15/30(b) 700,000 1,012,533
- -----------------------------------------------------------------------------------
Sr. Unsec. Notes,
6.50%, 11/25/25 4,762,000 4,796,121
- -----------------------------------------------------------------------------------
Unsec. Sub. Disc. Deb.,
6.74%, 10/09/19(c) 1,000,000 589,503
- -----------------------------------------------------------------------------------
7.37%, 10/09/19(c) 800,000 471,603
===================================================================================
6,892,802
===================================================================================
PRIVATE EXPORT FUNDING CORP.-0.42%
Series G, Sec. Gtd. Notes, 6.67%, 09/15/09 6,601,000 6,870,767
===================================================================================
TENNESSEE VALLEY AUTHORITY-0.36%
Series A, Bonds, 6.79%, 05/23/12 5,000,000 5,777,191
===================================================================================
Total U.S. Government Sponsored Agency
Securities (Cost $357,498,174) 364,546,695
===================================================================================
U.S. TREASURY SECURITIES-1.08%
U.S. TREASURY BILLS-0.02%
0.49%, 10/22/09(b)(c) 300,000 299,242
===================================================================================
U.S. TREASURY NOTES-0.47%
4.63%, 07/31/09(b) 7,411,000 7,594,538
===================================================================================
U.S. TREASURY BONDS-0.38%
7.50%, 11/15/24(b) 2,815,000 4,526,432
- -----------------------------------------------------------------------------------
7.63%, 02/15/25(b) 550,000 894,867
- -----------------------------------------------------------------------------------
6.88%, 08/15/25(b) 500,000 761,797
===================================================================================
6,183,096
===================================================================================
U.S. TREASURY STRIPS-0.21%
4.78%, 11/15/18(b)(c) 1,400,000 1,048,251
- -----------------------------------------------------------------------------------
4.94%, 11/15/18(b)(c) 2,100,000 1,572,375
- -----------------------------------------------------------------------------------
6.37%, 11/15/18(b)(c) 405,000 303,244
- -----------------------------------------------------------------------------------
6.79%, 11/15/18(b)(c) 250,000 187,187
- -----------------------------------------------------------------------------------
6.85%, 11/15/18(b)(c) 250,000 187,187
===================================================================================
3,298,244
===================================================================================
Total U.S. Treasury Securities (Cost
$15,034,330) 17,375,120
===================================================================================
FOREIGN SOVEREIGN BONDS-0.28%
SOVEREIGN DEBT-0.28%
Israel Government Agency for International
Development (AID) Bond (Israel), Gtd. Global
Bonds, 5.13%, 11/01/24 (Cost $3,832,788) 3,800,000 4,561,774
===================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. GOVERNMENT SECURITIES FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------------
MONEY MARKET FUNDS-6.79%
Government & Agency Portfolio-Institutional Class
(Cost $109,525,643)(d) 109,525,643 $ 109,525,643
===================================================================================
TOTAL INVESTMENTS-105.71% (Cost $1,691,227,278) 1,704,248,438
===================================================================================
OTHER ASSETS LESS LIABILITIES-(5.71)% (92,087,246)
===================================================================================
NET ASSETS-100.00% $1,612,161,192
___________________________________________________________________________________
===================================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
REMICS - Real Estate Mortgage Investment Conduits
Sec. - Secured
Sr. - Senior
STRIPS - Separately Traded Registered Interest and Principal Security
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
</Table>
Notes to Schedule of Investments:
(a) Security purchased on forward commitment basis. See Note 1J.
(b) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1N and Note 8.
(c) Security traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$1,581,701,635) $1,594,722,795
- -------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 109,525,643
=======================================================
Total investments (Cost
$1,691,227,278) 1,704,248,438
=======================================================
Receivables for:
Forward commitments -- sales 18,545,625
- -------------------------------------------------------
Investments sold 26,173,433
- -------------------------------------------------------
Fund shares sold 116
- -------------------------------------------------------
Dividends and Interest 9,780,088
- -------------------------------------------------------
Principal paydowns 18,132
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 34,658
- -------------------------------------------------------
Other assets 381
=======================================================
Total assets 1,758,800,871
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Forward commitments, at value 18,717,192
- -------------------------------------------------------
Investments purchased 113,219,098
- -------------------------------------------------------
Fund shares reacquired 940,400
- -------------------------------------------------------
Amount due custodian 1,094,233
- -------------------------------------------------------
Variation margin 11,515,906
- -------------------------------------------------------
Accrued fees to affiliates 971,388
- -------------------------------------------------------
Accrued other operating expenses 78,736
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 102,726
=======================================================
Total liabilities 146,639,679
=======================================================
Net assets applicable to shares
outstanding $1,612,161,192
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,494,952,314
- -------------------------------------------------------
Undistributed net investment income 60,726,416
- -------------------------------------------------------
Undistributed net realized gain (loss) (7,941,928)
- -------------------------------------------------------
Unrealized appreciation 64,424,390
=======================================================
$1,612,161,192
_______________________________________________________
=======================================================
NET ASSETS:
Series I $1,591,799,094
_______________________________________________________
=======================================================
Series II $ 20,362,098
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 121,992,016
_______________________________________________________
=======================================================
Series II 1,569,884
_______________________________________________________
=======================================================
Series I:
Net asset value per share $ 13.05
_______________________________________________________
=======================================================
Series II:
Net asset value per share $ 12.97
_______________________________________________________
=======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Interest $ 62,714,932
- ------------------------------------------------------
Dividends from affiliated money market
funds 1,686,267
======================================================
Total investment income 64,401,199
======================================================
EXPENSES:
Advisory fees 6,312,721
- ------------------------------------------------------
Administrative services fees 3,722,006
- ------------------------------------------------------
Custodian fees 203,950
- ------------------------------------------------------
Distribution fees -- Series II 47,751
- ------------------------------------------------------
Transfer agent fees 16,661
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 51,177
- ------------------------------------------------------
Other 145,297
======================================================
Total expenses 10,499,563
======================================================
Less: Fees waived and expense offset
arrangement(s) (470,487)
======================================================
Net expenses 10,029,076
======================================================
Net investment income 54,372,123
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (819,066)
- ------------------------------------------------------
Futures contracts 54,019,774
======================================================
53,200,708
======================================================
Change in net unrealized appreciation
of:
Investment securities 7,151,079
- ------------------------------------------------------
Futures contracts 51,395,940
======================================================
58,547,019
======================================================
Net realized and unrealized gain 111,747,727
======================================================
Net increase in net assets resulting
from operations $166,119,850
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- -----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 54,372,123 $ 52,094,836
- -----------------------------------------------------------------------------------------------------------
Net realized gain 53,200,708 4,286,420
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 58,547,019 11,480,413
===========================================================================================================
Net increase in net assets resulting from operations 166,119,850 67,861,669
===========================================================================================================
Distributions to shareholders from net investment income:
Series I (56,114,206) (45,822,129)
- -----------------------------------------------------------------------------------------------------------
Series II (694,714) (650,568)
===========================================================================================================
Total distributions from net investment income (56,808,920) (46,472,697)
===========================================================================================================
Share transactions-net:
Series I 314,015,739 241,536,480
- -----------------------------------------------------------------------------------------------------------
Series II 79,644 2,208,083
===========================================================================================================
Net increase in net assets resulting from share transactions 314,095,383 243,744,563
===========================================================================================================
Net increase in net assets 423,406,313 265,133,535
===========================================================================================================
NET ASSETS:
Beginning of year 1,188,754,879 923,621,344
===========================================================================================================
End of year (includes undistributed net investment income of
$60,726,416 and $56,693,446, respectively) $1,612,161,192 $1,188,754,879
___________________________________________________________________________________________________________
===========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is a high level of current income consistent
with reasonable concern for safety of principal.
The Fund currently offers two classes of shares, Series I and Series II, both
of which are offered to insurance company accounts funding variable annuity
contracts and variable life insurance policies ("variable products").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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. 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 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, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund 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 by a
significant amount.
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. OTHER RISKS -- 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. 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/to 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.
AIM V.I. GOVERNMENT SECURITIES FUND
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. 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.
L. 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.
M. 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.
N. 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
recalculating the value of the contracts on a daily basis. 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.
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.
AIM V.I. GOVERNMENT SECURITIES FUND
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement the Advisor and each of
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., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash in such affiliated money
market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$459,589.
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. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the year ended
December 31, 2008, Invesco did not reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $326,262 for accounting and fund administrative
services and reimbursed $3,395,744 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the
AIM V.I. GOVERNMENT SECURITIES FUND
Fund's own assumptions about the factors market participants would use in
determining fair value of the securities or instruments and would be based on
the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- -------------------------------------------------------
Level 1 $ 109,525,643 $51,574,797
- -------------------------------------------------------
Level 2 1,594,722,795 (171,567)
- -------------------------------------------------------
Level 3 -- --
=======================================================
$1,704,248,438 $51,403,230
_______________________________________________________
=======================================================
</Table>
* Other investments include futures and open forward commitments, which are
included at unrealized appreciation/(depreciation).
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $10,898.
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $6,202
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 7--OPEN FORWARD COMMITMENTS -- SALES AT PERIOD-END
<Table>
<Caption>
COMMITMENT PRINCIPAL
CONTRACT DATE AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
Pass Through Ctfs., TBA 6.50%, 01/01/39 02/19/09 $18,000,000 $18,717,192
_____________________________________________________________________________________________________________
=============================================================================================================
</Table>
AIM V.I. GOVERNMENT SECURITIES FUND
NOTE 8--FUTURES CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT VALUE APPRECIATION
- -----------------------------------------------------------------------------------------------------------------------
U. S. Treasury 5 Year Notes 3,281 March-2009/Long $390,618,431 $ 9,269,362
- -----------------------------------------------------------------------------------------------------------------------
U. S. Treasury 10 Year Notes 1,496 March-2009/Long 188,122,000 14,267,071
- -----------------------------------------------------------------------------------------------------------------------
U. S. Treasury 30 Year Bonds 2,210 March-2009/Long 305,083,594 28,038,364
=======================================================================================================================
Total $883,824,025 $51,574,797
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $56,808,920 $46,472,697
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 60,844,918
- -------------------------------------------------------------------------------------------------
Undistributed long-term gain 43,764,158
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation -- investments 12,718,304
- -------------------------------------------------------------------------------------------------
Temporary book/tax differences (118,502)
- -------------------------------------------------------------------------------------------------
Shares of beneficial interest 1,494,952,314
=================================================================================================
Total net assets $1,612,161,192
_________________________________________________________________________________________________
=================================================================================================
</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 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.
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 $54,493,981 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 at period-end.
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, 2008 was $1,807,290,595 and
$1,277,021,003, respectively. During the same period, purchases and sales of
U.S. Treasury obligations were $46,268,715 and $38,786,776. Cost of investments
on a tax basis includes the adjustments for financial reporting purposes as of
the most recently completed Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -----------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $14,890,384
- -----------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,172,080)
===============================================================================================
Net unrealized appreciation of investment securities $12,718,304
_______________________________________________________________________________________________
===============================================================================================
Cost of investments for tax purposes is $1,672,812,942.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of paydowns, on December
31, 2008, undistributed net investment income was increased by $6,469,767 and
undistributed net realized gain (loss) was decreased by $6,469,767. This
reclassification had no effect on the net assets of the Fund.
AIM V.I. GOVERNMENT SECURITIES FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2008(a) 2007
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 42,340,755 $ 529,835,003 23,152,709 $278,908,747
- -------------------------------------------------------------------------------------------------------------------------
Series II 722,852 8,979,278 442,120 5,311,096
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 4,387,350 56,114,206 3,834,488 45,822,129
- -------------------------------------------------------------------------------------------------------------------------
Series II 54,659 694,714 54,716 650,568
=========================================================================================================================
Reacquired:
Series I (21,773,179) (271,933,470) (6,854,490) (83,194,396)
- -------------------------------------------------------------------------------------------------------------------------
Series II (772,520) (9,594,348) (313,409) (3,753,581)
=========================================================================================================================
Net increase in share activity 24,959,917 $ 314,095,383 20,316,134 $243,744,563
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 94% 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, Invesco Aim and/or Invesco Aim affiliates may make payments to these
entities, which are considered to be related to the Fund, for providing
services to the Fund, Invesco Aim and or Invesco Aim affiliates including
but not limited to services such as, securities brokerage, third party
record keeping and account servicing and administrative services. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
NOTE 13--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008. Management is
currently in the process of determining the impact of the standard on the Fund's
disclosures in the financial statements.
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET ON SECURITIES DIVIDENDS
VALUE, NET (BOTH TOTAL FROM FROM NET NET ASSET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT VALUE, END TOTAL
OF PERIOD INCOME(a) UNREALIZED) OPERATIONS INCOME OF PERIOD RETURN(b)
- -------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $12.06 $0.50 $ 0.96 $1.46 $(0.47) $13.05 12.22%
Year ended 12/31/07 11.80 0.59 0.16 0.75 (0.49) 12.06 6.43
Year ended 12/31/06 11.87 0.55 (0.13) 0.42 (0.49) 11.80 3.55
Year ended 12/31/05 12.07 0.45 (0.25) 0.20 (0.40) 11.87 1.66
Year ended 12/31/04 12.23 0.40 (0.09) 0.31 (0.47) 12.07 2.56
- -------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 11.99 0.46 0.97 1.43 (0.45) 12.97 11.98
Year ended 12/31/07 11.74 0.56 0.15 0.71 (0.46) 11.99 6.11
Year ended 12/31/06 11.81 0.52 (0.13) 0.39 (0.46) 11.74 3.28
Year ended 12/31/05 12.01 0.41 (0.24) 0.17 (0.37) 11.81 1.41
Year ended 12/31/04 12.17 0.36 (0.08) 0.28 (0.44) 12.01 2.27
___________________________________________________________________________________________________________________
===================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME
END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- -----------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $1,591,799 0.73%(d) 0.76%(d) 3.96%(d) 109%
Year ended 12/31/07 1,169,985 0.73 0.76 4.93 106
Year ended 12/31/06 907,403 0.71 0.77 4.62 89
Year ended 12/31/05 812,824 0.85 0.88 3.68 174
Year ended 12/31/04 652,226 0.87 0.87 3.20 95
- -----------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 20,362 0.98(d) 1.01(d) 3.71(d) 109
Year ended 12/31/07 18,770 0.98 1.01 4.68 106
Year ended 12/31/06 16,218 0.96 1.02 4.37 89
Year ended 12/31/05 18,863 1.10 1.13 3.43 174
Year ended 12/31/04 17,728 1.12 1.12 2.95 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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios are based on average daily net assets (000's omitted) of $1,355,949
and $19,100 for Series I and Series II shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $1,089.60 $3.78 $1,021.52 $3.66 0.72%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 1,088.00 5.09 1,020.26 4.93 0.97
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Corporate Dividends Received Deduction* 0%
U.S. Treasury Obligations* 0.85%
</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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. GOVERNMENT SECURITIES FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. GOVERNMENT SECURITIES FUND
[INVESCO AIM LOGO] AIM V.I. HIGH YIELD FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. HIGH YIELD FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY coupled with negative news, declining
expectations or an increasing risk
For the year ended December 31, 2008, Series I shares of AIM V.I. High Yield Fund, profile.
excluding variable product issuer charges, outperformed the Fund's style-specific
index, but underperformed its broad market index.(triangle) As higher quality bonds o Very low yields.
(BB- and B-rated) outperformed lower quality securities (CCC-rated and below) within
the high yield market, the Fund's strategy of maintaining its focus on BB- and B-rated o Presentation of a better relative value
issues benefited performance relative to its style-specific benchmark. However, during opportunity.
the period, high yield bonds underperformed investment grade debt issues, which was the
primary reason the Fund lagged its broad market index. MARKET CONDITIONS AND YOUR FUND
Your Fund's long-term performance appears later in this report. Financial markets across the globe faced
severe challenges throughout 2008. Credit
FUND VS. INDEXES and money markets were under unusual
stress and experienced high levels of
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. If volatility, which was magnified by
variable product issuer charges were included, returns would be lower. uncertainties about the future of the U.S.
economy. By the end of the year, economic
Series I Shares -25.69% activity around the world decelerated
Series II Shares -25.80 sharply, the outlook for corporate profits
Barclay's Capital U.S. Aggregate Index(triangle) (Broad Market Index) 5.24 declined and the U.S. economy was
Barclays Capital U.S. Corporate High Yield Index(triangle) officially declared to be in a recession.
(Style-Specific Index) -26.16
Lipper VUF High Current Yield Bond Funds Category Average(triangle) During the year, as the housing market
(Peer Group) -26.93 continued to worsen and mortgage defaults
began to reach high levels, the two
(triangle)Lipper Inc. largest providers of U.S. mortgages,
Fannie Mae and Freddie Mac, were placed
Effective 11/03/08, the Lehman Brothers indexes were rebranded as Barclays Capital into U.S. government conservatorship in an
indexes effort to inject stability into the
financial and housing markets. In
======================================================================================= addition, large financial institutions
that were highly leveraged or
HOW WE INVEST and quantitative analysis. Changes in a under-capitalized, such as Lehman
security's risk/return profile or relative Brothers, AIG, Merrill Lynch, Washington
We invest primarily in debt securities value and top-down factors generally Mutual and Wachovia became insolvent,
that are determined to be below investment determine buy and sell decisions. causing significant market disruptions.
grade quality. These "junk bonds" are
typically corporate bonds of U.S. based Portfolio construction begins with a Since the middle of 2007, the U.S.
companies, many of which are moderately well-defined portfolio design that Federal Reserve (the Fed) deployed a range
sized companies. We principally invest in emphasizes diversification and establishes of policy tools to deal with a combination
junk bonds rated B or above, although we the target investment vehicles for of economic weakness and financial market
own holdings with lower quality ratings as generating the desired "alpha" (the extra distress. Over the year, the Fed lowered
well. We may invest in convertible, return above a specific benchmark) as well the federal funds target rate by 400 basis
preferred, derivatives and foreign as the risk parameters for the Fund. points (4.0%) to a range of zero to
securities. We may also invest up to 25% Investments are evaluated for liquidity 0.25%.(1) And the central bank in
of total assets in foreign securities of and risk versus relative value. Working conjunction with the U.S. Treasury
which 15% can be in developing markets. closely with other investment specialists Department sought to enhance market
and traders, we determine the timing and liquidity by introducing a large
The primary driver of our security amount of each alpha decision to use in
selection is fundamental analysis the portfolio at any time taking into
conducted by a team of analysts who account skill and market opportunities.
specialize by industry. This bottom-up
approach is augmented with an ongoing Sell decisions are based on:
review of securities' relative value and a
top-down process that includes sector, o Low equity value to debt, high
economic subordination and negative free cash
flow
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 FIXED INCOME ISSUERS*
By credit quality
AA 0.04% 1. Wireless Telecommunication 1. General Motors Acceptance Corp.
A 0.4 Services 4.5% LLC 2.0%
BBB 1.3 2. Oil & Gas Exploration & Production 4.2 2. HCA, Inc. 1.8
BB 28.1 3. Consumer Finance 3.8 3. MGM Mirage 1.3
B 35.6 4. Health Care Facilities 3.8 4. Avago Technologies Finance Ptc/
CCC 10.8 5. Integrated Telecommunication Avago Technologies U.S./
CC 0.07 Services 3.5 Avago Technologies Wireless 1.3
NR 0.79 ========================================== 5. Qwest Communications
Equity (non-preferred) 0.6 International Inc. 1.3
Money Market Funds ========================================== 6. Rainbow National Services LLC 1.2
Plus Other Assets Less Liabilities 22.3 Total Net Assets $40.3 million 7. Sprint Capital Corp 1.2
========================================== 8. TRAINS HY 1 2006 144A 1.1
Total Number of Holdings* 227 9. Healthsouth Corp. 1.1
========================================== 10. Viasystems Inc. 1.0
==========================================
Source: S&P, Moody's, Fitch: This table is calculated based on the highest rating
assigned by one of these agencies to an individual security.
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. HIGH YIELD FUND
number of programs, including the Primary Another strong performer over the PETER EHRET
Dealer Credit Facility and the Troubled period was GAZ CAPITAL S.A. a Luxem- Chartered Financial Analyst,
Asset Relief Program (TARP). In addition, burg-based, company, which was formed as a [EHRET senior portfolio manager, is
governments around the globe acted financing vehicle of Russian state- PHOTO] lead manager of AIM V.I. High
urgently to prevent further disruptions in controlled gas company Gazprom. Over the Yield Fund. Mr. Ehret joined
the financial system past few years, Gazprom benefited from the Invesco Aim in 2001. He
rapid growth of its market share in graduated cum laude with a B.S. in
Most fixed income securities lost Europe. economics from the University of
ground along with other financial assets Minnesota. He also earned an M.S. in real
during the year as the crisis within the While the portfolio remained estate appraisal and investment analysis
financial system deepened. Interest rates well-diversified across industries and from the University of Wisconsin-Madison.
fell, risk premiums (the additional yield securities, some of the Fund's holdings
over Treasuries) increased significantly delivered weaker performance results. DEX CAROLYN GIBBS
to all time wide levels, and the yield MEDIA INC., which publishes yellow and Chartered Financial Analyst,
curve steepened as investors fled to the white pages of the telephone directory for [GIBBS senior portfolio manager, is
safety of government bonds, especially Qwest Communications, was a detractor PHOTO] manager of AIM V.I. High Yield
those with short maturities. While credit from performance for the year. The company Fund. Ms. Gibbs has been in the
and yield spreads widened substantially was hurt by the economic downturn and slow investment business since 1983,
throughout 2008, default rates lagged, but progress in developing alternatives to its and she joined Invesco Aim in 1992. She
picked up in the latter half of the year. core directory business. graduated magna cum laude from Texas
Christian University, where she earned a
The high yield market experienced its SPANSION LLC, a maker of flash memory B.A. in English. She also earned an M.B.A.
worst annual performance in the past 20 devices, also detracted from returns. The in finance from The Wharton School at the
years.(2) Not surprisingly, returns by company's recent weak performance University of Pennsylvania.
credit quality mostly reflected the primarily can be attributed to the economy
overall flight-to-quality. BB-rated bonds and general chip industry downturn. DARREN HUGHES
were the best performing credit segment of Chartered Financial Analyst,
the high yield market. While wireless, Finally, MAGNACHIP SEMICONDUCTOR also [HUGHES senior portfolio manager, is
health care and aerospace/defense bonds detracted from relative performance. The PHOTO] manager of AIM V.I. High Yield
fared better, all sectors reported company was exposed to factors and Fund. He joined Invesco Aim in
negative total returns. geography that were of higher risk in 1992. Mr. Hughes earned a B.B.A.
terms of product demand and inventory in finance and economics from Baylor
During the period, we maintained our corrections such as China. These factors University.
focus on BB- and B-rated bonds -- the led to pricing pressure and resulted in
higher and middle-quality tiers of the lower profitability.
high yield market. Similar to the
investment grade corporate bond market, Thank you for your investment in AIM
the best returns were from higher rated V.I. High Yield Fund.
bonds, in this case, BB-rated securities.
As a result, our credit quality strategy (1) U.S. Federal Reserve
was positive for relative performance.
(2) StyleADVISOR
In the finance companies industry, our
exposure to GMAC FINANCIAL SERVICES, The views and opinions expressed in
formerly known as General Motors management's discussion of Fund
Acceptance Corporation and the wholly performance are those of Invesco Aim
owned financial services arm of General Advisors, Inc. These views and opinions
Motors, had a positive impact on are subject to change at any time based on
performance. During the first three factors such as market and economic
quarters of 2008,the company was hurt by conditions. These views and opinions may
problems associated with sub-prime not be relied upon as investment advice or
lending. However, its performance improved recommendations, or as an offer for a
significantly by the end of the year, as a particular security. The information is
result the Fed's approval of a plan to not a complete analysis of every aspect of
transform GMAC into a bank holding any market, country, industry, security or
company. the Fund. Statements of fact are from
sources considered reliable, but Invesco
In the energy sector, contributing to Aim Advisors, Inc. makes no representation
Fund performance was CHESAPEAKE ENERGY, or warranty as to their completeness or
one of the largest natural-gas providers accuracy. Although historical performance
in the United States. Despite recent is no guarantee of future results, these
struggles of the entire sector due to the insights may help you understand our
plunging energy prices, the company investment management philosophy.
benefited from its effective handling of
eroding prices of gas by hedging its See important Fund and index disclosures
production at higher prices. later in this report.
AIM V.I. HIGH YIELD FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in 20,000.
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 AIM V.I. HIGH YIELD FUND, A SERIES
effective than other types of charts in PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
illustrating THE PERFORMANCE DATA QUOTED REPRESENT IS CURRENTLY OFFERED THROUGH INSURANCE
PAST PERFORMANCE AND CANNOT GUARANTEE COMPANIES ISSUING VARIABLE PRODUCTS. YOU
========================================== COMPARABLE FUTURE RESULTS; CURRENT CANNOT PURCHASE SHARES OF THE FUND
AVERAGE ANNUAL TOTAL RETURNS PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE DIRECTLY. PERFORMANCE FIGURES GIVEN
As of 12/31/08 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 I SHARES MONTH-END VARIABLE PRODUCT PERFORMANCE. THEY DO NOT REFLECT SALES CHARGES,
Inception (5/1/98) -0.96% PERFORMANCE FIGURES REFLECT FUND EXPENSES, EXPENSES AND FEES ASSESSED IN CONNECTION
10 Years -0.24 REINVESTED DISTRIBUTIONS AND CHANGES IN WITH A VARIABLE PRODUCT. SALES CHARGES,
5 Years -0.98 NET ASSET VALUE. INVESTMENT RETURN AND EXPENSES AND FEES, WHICH ARE DETERMINED BY
1 Year -25.69 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 SHARES.
10 Years -0.46% THE MOST RECENT MONTH-END PERFORMANCE
5 Years -1.19 THE NET ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
1 Year -25.80 RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THE
========================================== PROSPECTUS AS OF THE DATE OF THIS REPORT INVESCO AIM AUTOMATED INFORMATION LINE,
FOR SERIES I AND SERIES II SHARES WAS 866 702 4402.
SERIES II SHARES' INCEPTION DATE IS 0.97% AND 1.22%, RESPECTIVELY.(1) THE
MARCH 26, 2002. RETURNS SINCE THAT DATE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO AS MENTIONED ABOVE, FOR THE MOST RECENT
ARE HISTORICAL. ALL OTHER RETURNS ARE THE SET FORTH IN THE MOST RECENT FUND MONTH-END PERFORMANCE INCLUDING VARIABLE
BLENDED RETURNS OF THE HISTORICAL PER- PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, PLEASE CONTACT YOUR
FORMANCE OF SERIES II SHARES SINCE THEIR FOR SERIES I AND SERIES II SHARES WAS VARIABLE PRODUCT ISSUER OR FINANCIAL
INCEPTION AND THE RESTATED HISTORICAL 1.16% AND 1.41%, RESPECTIVELY. THE EXPENSE ADVISOR.
PERFORMANCE OF SERIES I SHARES (FOR RATIOS PRESENTED ABOVE MAY VARY FROM THE
PERIODS PRIOR TO INCEPTION OF SERIES II EXPENSE RATIOS PRESENTED IN OTHER SECTIONS HAD THE ADVISOR NOT WAIVED FEES AND/OR
SHARES) ADJUSTED TO REFLECT THE RULE 12B-1 OF THIS REPORT THAT ARE BASED ON EXPENSES EXPENSES, PERFORMANCE WOULD HAVE BEEN
FEES APPLICABLE TO SERIES II SHARES. THE INCURRED DURING THE PERIOD COVERED BY THIS LOWER.
INCEPTION DATE OF SERIES I SHARES IS MAY REPORT.
1, 1998. (1) Total annual operating expenses less
any contractual fee waivers and/or
THE PERFORMANCE OF THE FUND'S SERIES I expense reimbursements by the advisor
AND SERIES II SHARE CLASSES WILL DIFFER in effect through at least April 30,
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. 2010. See current prospectus for more
information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/98, Fund data from 5/1/98
Lipper VUF High
Current Yield
AIM V.I. Barclays Capital Barclays Capital Bond Funds
High Yield Fund- U.S. Corporate High U.S. Aggregate Category
Date Series I Shares Yield Index(1) Index(1) Average(1)
- ------- ---------------- ------------------- ---------------- ---------------
4/30/98 $10000 $10000 $10000
5/98 $10080 10035 10095 9995
6/98 10050 10071 10180 10015
7/98 10090 10128 10202 10099
8/98 9410 9569 10368 9393
9/98 9129 9613 10611 9345
10/98 8790 9416 10555 9154
11/98 9279 9806 10615 9663
12/98 9239 9817 10647 9637
1/99 9374 9963 10723 9788
2/99 9479 9904 10535 9750
3/99 9584 9999 10594 9877
4/99 9929 10192 10627 10106
5/99 9772 10054 10534 9928
6/99 9803 10033 10501 9923
7/99 9939 10073 10456 9923
8/99 9835 9962 10451 9819
9/99 9720 9890 10572 9764
10/99 9667 9825 10611 9725
11/99 9918 9939 10610 9889
12/99 10211 10052 10559 10012
1/00 10336 10008 10525 9967
2/00 10506 10028 10652 10031
3/00 10211 9817 10792 9839
4/00 9928 9833 10761 9825
5/00 9646 9732 10756 9670
6/00 9883 9930 10980 9881
7/00 9826 10006 11080 9911
8/00 9769 10074 11240 9977
9/00 9622 9986 11311 9824
10/00 8750 9666 11386 9497
11/00 8139 9284 11572 9005
12/00 8270 9463 11787 9208
1/01 8998 10172 11979 9794
2/01 8986 10307 12084 9841
3/01 8479 10065 12145 9553
4/01 8232 9939 12094 9441
5/01 8310 10118 12167 9537
6/01 7933 9834 12213 9287
7/01 7907 9979 12486 9363
8/01 7919 10097 12629 9433
9/01 7334 9418 12776 8830
10/01 7581 9651 13044 9053
11/01 7919 10003 12864 9322
12/01 7858 9962 12782 9282
1/02 7858 10032 12886 9330
2/02 7621 9892 13010 9211
3/02 7784 10130 12794 9379
4/02 7829 10292 13042 9492
5/02 7740 10235 13153 9418
6/02 7311 9480 13267 8973
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
7/02 7045 9066 13427 8693
8/02 7119 9325 13653 8834
9/02 7045 9202 13874 8722
10/02 6956 9122 13811 8683
11/02 7297 9687 13808 9139
12/02 7400 9822 14093 9216
1/03 7548 10149 14105 9401
2/03 7622 10274 14300 9516
3/03 7829 10570 14289 9726
4/03 8229 11197 14407 10173
5/03 8347 11313 14676 10286
6/03 8584 11638 14646 10535
7/03 8525 11510 14154 10430
8/03 8629 11643 14248 10568
9/03 8851 11961 14625 10818
10/03 9073 12202 14489 11030
11/03 9221 12387 14523 11168
12/03 9475 12668 14671 11431
1/04 9682 12910 14789 11603
2/04 9635 12877 14949 11578
3/04 9650 12965 15061 11632
4/04 9682 12876 14669 11584
5/04 9476 12658 14611 11407
6/04 9634 12840 14693 11569
7/04 9713 13014 14839 11702
8/04 9903 13270 15122 11898
9/04 10062 13462 15163 12062
10/04 10252 13706 15290 12282
11/04 10394 13871 15168 12424
12/04 10540 14078 15308 12596
1/05 10557 14059 15404 12579
2/05 10786 14266 15313 12756
3/05 10475 13851 15234 12410
4/05 10312 13716 15440 12272
5/05 10508 13960 15608 12470
6/05 10687 14234 15693 12662
7/05 10867 14483 15550 12854
8/05 10900 14510 15749 12920
9/05 10785 14365 15587 12828
10/05 10671 14265 15464 12732
11/05 10736 14340 15532 12843
12/05 10826 14463 15680 12957
1/06 10952 14694 15680 13114
2/06 11078 14792 15733 13220
3/06 11132 14880 15578 13273
4/06 11167 14972 15550 13355
5/06 11167 14970 15533 13326
6/06 11096 14917 15566 13270
7/06 11186 15063 15777 13376
8/06 11347 15308 16018 13558
9/06 11473 15525 16159 13716
10/06 11635 15736 16266 13900
11/06 11814 16000 16455 14103
12/06 11989 16176 16359 14248
1/07 12146 16357 16352 14384
2/07 12283 16585 16604 14574
3/07 12322 16603 16605 14622
4/07 12498 16819 16695 14809
5/07 12596 16944 16568 14917
6/07 12381 16640 16519 14680
7/07 11930 16051 16657 14228
8/07 12009 16270 16861 14401
9/07 12322 16696 16989 14738
10/07 12421 16796 17141 14849
11/07 12088 16431 17450 14562
12/07 12139 16479 17499 14616
1/08 11927 16259 17793 14343
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
2/08 11864 16037 17817 14145
3/08 11759 15982 17878 14118
4/08 12245 16671 17841 14664
5/08 12351 16731 17710 14726
6/08 12075 16263 17696 14395
7/08 11906 16047 17681 14196
8/08 11949 16103 17849 14224
9/08 11315 14818 17609 13207
10/08 9348 12461 17194 11165
11/08 8544 11301 17753 10187
12/08 9018 12169 18416 10602
====================================================================================================================================
AIM V.I. HIGH YIELD FUND
AIM V.I. HIGH YIELD FUND'S INVESTMENT OBJECTIVE IS A HIGH LEVEL OF CURRENT INCOME.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Credit risk is the risk of loss on an The BARCLAYS CAPITAL U.S. AGGREGATE INDEX The Chartered Financial
investment due to the deterioration of an covers U.S. investment-grade fixed-rate Analyst--REGISTERED TRADEMARK--
issuer's financial health. Such a bonds with components for government and (CFA--REGISTERED TRADEMARK--) designation
deterioration of financial health may corporate securities, mortgage is a globally recognized standard for
result in a reduction of the credit rating pass-throughs, and asset-backed measuring the competence and integrity of
of the issuer's securities and may lead to securities. investment professionals.
the issuer's inability to honor its
contractual obligations, including making The BARCLAYS CAPITAL U.S. CORPORATE The returns shown in management's
timely payment of interest and principal. HIGH YIELD INDEX covers the universe of discussion of Fund performance are based
fixed rate, non-investment grade debt. on net asset values calculated for
Foreign securities have additional Pay-in-kind bonds, Eurobonds, and debt shareholder transactions. Generally
risks, including exchange rate changes, issues from countries designated as accepted accounting principles require
political and economic upheaval, relative emerging markets are excluded, but adjustments to be made to the net assets
lack of information, relatively low market Canadian and global bonds (SEC registered) of the Fund at period end for financial
liquidity, and the potential lack of of issuers in non-emerging countries are reporting purposes, and as such, the net
strict financial and accounting controls included. asset values for shareholder transactions
and standards. and the returns based on those net asset
The LIPPER VUF HIGH CURRENT YIELD BOND values may differ from the net asset
Investing in developing countries can FUNDS CATEGORY AVERAGE represents an values and returns reported in the
add additional risk, such as high rates of average of all of the variable insurance Financial Highlights. Additionally, the
inflation or sharply devalued currencies underlying funds in the Lipper High returns and net asset values shown
against the U.S. dollar. Transaction costs Current Yield Bond Funds category. These throughout this report are at the Fund
are often higher, and there may be delays funds have no credit rating restriction, level only and do not include variable
in settlement procedures. but tend to invest in fixed-income product issuer charges. If such charges
securities with lower credit ratings. were included, the total returns would be
Interest rate risk refers to the risk lower.
that bond prices generally fall as The Fund is not managed to track the
interest rates rise and vice versa. performance of any particular index, Industry classifications used in this
including the indexes defined here, and report are generally according to the
The Fund may invest in lower quality consequently, the performance of the Fund Global Industry Classification Standard,
debt securities, commonly known as "junk may deviate significantly from the which was developed by and is the
bonds." Compared to higher quality debt performance of the indexes. exclusive property and a service mark of
securities, junk bonds involve greater MSCI Inc. and Standard & Poor's.
risk of default or price changes due to A direct investment cannot be made in
changes in credit quality of the issuer an index. Unless otherwise indicated,
because they are generally unsecured and index results include reinvested
may be subordinated to other creditors' dividends, and they do not reflect sales
claims. Credit ratings on junk bonds do charges or fund expenses.
not necessarily reflect their actual
market risk.
Leveraging entails risks such as
magnifying changes in the value of the
portfolio's securities.
There is no guarantee that the
investment techniques and risk analysis
used by the Fund's portfolio managers will
produce the desired results.
The prices of securities held by the
Fund may decline in response to market
risks.
Reinvestment risk is the risk that a
bond's cash flows will be reinvested at an
interest rate below that of the original
bond.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
BONDS & NOTES-75.23%
AEROSPACE & DEFENSE-0.61%
DRS Technologies, Inc.,
Sr. Unsec. Gtd. Notes,
6.63%, 02/01/16 $ 10,000 $ 10,125
- ------------------------------------------------------------------------------
Sr. Unsec. Sub. Gtd. Notes,
7.63%, 02/01/18 205,000 207,819
- ------------------------------------------------------------------------------
Esterline Technologies Corp.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.75%, 06/15/13 30,000 26,400
==============================================================================
244,344
==============================================================================
AIRLINES-1.49%
Continental Airlines Inc.,
Sr. Unsec. Unsub. Notes,
8.75%, 12/01/11 185,000 115,625
- ------------------------------------------------------------------------------
Series 2000-1, Class C-1, Sec. Sub. Pass Through
Ctfs.,
8.50%, 05/01/11 53,723 39,889
- ------------------------------------------------------------------------------
Delta Air Lines Inc.,
Series 2002-1, Class C, Pass Through Ctfs.,
7.78%, 01/02/12 342,763 299,918
- ------------------------------------------------------------------------------
Series 2007-1, Class C, Global Pass Through
Ctfs.,
8.95%, 08/10/14 125,849 71,734
- ------------------------------------------------------------------------------
United Air Lines, Inc.-Series 2007-1, Class B, Sr.
Sec. Gtd. Global Pass Through Ctfs.,
7.34%, 07/02/19(b) 131,182 71,166
==============================================================================
598,332
==============================================================================
ALTERNATIVE CARRIERS-0.82%
Intelsat Subsidiary Holding Co. Ltd. (Bermuda),
Sr. Unsec. Notes,
8.50%, 01/15/13(b) 170,000 158,950
- ------------------------------------------------------------------------------
Level 3 Financing Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
9.25%, 11/01/14 295,000 172,575
==============================================================================
331,525
==============================================================================
ALUMINUM-1.14%
Century Aluminum Co.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.50%, 08/15/14 228,000 133,380
- ------------------------------------------------------------------------------
Novelis Inc. (Canada),
Sr. Unsec. Gtd. Global Notes,
7.25%, 02/15/15 554,000 326,860
==============================================================================
460,240
==============================================================================
APPAREL RETAIL-0.66%
Collective Brands, Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
8.25%, 08/01/13 350,000 266,000
==============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-2.31%
American Achievement Corp.,
Sr. Unsec. Gtd. Sub. Notes,
8.25%, 04/01/12(b) 205,000 150,675
- ------------------------------------------------------------------------------
Hanesbrands, Inc.
-Series B, Sr. Unsec. Gtd. Floating Rate Global
Notes,
5.70%, 12/15/14(c) 370,000 262,700
- ------------------------------------------------------------------------------
Levi Strauss & Co.,
Sr. Unsec. Unsub. Global Notes,
8.88%, 04/01/16 545,000 376,050
- ------------------------------------------------------------------------------
Perry Ellis International, Inc.
-Series B, Sr. Unsec. Gtd. Sub. Global Notes,
8.88%, 09/15/13 235,000 139,825
==============================================================================
929,250
==============================================================================
AUTO PARTS & EQUIPMENT-0.50%
Lear Corp.
-Series B, Sr. Unsec. Gtd. Global Notes,
8.50%, 12/01/13 255,000 81,600
- ------------------------------------------------------------------------------
Tenneco Inc.,
Sr. Unsec. Gtd. Global Notes,
8.13%, 11/15/15 200,000 89,500
- ------------------------------------------------------------------------------
Visteon Corp.,
Sr. Unsec. Unsub. Notes,
7.00%, 03/10/14 180,000 29,700
==============================================================================
200,800
==============================================================================
AUTOMOBILE MANUFACTURERS-0.76%
Ford Motor Co.,
Sr. Unsec. Unsub. Global Notes,
7.45%, 07/16/31 350,000 98,000
- ------------------------------------------------------------------------------
General Motors Corp.,
Sr. Unsec. Unsub. Global Notes,
7.20%, 01/15/11(d) 445,000 106,800
- ------------------------------------------------------------------------------
Sr. Unsec. Unsub. Notes,
8.38%, 07/15/33(d) 525,000 99,750
==============================================================================
304,550
==============================================================================
BROADCASTING-2.91%
Charter Communications Holdings II LLC/Charter
Communications Holdings II Capital Corp.,
Sr. Unsec. Notes,
10.25%, 09/15/10 265,000 127,200
- ------------------------------------------------------------------------------
Charter Communications Operating, LLC/Charter
Communications Operating Capital Corp., Sec.
Gtd. Second Lien Notes,
8.00%, 04/30/12(b) 110,000 91,300
- ------------------------------------------------------------------------------
CSC Holdings, Inc.
-Series B, Sr. Unsec. Notes,
7.63%, 04/01/11 80,000 77,200
- ------------------------------------------------------------------------------
Hughes Network Systems LLC/HNS Finance Corp.,
Sr. Unsec. Gtd. Global Notes,
9.50%, 04/15/14 250,000 205,625
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
BROADCASTING-(CONTINUED)
Rainbow National Services LLC,
Sr. Unsec. Gtd. Unsub. Notes,
8.75%, 09/01/12(b) $ 538,000 $ 486,890
- ------------------------------------------------------------------------------
Virgin Media Finance PLC (United Kingdom),
Sr. Unsec. Gtd. Global Notes,
8.75%, 04/15/14 235,000 185,650
==============================================================================
1,173,865
==============================================================================
BUILDING PRODUCTS-1.56%
AMH Holdings Inc.,
Sr. Unsec. Disc. Global Notes,
11.25%, 03/01/14(d)(e) 655,000 366,800
- ------------------------------------------------------------------------------
Building Materials Corp. of America,
Sec. Gtd. Second Lien Global Notes,
7.75%, 08/01/14 260,000 163,800
- ------------------------------------------------------------------------------
Ply Gem Industries Inc.,
Sr. Sec. Gtd. First & Second Lien Global Notes,
11.75%, 06/15/13 175,000 97,125
==============================================================================
627,725
==============================================================================
CASINOS & GAMING-3.18%
Great Canadian Gaming Corp. (Canada),
Sr. Unsec. Gtd. Sub. Notes,
7.25%, 02/15/15(b) 90,000 63,000
- ------------------------------------------------------------------------------
Mandalay Resort Group,
Sr. Unsec. Gtd. Global Notes,
6.50%, 07/31/09 105,000 102,112
- ------------------------------------------------------------------------------
MGM Mirage,
Sr. Sec. Gtd. Notes,
13.00%, 11/15/13(b)(d) 255,000 247,350
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
6.63%, 07/15/15 273,000 174,379
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Notes,
7.50%, 06/01/16(d) 190,000 120,887
- ------------------------------------------------------------------------------
Pinnacle Entertainment, Inc.,
Sr. Unsec. Gtd. Sub. Notes,
8.75%, 10/01/13 190,000 150,100
- ------------------------------------------------------------------------------
Seneca Gaming Corp.,
Sr. Unsec. Unsub. Global Notes,
7.25%, 05/01/12 160,000 111,600
- ------------------------------------------------------------------------------
-Series B, Sr. Unsec. Global Notes,
7.25%, 05/01/12 95,000 66,263
- ------------------------------------------------------------------------------
Snoqualmie Entertainment Authority,
Sr. Sec. Notes,
9.13%, 02/01/15(b) 315,000 198,450
- ------------------------------------------------------------------------------
Station Casinos, Inc.,
Sr. Unsec. Global Notes,
6.00%, 04/01/12 10,000 2,038
- ------------------------------------------------------------------------------
Wynn Las Vegas Capital LLC/Corp.,
Sr. Sec. Gtd. Global First Mortgage Notes,
6.63%, 12/01/14 60,000 45,720
==============================================================================
1,281,899
==============================================================================
COAL & CONSUMABLE FUELS-0.27%
Massey Energy Co.,
Sr. Unsec. Gtd. Unsub. Global Notes,
6.88%, 12/15/13 145,000 109,838
==============================================================================
COMMERCIAL PRINTING-0.04%
Quebecor World Inc. (Canada),
Sr. Notes,
9.75%, 01/15/15(b)(f) 105,000 15,750
==============================================================================
CONSTRUCTION & ENGINEERING-1.22%
Great Lakes Dredge & Dock Corp.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.75%, 12/15/13 291,000 226,252
- ------------------------------------------------------------------------------
MasTec, Inc.,
Sr. Unsec. Gtd. Global Notes,
7.63%, 02/01/17 350,000 266,000
==============================================================================
492,252
==============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.71%
Terex Corp.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.38%, 01/15/14 135,000 119,475
- ------------------------------------------------------------------------------
Titan International, Inc.,
Sr. Unsec. Gtd. Global Notes,
8.00%, 01/15/12 220,000 165,000
==============================================================================
284,475
==============================================================================
CONSTRUCTION MATERIALS-1.19%
Texas Industries, Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
7.25%, 07/15/13 65,000 50,700
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Notes,
7.25%, 07/15/13(b) 135,000 105,300
- ------------------------------------------------------------------------------
U.S. Concrete, Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
8.38%, 04/01/14 585,000 321,750
==============================================================================
477,750
==============================================================================
CONSUMER FINANCE-3.79%
Ford Motor Credit Co. LLC,
Sr. Unsec. Unsub. Global Notes,
5.80%, 01/12/09 350,000 348,294
- ------------------------------------------------------------------------------
7.00%, 10/01/13 145,000 100,050
- ------------------------------------------------------------------------------
Sr. Unsec. Unsub. Notes,
8.63%, 11/01/10 240,000 188,400
- ------------------------------------------------------------------------------
9.88%, 08/10/11 120,000 91,800
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
CONSUMER FINANCE-(CONTINUED)
General Motors Acceptance Corp. LLC,
Sr. Unsec. Unsub. Global Notes,
5.85%, 01/14/09(d) $ 230,000 $ 228,907
- ------------------------------------------------------------------------------
Sr. Unsec. Unsub. Gtd. Notes,
7.50%, 12/31/13(b) 29,000 21,227
- ------------------------------------------------------------------------------
6.75%, 12/01/14(b) 294,000 211,683
- ------------------------------------------------------------------------------
8.00%, 11/01/31(b) 491,000 311,785
- ------------------------------------------------------------------------------
Sr. Unsec. Unsub. Notes,
6.75%, 12/01/14 10,000 6,900
- ------------------------------------------------------------------------------
Unsec. Sub. Notes,
8.00%, 12/31/18(b) 35,000 18,407
==============================================================================
1,527,453
==============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.25%
First Data Corp.,
Sr. Notes,
9.88%, 09/24/15(b) 155,000 94,163
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
9.88%, 09/24/15(d) 165,000 100,237
- ------------------------------------------------------------------------------
Lender Processing Services Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
8.13%, 07/01/16 95,000 84,550
- ------------------------------------------------------------------------------
Sungard Data Systems Inc.,
Sr. Unsec. Gtd. Global Notes,
9.13%, 08/15/13 256,000 224,000
==============================================================================
502,950
==============================================================================
DISTILLERS & VINTNERS-0.44%
Constellation Brands Inc.,
Sr. Unsec. Gtd. Global Notes,
7.25%, 05/15/17 185,000 176,675
==============================================================================
DIVERSIFIED METALS & MINING-0.78%
FMG Finance Pty. Ltd. (Australia),
Sr. Sec. Notes,
10.63%, 09/01/16(b) 180,000 106,200
- ------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold Inc.,
Sr. Unsec. Notes,
8.25%, 04/01/15 240,000 206,925
==============================================================================
313,125
==============================================================================
DIVERSIFIED SUPPORT SERVICES-1.36%
Education Management LLC/ Education Management
Finance Corp.,
Sr. Unsec. Gtd. Global Notes,
8.75%, 06/01/14 105,000 81,637
- ------------------------------------------------------------------------------
Geo Group, Inc. (The),
Sr. Unsec. Global Notes,
8.25%, 07/15/13 68,000 60,180
- ------------------------------------------------------------------------------
Iron Mountain Inc.,
Sr. Unsec. Gtd. Sub. Notes,
8.00%, 06/15/20 150,000 121,875
- ------------------------------------------------------------------------------
Mobile Services Group Inc./Mobile Storage Group
Inc.,
Sr. Unsec. Gtd. Global Notes,
9.75%, 08/01/14 60,000 43,200
- ------------------------------------------------------------------------------
Travelport LLC,
Sr. Unsec. Gtd. Sub. Global Notes,
11.88%, 09/01/16 190,000 56,050
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Global Notes,
9.88%, 09/01/14 485,000 186,725
==============================================================================
549,667
==============================================================================
DRUG RETAIL-0.51%
General Nutrition Centers Inc.,
Sr. Unsec. Gtd. PIK Global Notes,
7.58%, 03/15/14(c) 250,000 131,250
- ------------------------------------------------------------------------------
Rite Aid Corp.,
Sr. Unsec. Gtd. Unsub. Notes,
8.63%, 03/01/15 215,000 75,788
==============================================================================
207,038
==============================================================================
ELECTRIC UTILITIES-1.27%
Elwood Energy LLC,
Sr. Sec. Global Notes,
8.16%, 07/05/26 144,962 102,923
- ------------------------------------------------------------------------------
LSP Energy L.P./LSP Batesville Funding Corp.
-Series C, Sr. Sec. Mortgage Bonds,
7.16%, 01/15/14 134,013 128,713
- ------------------------------------------------------------------------------
Tenaska Alabama Partners L.P.,
Sr. Sec. Mortgage Notes,
7.00%, 06/30/21(b) 368,538 280,089
==============================================================================
511,725
==============================================================================
GAS UTILITIES-0.34%
Ferrellgas Escrow LLC/Ferrellgas Finance Escrow
Corp.,
Sr. Unsec. Global Notes,
6.75%, 05/01/14 200,000 137,000
==============================================================================
GENERAL MERCHANDISE STORES-1.14%
Dollar General Corp.,
Sr. Unsec. Gtd. Sub. PIK Global Notes,
11.88%, 07/15/17 205,000 175,787
- ------------------------------------------------------------------------------
Pantry, Inc. (The),
Sr. Unsec. Gtd. Sub. Global Notes,
7.75%, 02/15/14 135,000 95,175
- ------------------------------------------------------------------------------
Susser Holdings LLC & Susser Finance Corp.,
Sr. Unsec. Gtd. Global Notes,
10.63%, 12/15/13 210,000 187,950
==============================================================================
458,912
==============================================================================
HEALTH CARE EQUIPMENT-0.33%
DJO Finance LLC/DJO Finance Corp.,
Sr. Unsec. Gtd. Global Notes,
10.88%, 11/15/14 185,000 133,200
==============================================================================
HEALTH CARE FACILITIES-3.77%
Community Health Systems Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
8.88%, 07/15/15 305,000 283,650
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
HEALTH CARE FACILITIES-(CONTINUED)
HCA, Inc.,
Sr. Sec. Gtd. Global Notes,
9.13%, 11/15/14(d) $ 140,000 $ 130,200
- ------------------------------------------------------------------------------
9.25%, 11/15/16 600,000 555,000
- ------------------------------------------------------------------------------
Sr. Unsec. Global Notes,
6.38%, 01/15/15 55,000 33,000
- ------------------------------------------------------------------------------
Healthsouth Corp.,
Sr. Unsec. Gtd. Floating Rate Global Notes,
8.32%, 06/15/14(c) 105,000 82,950
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
10.75%, 06/15/16(d) 380,000 351,500
- ------------------------------------------------------------------------------
Tenet Healthcare Corp.,
Sr. Unsec. Unsub. Notes,
6.38%, 12/01/11 109,000 84,202
==============================================================================
1,520,502
==============================================================================
HEALTH CARE SERVICES-2.07%
FMC Finance III SA,
Sr. Unsec. Gtd. Global Notes,
6.88%, 07/15/17 95,000 89,837
- ------------------------------------------------------------------------------
Multiplan Inc.,
Sr. Unsec. Sub. Notes,
10.38%, 04/15/16(b) 135,000 109,688
- ------------------------------------------------------------------------------
Omnicare Inc.,
Sr. Unsec. Gtd. Sub. Notes,
6.75%, 12/15/13 65,000 55,575
- ------------------------------------------------------------------------------
6.88%, 12/15/15 110,000 89,925
- ------------------------------------------------------------------------------
Rural/Metro Corp.,
Sr. Gtd. Sub. Global Notes,
9.88%, 03/15/15 56,000 44,240
- ------------------------------------------------------------------------------
Universal Hospital Services Inc.,
Sr. Sec. PIK Global Notes,
8.50%, 06/01/15 190,000 136,325
- ------------------------------------------------------------------------------
US Oncology Inc.,
Sr. Unsec. Gtd. Global Notes,
9.00%, 08/15/12 225,000 208,125
- ------------------------------------------------------------------------------
Viant Holdings Inc.,
Sr. Unsec. Gtd. Sub. Notes,
10.13%, 07/15/17 (Acquired 06/25/07-09/12/08;
Cost $221,233)(b) 247,000 101,270
==============================================================================
834,985
==============================================================================
HOMEBUILDING-0.24%
K. Hovnanian Enterprises Inc.,
Sr. Sec. Gtd. Notes,
11.50%, 05/01/13 115,000 87,400
- ------------------------------------------------------------------------------
TOUSA, Inc.,
Sr. Unsec. Gtd. Global Notes,
9.00%, 07/01/10(f) 223,000 10,593
==============================================================================
97,993
==============================================================================
HOTELS, RESORTS & CRUISE LINES-0.87%
NCL Corp. Ltd.,
Sr. Unsec. Unsub. Global Notes,
10.63%, 07/15/14 258,000 237,360
- ------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.,
Sr. Unsec. Unsub. Global Notes,
6.88%, 12/01/13 55,000 29,700
- ------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. (Trinidad),
Sr. Unsec. Unsub. Yankee Notes,
7.25%, 03/15/18 160,000 84,200
==============================================================================
351,260
==============================================================================
HOUSEWARES & SPECIALTIES-0.48%
Jarden Corp.,
Sr. Unsec. Gtd. Sub. Notes,
7.50%, 05/01/17 60,000 41,100
- ------------------------------------------------------------------------------
Yankee Acquisition Corp.
-Series B, Sr. Gtd. Global Notes,
8.50%, 02/15/15 320,000 154,000
==============================================================================
195,100
==============================================================================
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-2.72%
AES Red Oak LLC
-Series A, Sr. Sec. Bonds,
8.54%, 11/30/19 323,171 261,769
- ------------------------------------------------------------------------------
Energy Future Holdings Corp.,
Sr. Unsec. Gtd. Notes,
10.88%, 11/01/17(b) 415,000 302,950
- ------------------------------------------------------------------------------
-Series P, Sr. Unsec. Unsub. Global Notes,
5.55%, 11/15/14 4,000 1,900
- ------------------------------------------------------------------------------
Intergen N.V. (Netherlands),
Sr. Sec. Gtd. Bonds,
9.00%, 06/30/17(b) 50,000 40,500
- ------------------------------------------------------------------------------
Mirant Americas Generation LLC,
Sr. Unsec. Notes,
8.50%, 10/01/21 85,000 65,025
- ------------------------------------------------------------------------------
NRG Energy, Inc.,
Sr. Unsec. Gtd. Unsub. Notes,
7.38%, 02/01/16 40,000 37,600
- ------------------------------------------------------------------------------
7.38%, 01/15/17(d) 155,000 144,150
- ------------------------------------------------------------------------------
Texas Competitive Electric Holdings Co. LLC
-Series A, Sr. Unsec. Gtd. Notes,
10.50%, 11/01/15(b) 335,000 241,025
==============================================================================
1,094,919
==============================================================================
INDUSTRIAL CONGLOMERATES-0.61%
Aleris International Inc.,
Sr. Unsec. Gtd. PIK Global Notes,
9.00%, 12/15/14 215,000 15,050
- ------------------------------------------------------------------------------
Indalex Holding Corp.
-Series B, Sr. Sec. Gtd. Global Notes,
11.50%, 02/01/14 230,000 28,175
- ------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-(CONTINUED)
RBS Global Inc./Rexnord LLC,
Sr. Unsec. Unsub. Gtd. Global Notes,
9.50%, 08/01/14 $ 270,000 $ 203,175
==============================================================================
246,400
==============================================================================
INDUSTRIAL MACHINERY-0.34%
Columbus McKinnon Corp.,
Sr. Unsec. Gtd. Sub. Global Notes,
8.88%, 11/01/13 158,000 136,670
==============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-3.49%
Frontier Communications Corp.,
Sr. Unsec. Global Notes,
7.88%, 01/15/27 340,000 197,200
- ------------------------------------------------------------------------------
Sr. Unsec. Unsub. Global Notes,
9.00%, 08/15/31 305,000 196,725
- ------------------------------------------------------------------------------
Hawaiian Telcom Communications Inc.
-Series B, Sr. Unsec. Gtd. Unsub. Global Notes,
9.75%, 05/01/13(f) 360,000 28,800
- ------------------------------------------------------------------------------
Intelsat Jackson Holdings Ltd. (Bermuda),
Sr. Unsec. Gtd. Global Notes,
11.25%, 06/15/16 210,000 193,200
- ------------------------------------------------------------------------------
Qwest Communications International Inc.,
Sr. Unsec. Gtd. Global Notes,
7.25%, 02/15/11 575,000 506,000
- ------------------------------------------------------------------------------
Windstream Corp.,
Sr. Unsec. Gtd. Unsub. Global Notes,
8.13%, 08/01/13 130,000 122,200
- ------------------------------------------------------------------------------
8.63%, 08/01/16 180,000 162,000
==============================================================================
1,406,125
==============================================================================
INVESTMENT BANKING & BROKERAGE-0.10%
E*Trade Financial Corp.,
Sr. Unsec. Notes,
7.88%, 12/01/15 105,000 38,850
==============================================================================
MOVIES & ENTERTAINMENT-0.44%
AMC Entertainment Inc.,
Sr. Unsec. Sub. Global Notes,
8.00%, 03/01/14 180,000 111,600
- ------------------------------------------------------------------------------
Marquee Holdings Inc.,
Sr. Unsec. Disc. Global Notes,
12.00%, 08/15/14(e) 125,000 64,688
==============================================================================
176,288
==============================================================================
MULTI-LINE INSURANCE-0.05%
International Lease Finance Corp.,
Sr. Unsec. Global Notes,
6.38%, 03/15/09 20,000 19,025
==============================================================================
MULTI-SECTOR HOLDINGS-0.34%
Stena A.B. (Sweden),
Sr. Unsec. Global Notes,
7.50%, 11/01/13 195,000 134,794
==============================================================================
OFFICE SERVICES & SUPPLIES-0.16%
ACCO Brands Corp.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.63%, 08/15/15 130,000 66,300
==============================================================================
OIL & GAS EQUIPMENT & SERVICES-0.66%
Bristow Group, Inc.,
Sr. Unsec. Gtd. Global Notes,
7.50%, 09/15/17 95,000 63,650
- ------------------------------------------------------------------------------
Calfrac Holdings L.P.,
Sr. Unsec. Notes,
7.75%, 02/15/15(b) 245,000 131,075
- ------------------------------------------------------------------------------
Compagnie Generale de Geophysique-Veritas
(France),
Sr. Unsec. Gtd. Global Notes,
7.75%, 05/15/17 120,000 69,600
==============================================================================
264,325
==============================================================================
OIL & GAS EXPLORATION & PRODUCTION-4.21%
Chaparral Energy Inc.,
Sr. Unsec. Gtd. Global Notes,
8.50%, 12/01/15 140,000 32,200
- ------------------------------------------------------------------------------
8.88%, 02/01/17 305,000 70,150
- ------------------------------------------------------------------------------
Chesapeake Energy Corp.,
Sr. Unsec. Gtd. Global Notes,
6.38%, 06/15/15 420,000 329,700
- ------------------------------------------------------------------------------
6.88%, 11/15/20 100,000 73,000
- ------------------------------------------------------------------------------
Cimarex Energy Co.,
Sr. Unsec. Gtd. Notes,
7.13%, 05/01/17 85,000 67,575
- ------------------------------------------------------------------------------
Delta Petroleum Corp.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.00%, 04/01/15 575,000 120,750
- ------------------------------------------------------------------------------
Encore Acquisition Co.,
Sr. Unsec. Gtd. Sub. Global Notes,
6.00%, 07/15/15 295,000 191,750
- ------------------------------------------------------------------------------
Gaz Capital S.A. (Luxembourg),
Sr. Sec. Gtd. Notes,
8.15%, 04/11/18(b) 200,000 144,372
- ------------------------------------------------------------------------------
Newfield Exploration Co.,
Sr. Unsec. Sub. Global Notes,
7.13%, 05/15/18 170,000 134,300
- ------------------------------------------------------------------------------
Plains Exploration & Production Co.,
Sr. Unsec. Gtd. Notes,
7.75%, 06/15/15 125,000 95,625
- ------------------------------------------------------------------------------
7.63%, 06/01/18 185,000 128,575
- ------------------------------------------------------------------------------
Range Resources Corp.,
Sr. Unsec. Gtd. Sub. Notes,
7.50%, 05/15/16 135,000 118,125
- ------------------------------------------------------------------------------
SandRidge Energy, Inc.,
Sr. Unsec. Gtd. Unsub. Notes,
8.00%, 06/01/18(b) 140,000 78,050
- ------------------------------------------------------------------------------
Swift Energy Co.,
Sr. Unsec. Gtd. Notes,
7.13%, 06/01/17 195,000 113,100
==============================================================================
1,697,272
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
OIL & GAS REFINING & MARKETING-0.48%
Tesoro Corp.,
Sr. Unsec. Gtd. Unsub. Global Bonds,
6.50%, 06/01/17 $ 200,000 $ 111,000
- ------------------------------------------------------------------------------
United Refining Co.
-Series 2, Sr. Unsec. Gtd. Global Notes,
10.50%, 08/15/12 145,000 84,100
==============================================================================
195,100
==============================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.10%
Copano Energy LLC,
Sr. Unsec. Gtd. Global Notes,
8.13%, 03/01/16 330,000 242,550
- ------------------------------------------------------------------------------
Inergy L.P./Inergy Finance Corp.,
Sr. Unsec. Gtd. Global Notes,
8.25%, 03/01/16 135,000 106,650
- ------------------------------------------------------------------------------
Kinder Morgan Energy Partners L.P.,
Sr. Unsec. Putable Notes,
9.00%, 02/01/12 90,000 94,382
==============================================================================
443,582
==============================================================================
PACKAGED FOODS & MEATS-0.49%
Dole Food Co. Inc.,
Sr. Unsec. Gtd. Global Notes,
7.25%, 06/15/10 132,000 93,390
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Global Notes,
8.63%, 05/01/09 115,000 105,800
==============================================================================
199,190
==============================================================================
PAPER PACKAGING-1.31%
Caraustar Industries, Inc.,
Sr. Unsec. Unsub. Notes,
7.38%, 06/01/09 360,000 221,400
- ------------------------------------------------------------------------------
Graham Packaging Co. Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
9.88%, 10/15/14 130,000 78,650
- ------------------------------------------------------------------------------
Rock-Tenn Co.,
Sr. Unsec. Gtd. Notes,
9.25%, 03/15/16(b) 245,000 229,075
==============================================================================
529,125
==============================================================================
PAPER PRODUCTS-2.97%
Abitibi-Consolidated Co. of Canada (Canada),
Sr. Sec. Gtd. Notes,
13.75%, 04/01/11(b) 140,000 90,300
- ------------------------------------------------------------------------------
Cellu Tissue Holdings, Inc.,
Sec. Gtd. Global Notes,
9.75%, 03/15/10 182,000 144,690
- ------------------------------------------------------------------------------
Domtar Corp.,
Sr. Unsec. Gtd. Global Notes,
5.38%, 12/01/13 205,000 129,662
- ------------------------------------------------------------------------------
Exopack Holding Corp.,
Sr. Unsec. Gtd. Global Notes,
11.25%, 02/01/14 210,000 124,950
- ------------------------------------------------------------------------------
Georgia-Pacific LLC,
Sr. Unsec. Gtd. Unsub. Notes,
7.00%, 01/15/15(b) 125,000 107,500
- ------------------------------------------------------------------------------
7.13%, 01/15/17(b) 140,000 119,000
- ------------------------------------------------------------------------------
Mercer International Inc.,
Sr. Unsec. Global Notes,
9.25%, 02/15/13 537,000 271,185
- ------------------------------------------------------------------------------
Neenah Paper, Inc.,
Sr. Unsec. Gtd. Global Notes,
7.38%, 11/15/14 179,000 97,555
- ------------------------------------------------------------------------------
Verso Paper Holdings LLC/Verso Paper Inc.
-Series B, Sr. Unsec. Gtd. Sub. Global Notes,
11.38%, 08/01/16 350,000 110,250
==============================================================================
1,195,092
==============================================================================
PERSONAL PRODUCTS-0.43%
NBTY, Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
7.13%, 10/01/15 249,000 174,300
==============================================================================
PHARMACEUTICALS-0.54%
Elan Finance PLC/Elan Finance Corp. (Ireland),
Sr. Unsec. Gtd. Global Notes,
7.75%, 11/15/11 361,000 216,149
==============================================================================
PROPERTY & CASUALTY INSURANCE-0.45%
Crum & Forster Holdings Corp.,
Sr. Unsec. Unsub. Global Notes,
7.75%, 05/01/17 255,000 182,325
==============================================================================
PUBLISHING-0.91%
Dex Media Inc.,
Sr. Unsec. Disc. Global Notes,
9.00%, 11/15/13(e) 373,000 72,735
- ------------------------------------------------------------------------------
Dex Media West LLC/Dex Media West Finance Co.,
Series B, Sr. Unsec. Sub. Global Notes,
9.88%, 08/15/13 170,000 43,350
- ------------------------------------------------------------------------------
MediMedia USA Inc.,
Sr. Sub. Notes,
11.38%, 11/15/14(b) 30,000 18,300
- ------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen Finance Co.,
Sr. Unsec. Gtd. Sub. Disc. Global Notes,
12.50%, 08/01/16(e) 570,000 213,750
- ------------------------------------------------------------------------------
Reader's Digest Association Inc. (The),
Sr. Unsec. Gtd. Sub. Global Notes,
9.00%, 02/15/17 210,000 19,425
==============================================================================
367,560
==============================================================================
RAILROADS-0.20%
Kansas City Southern Railway,
Sr. Unsec. Gtd. Unsub. Notes,
8.00%, 06/01/15 100,000 81,000
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-0.59%
Amkor Technology Inc.,
Sr. Unsec. Global Notes,
7.13%, 03/15/11 $ 325,000 $ 225,469
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes,
9.25%, 06/01/16 20,000 11,600
==============================================================================
237,069
==============================================================================
SEMICONDUCTORS-3.91%
Avago Technologies Finance Pte./Avago Technologies
U.S./Avago Technologies Wireless (Singapore),
Sr. Unsec. Gtd. Global Notes,
10.13%, 12/01/13 585,000 451,181
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes,
11.88%, 12/01/15 120,000 84,450
- ------------------------------------------------------------------------------
Freescale Semiconductor Inc.,
Sr. Unsec. Gtd. Notes,
8.88%, 12/15/14 435,000 195,750
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes,
10.13%, 12/15/16(d) 290,000 121,800
- ------------------------------------------------------------------------------
MagnaChip Semiconductor S.A./MagnaChip
Semiconductor Finance Co. (South Korea),
Sr. Sec. Gtd. Global Notes,
6.88%, 12/15/11(f) 360,000 18,900
- ------------------------------------------------------------------------------
NXP BV/NXP Funding LLC (Netherlands),
Sr. Sec. Gtd. Global Notes,
7.88%, 10/15/14 570,000 223,725
- ------------------------------------------------------------------------------
Spansion Inc.,
Sr. Sec. Floating Rate Notes,
5.33%, 06/01/13(b)(c) 440,000 75,900
- ------------------------------------------------------------------------------
Viasystems Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
10.50%, 01/15/11 545,000 403,300
==============================================================================
1,575,006
==============================================================================
SPECIALTY CHEMICALS-1.14%
Huntsman International LLC,
Sr. Unsec. Gtd. Sub. Global Notes,
7.38%, 01/01/15 265,000 140,450
- ------------------------------------------------------------------------------
JohnsonDiversey Holdings Inc.
-Series B, Sr. Unsec. Sub. Disc. Global Notes,
10.67%, 05/15/13(e) 75,000 52,875
- ------------------------------------------------------------------------------
NewMarket Corp.,
Sr. Unsec. Gtd. Unsub. Global Notes,
7.13%, 12/15/16 150,000 114,000
- ------------------------------------------------------------------------------
Polypore Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
8.75%, 05/15/12 205,000 151,700
==============================================================================
459,025
==============================================================================
SPECIALTY STORES-0.92%
Michaels Stores, Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
10.00%, 11/01/14(d) 270,000 122,850
- ------------------------------------------------------------------------------
Sally Holdings LLC/Sally Capital Inc.,
Sr. Unsec. Gtd. Global Notes,
9.25%, 11/15/14(d) 285,000 247,594
==============================================================================
370,444
==============================================================================
STEEL-0.82%
Metals USA, Inc.,
Sr. Sec. Gtd. Global Notes,
11.13%, 12/01/15 185,000 111,000
- ------------------------------------------------------------------------------
Steel Capital S.A. (Russia),
Sec. Loan Participation Notes,
9.75%, 07/29/13(b) 225,000 120,375
- ------------------------------------------------------------------------------
Steel Dynamics Inc.,
Sr. Unsec. Unsub. Notes,
7.75%, 04/15/16(b) 145,000 98,600
==============================================================================
329,975
==============================================================================
THRIFTS & MORTGAGE FINANCE-0.04%
Countrywide Financial Corp.,
Sr. Unsec. Gtd. Unsub. Floating Rate Medium-Term
Notes,
4.35%, 01/05/09(c) 15,000 15,056
==============================================================================
TIRES & RUBBER-1.34%
Cooper Tire & Rubber Co.,
Sr. Unsec. Unsub. Notes,
8.00%, 12/15/19 320,000 148,800
- ------------------------------------------------------------------------------
7.63%, 03/15/27 260,000 109,200
- ------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The),
Sr. Unsec. Gtd. Unsub. Global Notes,
9.00%, 07/01/15 340,000 282,200
==============================================================================
540,200
==============================================================================
TRADING COMPANIES & DISTRIBUTORS-1.41%
Ashtead Capital Inc.,
Sec. Gtd. Notes,
9.00%, 08/15/16(b) 150,000 76,875
- ------------------------------------------------------------------------------
United Rentals North America, Inc.,
Sr. Unsec. Gtd. Global Notes,
6.50%, 02/15/12 297,000 236,115
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes,
7.75%, 11/15/13 25,000 16,625
- ------------------------------------------------------------------------------
Wesco Distribution Inc.,
Sr. Gtd. Sub. Global Notes,
7.50%, 10/15/17 360,000 238,500
==============================================================================
568,115
==============================================================================
TRUCKING-0.59%
Hertz Corp. (The),
Sr. Unsec. Gtd. Global Notes,
8.88%, 01/01/14 380,000 235,600
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-4.46%
Centennial Cellular Operating Co./Centennial
Communications Corp.,
Sr. Unsec. Gtd. Global Notes,
10.13%, 06/15/13 $ 348,000 $ 352,350
- ------------------------------------------------------------------------------
Cricket Communications Inc.,
Sr. Unsec. Gtd. Unsub. Global Notes,
9.38%, 11/01/14 60,000 54,900
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Notes,
10.00%, 07/15/15(b) 255,000 234,600
- ------------------------------------------------------------------------------
Digicel Group Ltd. (Bermuda),
Sr. Unsec. Notes,
8.88%, 01/15/15(b) 540,000 348,975
- ------------------------------------------------------------------------------
iPCS Inc.,
Sr. Sec. Gtd. Floating Rate First Lien Global
Notes,
5.32%, 05/01/13(c) 260,000 187,200
- ------------------------------------------------------------------------------
Sprint Capital Corp.,
Sr. Unsec. Gtd. Global Notes,
8.38%, 03/15/12 525,000 425,263
- ------------------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Global Notes,
6.88%, 11/15/28 90,000 54,153
- ------------------------------------------------------------------------------
VIP Finance Ireland Ltd. (Ireland),
Sec. Loan Participation Note,
8.38%, 04/30/13(b) 210,000 140,626
==============================================================================
1,798,067
==============================================================================
Total Bonds & Notes (Cost $43,558,894) 30,309,128
==============================================================================
BUNDLED SECURITIES-1.12%
INVESTMENT BANKING & BROKERAGE-1.12%
Targeted Return Index Securities Trust
-Series HY 2006-1 Sec. Bonds (Acquired 08/15/08;
Cost $595,350) (Cost $596,587)(b) 630,000 452,277
==============================================================================
<Caption>
SHARES
PREFERRED STOCKS-0.66%
INVESTMENT BANKING & BROKERAGE-0.15%
Preferred Blocker Inc.-Pfd.(b) 195 61,376
==============================================================================
PACKAGED FOODS & MEATS-0.51%
Heinz (H.J.) Finance Co.-Series B, 8.00%-Pfd.(b) 2 206,125
==============================================================================
Total Preferred Stocks (Cost $261,376) 267,501
==============================================================================
COMMON STOCKS & OTHER EQUITY INTERESTS-0.58%
BROADCASTING-0.52%
Adelphia Communications Corp.,(g) -- 14,965
- ------------------------------------------------------------------------------
Adelphia Recovery Trust-Series ACC-1(g) 318,570 11,150
- ------------------------------------------------------------------------------
Adelphia Recovery Trust-Series ARAHOVA(g) 109,170 27,293
- ------------------------------------------------------------------------------
Sirius XM Radio Inc. Wts., expiring 03/15/10(h) 182 47
- ------------------------------------------------------------------------------
Time Warner Cable, Inc.-Class A(i) 6,323 135,628
- ------------------------------------------------------------------------------
Virgin Media Inc. 4,129 20,604
==============================================================================
209,687
==============================================================================
CONSTRUCTION MATERIALS-0.00%
Dayton Superior Corp.-Wts., expiring 06/15/09
(Acquired 08/07/00; Cost $0)(b)(h) 175 0
==============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.00%
XO Holdings Inc.(i) 33 5
- ------------------------------------------------------------------------------
XO Holdings Inc.-Class A-Wts., expiring
01/16/10(h) 1,533 6
- ------------------------------------------------------------------------------
XO Holdings Inc.-Class B-Wts., expiring
01/16/10(h) 1,148 5
- ------------------------------------------------------------------------------
XO Holdings Inc.-Class C-Wts., expiring
01/16/10(h) 1,148 0
==============================================================================
16
==============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.06%
iPCS, Inc.(i) 3,489 23,935
==============================================================================
Total Common Stocks & Other Equity Interests
(Cost $503,823) 233,638
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
SENIOR SECURED FLOATING RATE INTEREST LOANS-0.13%
AIRLINES-0.13%
Evergreen International Aviation, Inc.
Sr. Gtd. First Lien Term Loan,
9.00%, 10/31/11 (Cost $96,249)(c) $ 96,249 53,899
==============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-19.60%
Liquid Assets Portfolio-Institutional Class(j) 3,948,020 3,948,020
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(j) 3,948,020 3,948,020
==============================================================================
Total Money Market Funds (Cost $7,896,040) 7,896,040
==============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-97.32% (Cost $52,912,969) 39,212,483
==============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-3.99%
Liquid Assets Portfolio-Institutional Class (Cost
$1,607,461)(j)(k) 1,607,461 1,607,461
==============================================================================
TOTAL INVESTMENTS-101.31% (Cost $54,520,430) 40,819,944
==============================================================================
OTHER ASSETS LESS LIABILITIES-(1.31)% (528,232)
==============================================================================
NET ASSETS-100.00% $40,291,712
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. HIGH YIELD FUND
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Disc. - Discounted
Gtd. - Guaranteed
Jr. - Junior
Pfd. - Preferred
PIK - Payment in Kind
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at December 31, 2008 was $6,161,219, which represented 15.29% of the
Fund's Net Assets.
(c) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2008.
(d) All or a portion of this security was out on loan at December 31, 2008.
(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) Defaulted security. Currently, the issuer is partially or fully in default
with respect to interest payments. The aggregate market value of these
securities at December 31, 2008 was $74,043, which represented 0.18% of
the Fund's Net Assets.
(g) Non-income producing security acquired as part of the Adelphia
Communications bankruptcy reorganization.
(h) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(i) Non-income producing security.
(j) The money market fund and the Fund are affiliated by having the same
investment advisor.
(k) 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 1J.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$45,016,929)* $ 31,316,443
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 9,503,501
======================================================
Total investments (Cost
$54,520,430) 40,819,944
======================================================
Cash 203,458
- ------------------------------------------------------
Receivables for:
Investments sold 7,030
- ------------------------------------------------------
Fund shares sold 89,283
- ------------------------------------------------------
Dividends and Interest 1,043,344
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 24,849
======================================================
Total assets 42,187,908
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 111,594
- ------------------------------------------------------
Fund shares reacquired 50,948
- ------------------------------------------------------
Credit default swap contracts close-
out 24,885
- ------------------------------------------------------
Dividends 158
- ------------------------------------------------------
Collateral upon return of securities
loaned 1,607,461
- ------------------------------------------------------
Accrued fees to affiliates 25,830
- ------------------------------------------------------
Accrued other operating expenses 45,422
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 29,886
- ------------------------------------------------------
Unrealized depreciation on swap
agreements 12
======================================================
Total liabilities 1,896,196
======================================================
Net assets applicable to shares
outstanding $ 40,291,712
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 65,436,713
- ------------------------------------------------------
Undistributed net investment income 4,413,973
- ------------------------------------------------------
Undistributed net realized gain (loss) (15,858,476)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (13,700,498)
======================================================
$ 40,291,712
______________________________________________________
======================================================
NET ASSETS:
Series I $ 39,918,141
______________________________________________________
======================================================
Series II $ 373,571
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 10,828,827
______________________________________________________
======================================================
Series II 101,418
______________________________________________________
======================================================
Series I:
Net asset value per share $ 3.69
______________________________________________________
======================================================
Series II:
Net asset value per share $ 3.68
______________________________________________________
======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $1,596,910 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Interest $ 4,618,003
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $121,666) 170,937
- ------------------------------------------------------
Dividends 23,260
======================================================
Total investment income 4,812,200
======================================================
EXPENSES:
Advisory fees 296,663
- ------------------------------------------------------
Administrative services fees 162,575
- ------------------------------------------------------
Custodian fees 11,932
- ------------------------------------------------------
Distribution fees -- Series II 1,390
- ------------------------------------------------------
Transfer agent fees 12,732
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 17,066
- ------------------------------------------------------
Professional services fees 52,310
- ------------------------------------------------------
Other 21,521
======================================================
Total expenses 576,189
======================================================
Less: Fees waived (125,937)
======================================================
Net expenses 450,252
======================================================
Net investment income 4,361,948
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (5,301,923)
- ------------------------------------------------------
Foreign currencies 1,616
- ------------------------------------------------------
Swap agreements 99,034
======================================================
(5,201,273)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (11,505,458)
- ------------------------------------------------------
Swap agreements 46,085
======================================================
(11,459,373)
======================================================
Net realized and unrealized gain (loss) (16,660,646)
======================================================
Net increase (decrease) in net assets
resulting from operations $(12,298,698)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,361,948 $ 4,335,824
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (5,201,273) 773,036
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (11,459,373) (4,039,148)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (12,298,698) 1,069,712
========================================================================================================
Distributions to shareholders from net investment income:
Series I (4,318,865) (3,849,927)
- --------------------------------------------------------------------------------------------------------
Series II (48,535) (46,750)
========================================================================================================
Total distributions from net investment income (4,367,400) (3,896,677)
========================================================================================================
Share transactions-net:
Series I 5,152,523 (4,318,662)
- --------------------------------------------------------------------------------------------------------
Series II (85,487) (218,532)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions 5,067,036 (4,537,194)
========================================================================================================
Net increase (decrease) in net assets (11,599,062) (7,364,159)
========================================================================================================
NET ASSETS:
Beginning of year 51,890,774 59,254,933
========================================================================================================
End of year (includes undistributed net investment income of $4,413,973
and $4,329,317, respectively) $ 40,291,712 $51,890,774
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is a high level of current income.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
AIM V.I. HIGH YIELD FUND
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. HIGH YIELD FUND
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.
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. SWAP AGREEMENTS -- The Fund may enter into various swap transactions,
including interest rate, index, currency exchange rate and credit default
swap contracts ("CDS") for investment purposes or to manage interest rate,
currency or credit risk.
Interest rate, index, and currency exchange rate swap agreements are
two-party contracts entered into primarily to exchange the returns (or
differentials in rates of returns) earned or realized on particular
predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to
a notional amount, i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index.
A CDS is an agreement between two parties ("Counterparties") to exchange
the credit risk of an issuer. A buyer of a CDS is said to buy protection
by paying a fixed payment over the life of the agreement and in some
situations an upfront payment 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 eligible bonds issued by the 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 a fixed payment over the life of the
agreement and an upfront payment, if applicable. 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 "par value" or the full notional
value of the referenced obligation, and the Fund would receive the
eligible bonds issued by the reference entity. In turn, these bonds may be
sold in order to realize a recovery value. Alternatively, the seller of
the CDS and its counterparty may agree to net the notional amount and the
market value of the bonds and make a cash payment equal to the difference
to the buyer of protection. 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. In connection with these agreements, cash
and securities may be identified as collateral in accordance with the
terms of the respective swap agreements to provide assets of value and
recourse in the event of default under the swap agreement or
bankruptcy/insolvency of a party to the swap agreement.
Implied credit spreads represent the current level at which protection
could be bought or sold given the terms of the existing CDS contract and
serve as an indicator of the current status of the payment/performance
risk of the CDS. An implied spread that has widened or increased since
entry into the initial contract may indicate a deteriorating credit
profile and increased risk of default for the reference entity. A
declining or narrowing spread may indicate an improving credit profile or
decreased risk of default for the reference entity. Alternatively, credit
spreads may increase or decrease reflecting the general tolerance for risk
in the credit markets.
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 accrues for the fixed payment
stream and amortizes upfront payments, if any, 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.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
AIM V.I. HIGH YIELD FUND
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$125,937.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $112,575 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
AIM V.I. HIGH YIELD FUND
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- -------------------------------------------------------
Level 1 $ 9,683,731 $ --
- -------------------------------------------------------
Level 2 30,446,576 (12)
- -------------------------------------------------------
Level 3 689,637 --
=======================================================
$40,819,944 $(12)
_______________________________________________________
=======================================================
</Table>
* Other investments include credit default swap contracts, which are included at
unrealized appreciation/(depreciation).
NOTE 4--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,213
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 6--CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE
NOTIONAL UNREALIZED
BUY/SELL (PAY)/RECEIVE EXPIRATION AMOUNT APPRECIATION
REFERENCE ENTITY COUNTERPARTY PROTECTION FIXED RATE DATE (000) (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
Wegerhaeuser Co. UBS AG Buy (2.25)% 12/20/13 $195 $(12)
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
AIM V.I. HIGH YIELD FUND
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $4,367,400 $3,896,677
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 4,452,209
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (14,093,095)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (12)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (38,236)
- ------------------------------------------------------------------------------------------------
Post-October loss deferrals (2,037,221)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (13,428,646)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 65,436,713
================================================================================================
Total net assets $ 40,291,712
________________________________________________________________________________________________
================================================================================================
</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 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.
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 to utilizing
$11,026,795 of capital loss carryforward in the fiscal year ending December 31,
2009.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2010 $10,225,025
- -----------------------------------------------------------------------------------------------
December 31, 2016 3,203,621
===============================================================================================
Total capital loss carryforward $13,428,646
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $38,089,543 and
$40,194,349, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 608,872
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (14,701,967)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(14,093,095)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $54,913,039.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of swap agreements, on
December 31, 2008, undistributed net investment income was increased by $90,108
and undistributed net realized gain (loss) was decreased by $90,108. This
reclassification had no effect on the net assets of the Fund.
AIM V.I. HIGH YIELD FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 6,943,158 $ 35,095,084 4,258,577 $ 26,501,855
- ------------------------------------------------------------------------------------------------------------------------
Series II 20,816 115,600 6,878 42,592
========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,251,845 4,318,865 669,553 3,849,927
- ------------------------------------------------------------------------------------------------------------------------
Series II 14,068 48,535 8,159 46,750
========================================================================================================================
Reacquired:
Series I (6,290,819) (34,261,426) (5,538,034) (34,670,444)
- ------------------------------------------------------------------------------------------------------------------------
Series II (49,870) (249,622) (49,587) (307,874)
========================================================================================================================
Net increase (decrease) in share activity 1,889,198 $ 5,067,036 (644,454) $ (4,537,194)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
NOTE 11--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008. Management is
currently in the process of determining the impact of the standard on the Fund's
disclosures in the financial statements.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
Net gains
(losses) on
NET ASSET securities Dividends
VALUE, NET (both Total from from net Net asset
BEGINNING OF INVESTMENT realized and investment investment value, end Total
PERIOD INCOME(a) unrealized) operations income of period Return(b)
- ---------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $5.74 $0.49 $(2.00) $(1.51) $(0.54) $3.69 (25.69)%
Year ended 12/31/07 6.12 0.46 (0.38) 0.08 (0.46) 5.74 1.24
Year ended 12/31/06 6.03 0.45 0.19 0.64 (0.55) 6.12 10.74
Year ended 12/31/05 6.45 0.43 (0.26) 0.17 (0.59) 6.03 2.72
Year ended 12/31/04 5.97 0.42 0.25(e) 0.67 (0.19) 6.45 11.25(f)
SERIES II
Year ended 12/31/08 5.72 0.47 (1.99) (1.52) (0.52) 3.68 (26.00)
Year ended 12/31/07 6.09 0.44 (0.38) 0.06 (0.43) 5.72 1.01
Year ended 12/31/06 6.00 0.43 0.19 0.62 (0.53) 6.09 10.41
Year ended 12/31/05 6.43 0.41 (0.26) 0.15 (0.58) 6.00 2.43
Year ended 12/31/04 5.95 0.41 0.25(e) 0.66 (0.18) 6.43 11.14(f)
_____________________________________________________________________________________________________________________
=====================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME
END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- ------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $39,918 0.95%(d) 1.22%(d) 9.19%(d) 85%
Year ended 12/31/07 51,225 0.96 1.15 7.42 113
Year ended 12/31/06 58,336 0.96 1.18 7.22 135
Year ended 12/31/05 54,731 1.01 1.16 6.58 69
Year ended 12/31/04 96,602 1.04 1.04 6.79 131
SERIES II
Year ended 12/31/08 374 1.20(d) 1.47(d) 8.94(d) 85
Year ended 12/31/07 666 1.21 1.40 7.17 113
Year ended 12/31/06 919 1.21 1.43 6.97 135
Year ended 12/31/05 1,556 1.22 1.41 6.37 69
Year ended 12/31/04 1,072 1.24 1.29 6.59 131
____________________________________________________________________________________________________________
============================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios are based on average daily net assets (000's omitted) of $46,910 and
$556 for Series I and Series II shares, respectively.
(e) Includes net increase from payments by affiliates of $0.02 and $0.01 for
Series I and Series II shares, respectively.
(f) 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% and 10.96% for Series I and Series II shares,
respectively.
AIM V.I. HIGH YIELD 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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $747.00 $4.17 $1,020.36 $4.82 0.95%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 745.90 5.27 1,019.10 6.09 1.20
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. HIGH YIELD FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. HIGH YIELD FUND
[INVESCO AIM LOGO] AIM V.I. INTERNATIONAL GROWTH FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. INTERNATIONAL GROWTH FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY nomic conditions deteriorated and turmoil
in the financials sector worsened. Asian
The performance of global equity markets during 2008 was turbulent. Most markets equities were volatile as well, falling
registered double-digit losses as global growth slowed and a number of financial sharply toward the end of the year.(1)
institutions worldwide fell victim to the broadening credit crisis.(triangle) While there were sporadic attempts to
rally, weakness remained the dominant
For the year ended December 31, 2008, Series I shares of AIM V.I. International trend during the year.
Growth Fund, excluding variable product issuer charges, returned -40.38%, compared with
the MSCI EAFE Growth Index and the MSCI EAFE Index, which returned -42.70% and -43.38%, Emerging markets stocks tumbled from
respectively.(triangle) An underweight exposure to materials, the market's weakest record highs(1) as global recession
sector, and a higher-than-average cash position were the main drivers of relative concerns deepened and commodity prices
outperformance. fell sharply.(2) There were concerns that
some countries could start to default on
Your Fund's long-term performance appears later in this report. their foreign loans.
FUND VS. INDEXES Series I shares of AIM V.I.
International Growth Fund, excluding
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. variable product issuer charges, did not
If variable product issuer charges were included, returns would be lower. go unscathed by this global downturn, but
fared better than both the Fund's
Series I Shares -40.38% style-specific and broad market indexes,
Series II Shares -40.55 the MSCI EAFE Growth Index and the MSCI
MSCI EAFE Index(triangle) (Broad Market Index) -43.38 EAFE Index, respectively.
MSCI EAFE Growth Index(triangle) (Style-Specific Index) -42.70
Lipper VUF International Growth Funds Index(triangle) (Peer Group Index) -45.71 The Fund's relative results suffered
early in the year due to its significant
(triangle) Lipper Inc. underweight position in the materials
======================================================================================= sector versus the MSCI EAFE Growth Index.
In our view, underlying assumptions used
HOW WE INVEST We believe disciplined sell decisions to justify the sector's dramatic price
are key to successful investing. We appreciation over the last several years
When selecting stocks for your Fund, we consider selling a stock for one of the were unreasonably optimistic and did not
employ a disciplined investment strategy following reasons: support extreme valuations. The latter.
that emphasizes fundamental research, part of the year brought a dramatic
supported by both quantitative analysis o A company's fundamentals deteriorate, reversal of this upward trend, as the
and portfolio construction techniques. Our or it posts disappointing earnings. sector declined sharply as a result of
EQV (Earnings, Quality, Valuation) falling commodity prices. Our limited
strategy focuses primarily on identifying o A stock's price seems overvalued. exposure to this volatile sector,
quality companies that have experienced, particularly the metals and mining
or exhibit potential for, accelerating or o A more attractive opportunity becomes industry, contributed favorably to
above-average earnings growth but whose available. relative results. A higher-than-average
stock prices do not fully reflect these cash position of approximately 15% in a
attributes. MARKET CONDITIONS AND YOUR FUND declining market contributed favorably as
well. The current level of cash should not
While research responsibilities within Many factors contributed to the negative be seen as a new defensive long-term
the portfolio management team are focused performance of most major market indexes position.
by geographic region, we select for the year ended December 31, 2008.(1)
investments for the Fund by using a The chief catalyst was the ongoing Severe declines across all markets and
bottom-up investment approach, which means subprime loan crisis and its far-reaching sectors resulted in few stocks performing
that we construct the Fund primarily on a effects on overall credit availability. positively. Two stocks that held up well
stock-by-stock basis. We focus on the Additionally, high crude oil prices,(2) over the year and contributed positively
strengths of individual companies rather falling home values and the weak U.S. to absolute Fund returns included the
than sectors, countries or market-cap dollar placed significant pressure on the
trends. purchasing power of U.S. consumers.
During the year, European equities
remained under pressure as macroeco-
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Health Care 15.8% 1. United Kingdom 16.6% 1. Roche Holding AG 3.5%
Consumer Staples 13.5 2. Switzerland 9.4 2. Nestle S.A. 2.9
Consumer Discretionary 12.3 3. Japan 7.9 3. Imperial Tobacco Group PLC 2.9
Information Technology 9.7 4. Germany 7.5 4. Teva Pharmaceutical
Industrials 8.9 5. France 4.8 Industries Ltd.-ADR 2.9
Telecommunication Services 7.8 ========================================== 5. Telefonica S.A. 2.5
Financials 6.3 6. Bayer AG 2.0
Energy 6.1 ========================================== 7. Total S.A. 1.9
Materials 4.0 Total Net Assets $1.2 billion 8. Anheuser-Busch InBev N.V. 1.9
Utilities 1.0 9. Vodafone Group PLC 1.9
Money Market Funds Total Number of Holdings* 73 10. Shire PLC 1.8
Plus Other Assets Less Liabilities 14.6 ========================================== ==========================================
========================================== 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. INTERNATIONAL GROWTH FUND
Indonesian telecommunication services The views and opinions expressed in CLAS OLSSON
company TELEKOM INDONESIA and U.K.-based management's discussion of Fund Senior portfolio manager
marketing firm WPP GROUP. We sold our performance are those of Invesco Aim [OLSSON and head of Invesco Aim's
holdings in WPP Group before the end of Advisors, Inc. These views and opinions PHOTO] International Investment
the year covered by this report. are subject to change at any time based on Management Unit, is lead manager
factors such as market and economic of AIM V.I. International Growth
Our stock selection across the consumer conditions. These views and opinions may Fund with respect to the Fund's
discretionary and consumer staples sectors not be relied upon as investment advice or investments in Europe and Canada. He
detracted from Fund returns. German recommendations, or as an offer for a joined Invesco Aim in 1994. Mr. Olsson
automobile company PORSCHE, German sports particular security. The information is also earned a B.B.A. from The University
apparel manufacturer PUMA and Belgian not a complete analysis of every aspect of of Texas at Austin.
brewer ANHUESER BUSCH-INBEV disappointed any market, country, industry, security or
over the year. Singaporean marine rig the Fund. Statements of fact are from BARRETT SIDES
manufacturer KEPPEL and Norwegian oil and sources considered reliable, but Invesco Senior portfolio manager, is
gas company PETROLEUM GEO SERVICES Aim Advisors, Inc. makes no representation [SIDES lead manager of AIM V.I.
disappointed as well. We believe these or warranty as to their completeness or PHOTO] International Growth Fund with
stocks were hit disproportionately despite accuracy. Although historical performance respect to the Fund's
their strong fundamentals. This was is no guarantee of future results, these investments in the Asia Pacific
because the stocks rose strongly in 2007 insights may help you understand our region and Latin America. He joined
and early 2008; when investors sought to investment management philosophy. Invesco Aim in 1990. Mr. Sides earned a
raise cash late in 2008, many chose to B.S. in economics from Bucknell University
sell these previously strong performing See important Fund and index disclosures and an M.B.A. in international business
stocks and take their profits. later in this report. from the University of St. Thomas.
Our overall EQV strategy remained SHUXIN CAO
unchanged despite market volatility. Over Chartered Financial Analyst,
the year, our exposure to the [CAO senior portfolio manager, is
telecommunication services and health care PHOTO] manager of AIM V.I.
sectors increased markedly as we added International Growth Fund. Mr.
stocks with robust growth and reasonable Cao joined Invesco Aim in 1997.
valuations to the portfolio. In contrast, He graduated from Tianjin Foreign Language
our exposure to the financials and Institute with a B.A. in English. Mr. Cao
industrials sectors was reduced also earned an M.B.A. from Texas A&M
significantly over the year. University and is a Certified Public
Accountant.
From a regional perspective, we
modestly increased the Fund's exposure to MATTHEW DENNIS
Europe as we uncovered attractive Chartered Financial Analyst,
investment opportunities across the U.K. [DENNIS portfolio manager, is manager of
Conversely, we reduced our exposure to PHOTO] AIM V.I. International Growth
Asia and Latin America as we decreased or Fund. Mr. Dennis joined Invesco
eliminated select holdings in South Korea, Aim in 2000. He earned a B.A. in
Taiwan, Brazil and Mexico. We also trimmed economics from The University of Texas at
back our exposure to Japan as we believe Austin and an M.S. in finance from Texas
prospects for near-term improvement are A&M University.
relatively bleak. We decreased the Fund's
overall emerging markets exposure over the JASON HOLZER
year as well. Chartered Financial Analyst,
[HOLZER senior portfolio manager, is
Volatile markets can test an investor's PHOTO] manager of AIM V.I.
resolve, and 2008 was one of the most International Growth Fund. Mr.
turbulent periods in many years. However, Holzer joined Invesco Aim in
remember that market turbulence can create 1996. He earned a B.A. in quantitative
investment opportunities. economics and an M.S. in engineering
economic systems from Stanford University.
We welcome new investors who joined the
Fund during the year, and we would like to Assisted by the Asia Pacific/Latin America
express to all our shareholders our and Europe/Canada Teams
appreciation for your continued investment
in AIM V.I. International Growth Fund.
(1) Lipper Inc.
(2) Bloomberg L.P.
AIM V.I. INTERNATIONAL GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. INTERNATIONAL GROWTH FUND, A
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
COMPARABLE FUTURE RESULTS; CURRENT FUNDS, IS CURRENTLY OFFERED THROUGH
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INSURANCE COMPANIES ISSUING VARIABLE
Inception (5/5/93) 5.96% CONTACT YOUR VARIABLE PRODUCT ISSUER OR PRODUCTS. YOU CANNOT PURCHASE SHARES OF
10 Years 1.99 FINANCIAL ADVISOR FOR THE MOST RECENT THE FUND DIRECTLY. PERFORMANCE FIGURES
5 Years 5.10 MONTH-END VARIABLE PRODUCT PERFORMANCE. GIVEN REPRESENT THE FUND AND ARE NOT
1 Year -40.38 PERFORMANCE FIGURES REFLECT FUND EXPENSES, INTENDED TO REFLECT ACTUAL VARIABLE
REINVESTED DISTRIBUTIONS AND CHANGES IN PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND CHARGES, EXPENSES AND FEES ASSESSED IN
10 Years 1.73% PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU CONNECTION WITH A VARIABLE PRODUCT. SALES
5 Years 4.85 MAY HAVE A GAIN OR LOSS WHEN YOU SELL CHARGES, EXPENSES AND FEES, WHICH ARE
1 Year -40.55 SHARES. DETERMINED BY THE VARIABLE PRODUCT
========================================== ISSUERS, WILL VARY AND WILL LOWER THE
THE NET ANNUAL FUND OPERATING EXPENSE TOTAL RETURN.
SERIES II SHARES' INCEPTION DATE IS RATIO SET FORTH IN THE MOST RECENT FUND
SEPTEMBER 19, 2001. RETURNS SINCE THAT PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
DATE ARE HISTORICAL. ALL OTHER RETURNS ARE FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
THE BLENDED RETURNS OF THE HISTORICAL 1.07% AND 1.32%, RESPECTIVELY.(1) THE PRODUCT CHARGES, IS AVAILABLE ON THE
PERFORMANCE OF SERIES II SHARES SINCE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO INVESCO AIM AUTOMATED INFORMATION LINE,
THEIR INCEPTION AND THE RESTATED SET FORTH IN THE MOST RECENT FUND 866 702 4402. AS MENTIONED ABOVE, FOR THE
HISTORICAL PERFORMANCE OF SERIES I SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT MOST RECENT MONTH-END PERFORMANCE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES FOR SERIES I AND SERIES II SHARES WAS INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
II SHARES) ADJUSTED TO REFLECT THE RULE 1.08% AND 1.33%, RESPECTIVELY. THE EXPENSE CONTACT YOUR VARIABLE PRODUCT ISSUER OR
12B-1 FEES APPLICABLE TO SERIES II SHARES. RATIOS PRESENTED ABOVE MAY VARY FROM THE FINANCIAL ADVISOR.
THE INCEPTION DATE OF SERIES I SHARES IS EXPENSE RATIOS PRESENTED IN OTHER SECTIONS
MAY 5, 1993. OF THIS REPORT THAT ARE BASED ON EXPENSES (1) Total annual operating expenses less
INCURRED DURING THE PERIOD COVERED BY THIS contractual advisory fee waivers by
THE PERFORMANCE OF THE FUND'S SERIES I REPORT. the advisor in effect through at least
AND SERIES II SHARE CLASSES WILL DIFFER April 30, 2010. See current prospectus
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. for more information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - OLDEST SHARE CLASS SINCE INCEPTION
Index data from 4/30/93, Fund data from 5/5/93
AIM V.I.
International
Growth Fund- MSCI EAFE
Date Series I Shares MSCI EAFE Index(1) Growth 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
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
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
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
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
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
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 41528 32094 24403
1/08 37861 29129 22158
2/08 38122 29546 22760
3/08 37951 29235 22411
4/08 39249 30822 23517
5/08 39767 31122 24060
6/08 36542 28577 22416
7/08 35716 27660 21634
8/08 34394 26539 20605
9/08 30814 22702 17502
10/08 24799 18121 14039
11/08 23428 17141 13145
12/08 24766 18172 13984
====================================================================================================================================
AIM V.I. INTERNATIONAL GROWTH FUND
AIM V.I. INTERNATIONAL GROWTH FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Investing in developing countries can add The MSCI EAFE--REGISTERED TRADEMARK-- The Chartered Financial
additional risk, such as high rates of INDEX is a free float-adjusted market Analyst--REGISTERED TRADEMARK--
inflation or sharply devalued currencies capitalization index that is designed to (CFA--REGISTERED TRADEMARK--) designation
against the U.S. dollar. Transaction costs measure developed market equity is a globally recognized standard for
are often higher, and there may be delays performance, excluding the U.S. and measuring the competence and integrity of
in settlement procedures. Canada. investment professionals.
Prices of equity securities change in The MSCI EAFE--REGISTERED TRADEMARK-- CPA--REGISTERED TRADEMARK-- and
response to many factors, including the GROWTH INDEX is an unmanaged index Certified Public Accountant--REGISTERED
historical and prospective earnings of the considered representative of growth stocks TRADEMARK-- are trademarks owned by the
issuer, the value of its assets, general of Europe, Australasia and the Far East. American Institute of Certified Public
economic conditions, interest rates, Accountants.
investor perceptions and market liquidity. The LIPPER VUF INTERNATIONAL GROWTH
FUNDS INDEX is an equally weighted The returns shown in management's
Foreign securities have additional representation of the largest variable discussion of Fund performance are based
risks, including exchange rate changes, insurance underlying funds in the Lipper on net asset values calculated for
political and economic upheaval, relative International Growth Funds category. These shareholder transactions. Generally
lack of information, relatively low market funds invest at least 75% of their equity accepted accounting principles require
liquidity, and the potential lack of assets in companies strictly outside the adjustments to be made to the net assets
strict financial and accounting controls U.S. and typically have an above-average of the Fund at period end for financial
and standards. price-to-cash flow ratio, price-to-book reporting purposes, and as such, the net
ratio and three-year sales-per-share asset values for shareholder transactions
There is no guarantee that the growth value compared to the S&P/Citigroup and the returns based on those net asset
investment techniques and risk analysis World ex-U.S. BMI. values may differ from the net asset
used by the Fund's portfolio managers will values and returns reported in the
produce the desired results. The Fund is not managed to track the Financial Highlights. Additionally, the
performance of any particular index, returns and net asset values shown
The prices of securities held by the including the indexes defined here, and throughout this report are at the Fund
Fund may decline in response to market consequently, the performance of the Fund level only and do not include variable
risks. may deviate significantly from the product issuer charges. If such charges
performance of the indexes. 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. MSCI Inc. and Standard & Poor's.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-82.45%
AUSTRALIA-3.20%
BHP Billiton Ltd. 885,698 $ 19,022,533
- ---------------------------------------------------------------------------------
Cochlear Ltd. 374,436 15,032,254
- ---------------------------------------------------------------------------------
QBE Insurance Group Ltd. 304,823 5,650,425
=================================================================================
39,705,212
=================================================================================
BELGIUM-1.87%
Anheuser-Busch InBev N.V.(b) 612,336 3,421
- ---------------------------------------------------------------------------------
Anheuser-Busch InBev N.V.-Ctfs. 995,050 23,181,605
=================================================================================
23,185,026
=================================================================================
CANADA-2.21%
Canadian National Railway Co. 243,088 8,959,081
- ---------------------------------------------------------------------------------
Canadian Natural Resources Ltd. 215,353 8,618,368
- ---------------------------------------------------------------------------------
Suncor Energy, Inc. 502,350 9,810,411
=================================================================================
27,387,860
=================================================================================
DENMARK-1.62%
Novo Nordisk A.S.-Class B 392,287 20,059,520
=================================================================================
FINLAND-0.96%
Nokia Oyj 765,460 11,924,504
=================================================================================
FRANCE-4.83%
Axa S.A. 661,958 14,829,828
- ---------------------------------------------------------------------------------
BNP Paribas 295,112 12,469,426
- ---------------------------------------------------------------------------------
Cap Gemini S.A. 230,984 8,946,137
- ---------------------------------------------------------------------------------
Total S.A. 431,681 23,648,537
=================================================================================
59,893,928
=================================================================================
GERMANY-5.19%
Bayer AG 419,635 24,771,077
- ---------------------------------------------------------------------------------
Deutsche Boerse AG 86,990 6,366,450
- ---------------------------------------------------------------------------------
Merck KGaA 209,312 19,122,550
- ---------------------------------------------------------------------------------
Puma AG Rudolf Dassler Sport 70,656 14,106,595
=================================================================================
64,366,672
=================================================================================
GREECE-0.62%
OPAP S.A. 265,710 7,675,252
=================================================================================
HONG KONG-2.84%
Esprit Holdings Ltd. 2,085,300 11,886,202
- ---------------------------------------------------------------------------------
Hutchison Whampoa Ltd. 3,163,000 15,955,016
- ---------------------------------------------------------------------------------
Li & Fung Ltd. 4,310,000 7,385,155
=================================================================================
35,226,373
=================================================================================
INDIA-2.49%
Bharat Heavy Electricals Ltd. 333,487 9,431,884
- ---------------------------------------------------------------------------------
Infosys Technologies Ltd. 928,763 21,471,723
=================================================================================
30,903,607
=================================================================================
INDONESIA-0.71%
PT Telekomunikasi Indonesia 13,822,000 8,812,123
=================================================================================
IRELAND-0.84%
CRH PLC 409,270 10,379,181
=================================================================================
ISRAEL-2.86%
Teva Pharmaceutical Industries Ltd.-ADR 831,725 35,406,533
=================================================================================
ITALY-3.28%
Eni S.p.A. 914,516 21,775,505
- ---------------------------------------------------------------------------------
Finmeccanica S.p.A. 1,223,677 18,836,099
=================================================================================
40,611,604
=================================================================================
JAPAN-7.95%
Denso Corp. 393,200 6,535,774
- ---------------------------------------------------------------------------------
Fanuc Ltd. 253,200 17,992,457
- ---------------------------------------------------------------------------------
Hoya Corp. 672,400 11,671,168
- ---------------------------------------------------------------------------------
Keyence Corp. 96,300 19,701,714
- ---------------------------------------------------------------------------------
Nidec Corp. 395,700 15,375,146
- ---------------------------------------------------------------------------------
Nintendo Co., Ltd. 28,700 11,017,278
- ---------------------------------------------------------------------------------
Toyota Motor Corp. 499,300 16,329,991
=================================================================================
98,623,528
=================================================================================
LUXEMBOURG-0.03%
Reinet Investments S.C.A.(b) 42,917 419,626
=================================================================================
MEXICO-3.65%
America Movil S.A.B. de C.V.-Series L-ADR 678,789 21,035,671
- ---------------------------------------------------------------------------------
Desarrolladora Homex S.A. de C.V.-ADR(b) 320,959 7,327,494
- ---------------------------------------------------------------------------------
Grupo Televisa S.A.-ADR 924,539 13,812,613
- ---------------------------------------------------------------------------------
Urbi, Desarrollos Urbanos, S.A. de C.V.(b) 2,261,200 3,114,544
=================================================================================
45,290,322
=================================================================================
NETHERLANDS-1.95%
Heineken Holding N.V. 428,944 12,339,765
- ---------------------------------------------------------------------------------
TNT N.V. 618,023 11,878,382
=================================================================================
24,218,147
=================================================================================
NORWAY-0.27%
Petroleum Geo-Services A.S.A.(b) 816,963 3,356,799
=================================================================================
PHILIPPINES-1.02%
Philippine Long Distance Telephone Co. 275,770 12,676,412
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. INTERNATIONAL GROWTH FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
SINGAPORE-2.75%
Keppel Corp. Ltd. 2,532,000 $ 7,734,003
- ---------------------------------------------------------------------------------
Singapore Technologies Engineering Ltd. 4,594,000 7,657,508
- ---------------------------------------------------------------------------------
United Overseas Bank Ltd. 2,050,000 18,649,805
=================================================================================
34,041,316
=================================================================================
SPAIN-3.21%
Banco Santander S.A. 854,680 8,288,683
- ---------------------------------------------------------------------------------
Telefonica S.A. 1,396,128 31,446,843
=================================================================================
39,735,526
=================================================================================
SWITZERLAND-9.39%
Nestle S.A. 928,728 36,530,662
- ---------------------------------------------------------------------------------
Roche Holding AG 283,396 43,537,310
- ---------------------------------------------------------------------------------
Sonova Holding AG 262,901 15,828,974
- ---------------------------------------------------------------------------------
Syngenta AG 106,003 20,495,126
=================================================================================
116,392,072
=================================================================================
TAIWAN-1.62%
Hon Hai Precision Industry Co., Ltd. 3,232,312 6,377,320
- ---------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR 1,733,482 13,694,508
=================================================================================
20,071,828
=================================================================================
TURKEY-0.50%
Akbank T.A.S. 1,965,451 6,147,423
=================================================================================
UNITED KINGDOM-16.59%
Aviva PLC 936,302 5,377,855
- ---------------------------------------------------------------------------------
British American Tobacco PLC 193,979 5,114,366
- ---------------------------------------------------------------------------------
Capita Group PLC 1,052,386 11,378,117
- ---------------------------------------------------------------------------------
Compass Group PLC 3,771,300 18,990,041
- ---------------------------------------------------------------------------------
Imperial Tobacco Group PLC 1,315,887 35,668,518
- ---------------------------------------------------------------------------------
Informa PLC 2,007,618 7,212,445
- ---------------------------------------------------------------------------------
International Power PLC 3,615,924 12,739,482
- ---------------------------------------------------------------------------------
Reckitt Benckiser Group PLC 533,574 20,170,387
- ---------------------------------------------------------------------------------
Reed Elsevier PLC 1,617,940 11,931,878
- ---------------------------------------------------------------------------------
Shire PLC 1,482,008 21,991,364
- ---------------------------------------------------------------------------------
Tesco PLC 4,147,494 21,925,924
- ---------------------------------------------------------------------------------
Vodafone Group PLC 11,304,622 23,092,243
- ---------------------------------------------------------------------------------
WPP PLC 1,696,678 10,035,829
=================================================================================
205,628,449
=================================================================================
Total Common Stocks & Other Equity Interests
(Cost $1,317,466,158) 1,022,138,843
=================================================================================
PREFERRED STOCKS-2.93%
BRAZIL-0.64%
Petroleo Brasileiro S.A.-Pfd.-ADR 386,806 7,894,711
=================================================================================
GERMANY-2.29%
Henkel AG & Co. KGaA-Pfd. 390,811 12,590,747
- ---------------------------------------------------------------------------------
Porsche Automobil Holding S.E.-Pfd. 202,609 15,860,900
=================================================================================
28,451,647
=================================================================================
Total Preferred Stocks (Cost $51,385,144) 36,346,358
=================================================================================
MONEY MARKET FUNDS-11.67%
Liquid Assets Portfolio-Institutional Class(c) 72,347,965 72,347,965
- ---------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 72,347,965 72,347,965
=================================================================================
Total Money Market Funds (Cost $144,695,930) 144,695,930
=================================================================================
TOTAL INVESTMENTS-97.05% (Cost $1,513,547,232) 1,203,181,131
=================================================================================
OTHER ASSETS LESS LIABILITIES-2.95% 36,620,601
=================================================================================
NET ASSETS-100.00% $1,239,801,732
_________________________________________________________________________________
=================================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$1,368,851,302) $1,058,485,201
- -------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 144,695,930
=======================================================
Total investments (Cost
$1,513,547,232) 1,203,181,131
=======================================================
Foreign currencies, at value (Cost
$39,956,636) 39,146,043
- -------------------------------------------------------
Receivables for:
Fund shares sold 945,841
- -------------------------------------------------------
Dividends 1,212,559
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 34,669
- -------------------------------------------------------
Other assets 201
=======================================================
Total assets 1,244,520,444
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Investments purchased 313,788
- -------------------------------------------------------
Fund shares reacquired 2,763,921
- -------------------------------------------------------
Accrued fees to affiliates 1,186,666
- -------------------------------------------------------
Accrued other operating expenses 357,704
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 96,633
=======================================================
Total liabilities 4,718,712
=======================================================
Net assets applicable to shares
outstanding $1,239,801,732
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,660,804,162
- -------------------------------------------------------
Undistributed net investment income 24,613,828
- -------------------------------------------------------
Undistributed net realized gain (loss) (134,420,426)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (311,195,832)
=======================================================
$1,239,801,732
_______________________________________________________
=======================================================
NET ASSETS:
Series I $ 446,437,225
_______________________________________________________
=======================================================
Series II $ 793,364,507
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 22,910,314
_______________________________________________________
=======================================================
Series II 41,251,746
_______________________________________________________
=======================================================
Series I:
Net asset value per share $ 19.49
_______________________________________________________
=======================================================
Series II:
Net asset value per share $ 19.23
_______________________________________________________
=======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $3,513,775) $ 38,829,200
- -------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $261,018) 4,618,221
=======================================================
Total investment income 43,447,421
=======================================================
EXPENSES:
Advisory fees 10,228,885
- -------------------------------------------------------
Administrative services fees 3,872,885
- -------------------------------------------------------
Custodian fees 874,530
- -------------------------------------------------------
Distribution fees -- Series II 1,989,404
- -------------------------------------------------------
Transfer agent fees 55,458
- -------------------------------------------------------
Trustees' and officers' fees and
benefits 55,543
- -------------------------------------------------------
Other 226,874
=======================================================
Total expenses 17,303,579
=======================================================
Less: Fees waived and expense offset
arrangement(s) (201,485)
- -------------------------------------------------------
Net expenses 17,102,094
- -------------------------------------------------------
Net investment income 26,345,327
=======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (net of foreign
taxes of $357,722) (131,052,891)
- -------------------------------------------------------
Foreign currencies (1,010,587)
=======================================================
(132,063,478)
=======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (626,778,809)
- -------------------------------------------------------
Foreign currencies (837,752)
=======================================================
(627,616,561)
=======================================================
Net realized and unrealized gain (loss) (759,680,039)
=======================================================
Net increase (decrease) in net assets
resulting from operations $(733,334,712)
_______________________________________________________
=======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 26,345,327 $ 10,346,855
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (132,063,478) 42,387,660
- ------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (627,616,561) 53,567,858
============================================================================================================
Net increase (decrease) in net assets resulting from operations (733,334,712) 106,302,373
============================================================================================================
Distributions to shareholders from net investment income:
Series I (3,478,321) (3,152,708)
- ------------------------------------------------------------------------------------------------------------
Series II (5,065,468) (2,719,089)
============================================================================================================
Total distributions from net investment income (8,543,789) (5,871,797)
============================================================================================================
Distributions to shareholders from net realized gains:
Series I (8,411,008) --
- ------------------------------------------------------------------------------------------------------------
Series II (14,727,306) --
============================================================================================================
Total distributions from net realized gains (23,138,314) --
============================================================================================================
Share transactions-net:
Series I (13,325,486) 149,884,993
- ------------------------------------------------------------------------------------------------------------
Series II 480,159,184 560,552,308
============================================================================================================
Net increase in net assets resulting from share transactions 466,833,698 710,437,301
============================================================================================================
Net increase (decrease) in net assets (298,183,117) 810,867,877
____________________________________________________________________________________________________________
============================================================================================================
NET ASSETS:
Beginning of year 1,537,984,849 727,116,972
============================================================================================================
End of year (includes undistributed net investment income of
$24,613,828 and $7,026,310, respectively) $1,239,801,732 $1,537,984,849
____________________________________________________________________________________________________________
============================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. INTERNATIONAL GROWTH FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. INTERNATIONAL GROWTH FUND
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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The Advisor did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$200,529.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $341,985 for accounting and fund administrative
services and reimbursed $3,530,900 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, expenses
incurred under the Plan are detailed in the Statement of Operations as
distribution fees.
AIM V.I. INTERNATIONAL GROWTH FUND
Certain officers and trustees of the Trust are officers and directors of
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $ 364,792,292
- --------------------------------------
Level 2 838,388,839
- --------------------------------------
Level 3 --
======================================
$1,203,181,131
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $7,345,154.
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $956.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $6,668
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
AIM V.I. INTERNATIONAL GROWTH FUND
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $10,198,789 $5,871,797
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 21,483,314 --
=======================================================================================================
Total distributions $31,682,103 $5,871,797
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 25,200,737
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (327,446,522)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (829,731)
- -------------------------------------------------------------------------------------------------
Temporary book/tax differences (112,414)
- -------------------------------------------------------------------------------------------------
Capital loss carryforward (87,932,439)
- -------------------------------------------------------------------------------------------------
Post-October deferrals (29,882,061)
- -------------------------------------------------------------------------------------------------
Shares of beneficial interest 1,660,804,162
=================================================================================================
Total net assets $1,239,801,732
_________________________________________________________________________________________________
=================================================================================================
</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 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 has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $87,932,439
_______________________________________________________________________________________________
===============================================================================================
</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, 2008 was $969,450,879 and
$575,421,770, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 20,720,632
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (348,167,154)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(327,446,522)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $1,530,627,653.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, proxy costs and passive foreign investment companies on December
31, 2008, undistributed net investment income was decreased by $214,020,
undistributed net realized gain (loss) was increased by $252,926 and shares of
beneficial interest decreased by $38,906. This reclassification had no effect on
the net assets of the Fund.
AIM V.I. INTERNATIONAL GROWTH FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2008(A) 2007
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 5,416,504 $ 152,657,919 9,094,637 $ 298,953,566
- -------------------------------------------------------------------------------------------------------------------------
Series II 22,885,713 587,146,644 18,926,292 627,011,734
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 647,214 11,889,329 90,543 3,152,708
- -------------------------------------------------------------------------------------------------------------------------
Series II 1,091,714 19,792,774 78,997 2,719,089
=========================================================================================================================
Reacquired:
Series I (6,729,062) (177,872,734) (4,751,273) (152,221,281)
- -------------------------------------------------------------------------------------------------------------------------
Series II (5,147,388) (126,780,234) (2,196,518) (69,178,515)
=========================================================================================================================
Net increase in share activity 18,164,695 $ 466,833,698 21,242,678 $ 710,437,301
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 56% of the
outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with these
entities whereby these entities sell units of interest in separate accounts
funding variable products that are invested in the Fund. The Fund, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. INTERNATIONAL GROWTH FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(a) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $33.63 $0.54 $(14.16) $(13.62) $(0.15) $(0.37) $(0.52)
Year ended 12/31/07 29.44 0.34 3.98 4.32 (0.13) -- (0.13)
Year ended 12/31/06 23.17 0.23 6.32 6.55 (0.28) -- (0.28)
Year ended 12/31/05 19.77 0.23 3.31 3.54 (0.14) -- (0.14)
Year ended 12/31/04 16.04 0.15 3.70 3.85 (0.12) -- (0.12)
- --------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 33.24 0.45 (13.96) (13.51) (0.13) (0.37) (0.50)
Year ended 12/31/07 29.16 0.26 3.94 4.20 (0.12) -- (0.12)
Year ended 12/31/06 23.00 0.17 6.25 6.42 (0.26) -- (0.26)
Year ended 12/31/05 19.65 0.18 3.30 3.48 (0.13) -- (0.13)
Year ended 12/31/04 15.97 0.11 3.66 3.77 (0.09) -- (0.09)
__________________________________________________________________________________________________________________________
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSET NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME
VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
OF PERIOD RETURN(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $19.49 (40.38)% $446,437 1.05%(d) 1.06%(d) 1.96%(d) 44%
Year ended 12/31/07 33.63 14.68 792,779 1.06 1.07 1.06 20
Year ended 12/31/06 29.44 28.28 563,460 1.10 1.10 0.90 34
Year ended 12/31/05 23.17 17.93 444,608 1.11 1.11 1.11 36
Year ended 12/31/04 19.77 24.00 346,605 1.14 1.14 0.90 48
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 19.23 (40.55) 793,365 1.30(d) 1.31(d) 1.71(d) 44
Year ended 12/31/07 33.24 14.41 745,206 1.31 1.32 0.81 20
Year ended 12/31/06 29.16 27.92 163,657 1.35 1.35 0.65 34
Year ended 12/31/05 23.00 17.70 54,658 1.36 1.36 0.86 36
Year ended 12/31/04 19.65 23.63 21,497 1.39 1.39 0.65 48
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios are based on average daily net assets (000's omitted) of $647,650
and $795,762 for Series I and Series II shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
AIM V.I. INTERNATIONAL GROWTH FUND
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
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, 2008, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $677.60 $4.34 $1,019.96 $5.23 1.03%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 676.60 5.39 1,018.70 6.50 1.28
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $ 21,483,314
Foreign Taxes 0.0355 per share
Foreign Source Income 0.7186 per share
</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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. INTERNATIONAL GROWTH FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. INTERNATIONAL GROWTH FUND
[INVESCO AIM LOGO] AIM V.I. LARGE CAP GROWTH FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. LARGE CAP GROWTH FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY Our sell process is designed to avoid
"high risk" situations we believe (may)
For the year ended December 31, 2008, Series I shares of AIM V.I. Large Cap Growth lead to underperformance. Examples of
Fund, excluding variable product issuer charges, had double-digit negative returns but "high risk" situations include:
performed in line with the Fund's style-specific index, the Russell 1000 Growth Index.
(triangle) Outperformance in several sectors was offset by underperformance in other o Deteriorating business prospects
sectors.
o Negative changes to investment thesis
Excluding variable product issuer charges, the Fund's Series I shares narrowly
underperformed the Fund's broad market index, the S&P 500 Index.(triangle) o Sell model signals
Your Fund's long-term performance appears later in this report. MARKET CONDITIONS AND YOUR FUND
FUND VS. INDEXES Many factors contributed to the negative
performance of most major market indexes
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. for the year ended December 31, 2008.(1)
If variable product issuer charges were included, returns would be lower. The chief catalyst was the ongoing
subprime loan crisis and its far-reaching
Series I Shares -38.29% effects on overall credit availability.
Series II Shares -38.41 Additionally, record high crude oil
S&P 500 Index(triangle) (Broad Market Index) -36.99 prices,(2) falling home values and the
Russell 1000 Growth Index(triangle) (Style-Specific Index) -38.44 weak U.S. dollar placed significant
Lipper VUF Large-Cap Growth Funds Index(triangle) (Peer Group Index) -40.84 pressure on the purchasing power of
consumers. Later in the year, consumer
(triangle)Lipper Inc. confidence fell and market volatility
increased dramatically due to growing
======================================================================================= fears of a global recession.
HOW WE INVEST Our fundamental analysis seeks to To ensure the orderly functioning of
determine the drivers of a company's the credit markets and prevent a more
We believe a growth investment strategy is earnings. To accomplish this goal, we severe economic downturn, in early October
an essential component of a diversified examine financial statements to gain a Congress enacted a $700 billion rescue
portfolio. critical understanding of growth drivers, plan - the Troubled Assets Relief Program.
allowing us to quantify earnings power. We In addition, the U.S. Federal Reserve (the
We seek to identify large-cap companies analyze industry trends, growth rates and Fed), in concert with other central banks,
with the potential to meet or exceed the competitive landscape, and we talk or dramatically lowered short-term interest
consensus earnings estimates and that can meet with company management to evaluate rates.
generate sustainable growth proprietary products and the quality of
characteristics. To accomplish this goal, management. We also closely analyze In this environment, the Fund's Series
we utilize a rules-based approach that valuation levels to help reduce the risk I shares, excluding variable product
balances proprietary quantitative analysis of holding highly priced stocks and to issuer charges, had double-digit negative
with rigorous fundamental analysis. We determine the potential for capital performance but performed in line with the
also incorporate a proprietary sell model appreciation. Russell 1000 Growth Index for the year.(1)
that seeks to identify and eliminate Outperformance versus the index in the
stocks at high risk of underperformance. Portfolio construction plays an consumer discretionary, energy and
important role in risk management. While financials sectors was offset by
Our quantitative model ranks companies sector overweights and underweights are underperformance in the consumer staples,
based on a set of fundamental, valuation driven by our investment process, we cap industrials, health care and materials
and timeliness factors. This model the Fund's maximum sector overweight at sectors.
provides an objective approach to 1,000 basis points (10 percentage points)
identifying new investment opportunities. versus Russell 1000 Growth Index sectors. The Fund outperformed its
We focus our fundamental analysis on the We seek to manage stock-specific risk by style-specific index by the widest margin
top 20% of the stocks in the investment building a diversified portfolio of in the consumer discretionary sector,
universe identified by our quantitative typically 50 to 80 stocks. driven by stock selection and an
model. underweight position.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Information Technology 29.9% 1. Aerospace & Defense 9.8% 1. Hewlett-Packard Co. 5.2%
Health Care 19.1 2. Systems Software 9.1 2. Lockheed Martin Corp. 5.1
Industrials 17.3 3. Computer Hardware 8.8 3. Amgen Inc. 4.2
Consumer Staples 7.9 4. Biotechnology 8.2 4. Accenture Ltd.-Class A 4.0
Consumer Discretionary 6.8 5. Health Care Equipment 6.4 5. Baxter International Inc. 3.8
Energy 6.7 ========================================== 6. Johnson & Johnson 3.4
Financials 5.9 7. Wal-Mart Stores, Inc. 3.2
Materials 2.0 ========================================== 8. Occidental Petroleum Corp. 2.7
Telecommunication Services 0.7 Total Net Assets $63.4 million 9. Oracle Corp. 2.7
Money Market Funds 10. Gildead Sciences, Inc. 2.7
Plus Other Assets Less Liabilities 3.7 Total Number of Holdings* 54
========================================== ========================================== ==========================================
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
The Fund's underweight position was a Underperformance in the materials GEOFFREY KEELING
benefit during the year as many consumer sector was driven primarily by stock Chartered Financial Analyst,
discretionary stocks performed poorly due selection and an overweight position in [KEELING senior portfolio manager, is
to significant reductions in consumer metals and mining stocks. The stocks of PHOTO] co-manager of AIM V.I. Large Cap
spending. Two holdings that held up well several Fund holdings in this industry Growth Fund. He joined Invesco
in this difficult environment were auto declined due to the rapid slowdown in Aim in 1995. Mr. Keeling earned a B.B.A.
parts retailer AUTOZONE and adult demand for commodities driven by the degree in finance from The University of
education provider APOLLO GROUP. These two global recession. Those stocks included Texas at Austin.
holdings were among the Fund's leading FREEPORT MCMORAN COPPER and RIO TINTO.
contributors to performance for the year. While we sold our position in Freeport ROBERT SHOSS
McMoran Copper during the year, we Senior portfolio manager, is
The Fund also outperformed its continued to hold a small position in Rio [SHOSS co-manager of AIM V.I. Large Cap
style-specific index in the energy sector, Tinto at year end. PHOTO] Growth Fund. He joined Invesco
due to stock selection and an underweight Aim in 1995. Mr. Shoss earned a
position. After reaching a record high in Our investment process also led us to B.A. from The University of Texas at
July,(2) the price of oil fell sharply due reduce our exposure to several sectors Austin and an M.B.A. and a J.D. from the
to weakening demand caused by the global during the year, including materials, University of Houston.
economic slowdown. As a result, the Fund's telecommunication services, information
underweight position in the energy sector technology, financials and utilities. Assisted by the Large/Multi-Cap Growth
benefited performance. Proceeds from these sales were primarily Team
invested in the more defensive consumer
The financials sector was the weakest staples and health care sectors.
performing sector in the Russell 1000
Growth Index in 2008 as the credit crisis We thank you for your commitment to AIM
intensified and a liquidity crunch V.I. Large Cap Growth Fund.
emerged. Within this sector,
outperformance versus the index was driven (1) Lipper Inc.
by stock selection and an underweight
position. The Fund benefited from an (2) Bloomberg L.P.
underweight position in several industries
in which companies had steep declines in The views and opinions expressed in
their stock prices when investor management's discussion of Fund
confidence faltered, including capital performance are those of Invesco Aim
markets, consumer finance and diversified Advisors, Inc. These views and opinions
financial services. are subject to change at any time based on
factors such as market and economic
The Fund underperformed the Russell conditions. These views and opinions may
1000 Growth Index by the widest margin in not be relied upon as investment advice or
the consumer staples sector, primarily recommendations, or as an offer for a
driven by an underweight position. While particular security. The information is
the consumer staples sector had negative not a complete analysis of every aspect of
returns, its more defensive nature made it any market, country, industry, security or
a refuge in the volatile market the Fund. Statements of fact are from
environment, and it held up better than sources considered reliable, but Invesco
all other sectors in the index. As a Aim Advisors, Inc. makes no representation
result, the Fund's underweight position or warranty as to their completeness or
detracted from performance. accuracy. Although historical performance
is no guarantee of future results, these
Underperformance in the industrials insights may help you understand our
sector was due to stock selection and an investment management philosophy.
overweight position. Many holdings in the
industrials sector were hurt by fears that See important Fund and index disclosures
the slowdown in the U.S. economy would later in this report.
lead to a global recession. One holding in
the sector that detracted from Fund
performance was power and automation
technology provider ABB. Several aerospace
and defense holdings also were weak,
including LOCKHEED MARTIN.
A third area of weakness for the Fund
was the health care sector. Several of the
Fund's health care providers and services
holdings performed poorly, among them
WELLPOINT and COVENTRY HEALTHCARE. We sold
both holdings before the close of the year
due to deteriorating fundamentals.
AIM V.I. LARGE CAP GROWTH FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS ASSET VALUE. INVESTMENT RETURN AND FIGURES GIVEN REPRESENT THE FUND AND ARE
As of 12/31/08 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU NOT INTENDED TO REFLECT ACTUAL VARIABLE
MAY HAVE A GAIN OR LOSS WHEN YOU SELL PRODUCT VALUES. THEY DO NOT REFLECT SALES
SERIES I SHARES SHARES. CHARGES, EXPENSES AND FEES ASSESSED IN
CONNECTION WITH A VARIABLE PRODUCT. SALES
Inception (8/29/03) -0.28% THE NET ANNUAL FUND OPERATING EXPENSE CHARGES, EXPENSES AND FEES, WHICH ARE
5 Years -2.03 RATIO SET FORTH IN THE MOST RECENT FUND DETERMINED BY THE VARIABLE PRODUCT
1 Year -38.29 PROSPECTUS AS OF THE DATE OF THIS REPORT ISSUERS, WILL VARY AND WILL LOWER THE
FOR SERIES I AND SERIES II SHARES WAS TOTAL RETURN.
SERIES II SHARES 1.01% AND 1.26%, RESPECTIVELY.(1) THE
Inception (8/29/03) -0.48% TOTAL ANNUAL FUND OPERATING EXPENSE RATIO THE MOST RECENT MONTH-END PERFORMANCE
5 Years -2.23 SET FORTH IN THE MOST RECENT FUND DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
1 Year -38.41 PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT CHARGES, IS AVAILABLE ON THE
========================================== FOR SERIES I AND SERIES II SHARES WAS INVESCO AIM AUTOMATED INFORMATION LINE,
1.06% AND 1.31%, RESPECTIVELY. THE EXPENSE 866 702 4402. AS MENTIONED ABOVE, FOR THE
THE PERFORMANCE OF THE FUND'S SERIES I AND RATIOS PRESENTED ABOVE MAY VARY FROM THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARE CLASSES WILL DIFFER EXPENSE RATIOS PRESENTED IN OTHER SECTIONS INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. OF THIS REPORT THAT ARE BASED ON EXPENSES CONTACT YOUR VARIABLE PRODUCT ISSUER OR
INCURRED DURING THE PERIOD COVERED BY THIS FINANCIAL ADVISOR.
THE PERFORMANCE DATA QUOTED REPRESENT REPORT.
PAST PERFORMANCE AND CANNOT GUARANTEE HAD THE ADVISOR NOT WAIVED FEES AND/OR
COMPARABLE FUTURE RESULTS; CURRENT AIM V.I. LARGE CAP GROWTH FUND, A REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE SERIES PORTFOLIO OF AIM VARIABLE INSURANCE PERFORMANCE WOULD HAVE BEEN LOWER.
CONTACT YOUR VARIABLE PRODUCT ISSUER OR FUNDS, IS CURRENTLY OFFERED THROUGH
FINANCIAL ADVISOR FOR THE MOST RECENT INSURANCE COMPANIES ISSUING VARIABLE (1) Total annual operating expenses less
MONTH-END VARIABLE PRODUCT PERFORMANCE. PRODUCTS. YOU CANNOT PURCHASE SHARES OF any contractual fee waivers and/or
PERFORMANCE FIGURES REFLECT FUND EXPENSES, THE FUND DIRECTLY. PERFORMANCE expense reimbursements by the advisor
REINVESTED DISTRIBUTIONS AND CHANGES IN in effect through at least April 30,
NET 2010. See current prospectus for more
information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - OLDEST SHARE CLASSES SINCE INCEPTION
Fund data from 8/29/03, index data from 08/31/03
AIM V.I. Large AIM V.I. Large Lipper VUF
Cap Growth Fund- Cap Growth Fund- Russell 1000 Growth Large-Cap Growth
Date Series I Shares Series II Shares S&P 500 Index(1) Index(1) Funds Index(1)
- ------- ---------------- ---------------- ---------------- ------------------- ----------------
8/29/03 $10000 $10000
8/03 10000 10000 $10000 $10000 10000
9/03 9840 9840 9894 9893 9786
10/03 10610 10610 10454 10449 10392
11/03 10830 10830 10545 10558 10475
12/03 10917 10911 11098 10923 10848
1/04 11107 11101 11302 11146 11020
2/04 11117 11111 11459 11217 11060
3/04 11177 11171 11286 11009 10964
4/04 10916 10911 11109 10881 10729
5/04 11257 11241 11261 11084 10920
6/04 11457 11442 11480 11222 11115
7/04 10777 10761 11100 10588 10481
8/04 10676 10661 11145 10536 10427
9/04 10987 10971 11265 10636 10665
10/04 10958 10941 11437 10802 10844
11/04 11569 11542 11900 11173 11306
12/04 11909 11881 12305 11611 11765
1/05 11617 11590 12005 11224 11362
2/05 11738 11711 12257 11344 11394
3/05 11547 11520 12041 11137 11263
4/05 11075 11049 11812 10925 11003
5/05 11617 11591 12188 11453 11589
6/05 11777 11752 12205 11411 11658
7/05 12148 12113 12659 11969 12175
8/05 11998 11963 12544 11815 12066
9/05 12329 12294 12645 11869 12211
10/05 12169 12123 12434 11754 12155
11/05 12691 12645 12904 12261 12724
12/05 12777 12731 12909 12222 12765
1/06 13421 13363 13251 12437 13131
2/06 13190 13132 13286 12417 12976
3/06 13412 13353 13452 12601 13086
4/06 13412 13344 13632 12583 13103
5/06 12688 12620 13240 12157 12471
6/06 12698 12641 13258 12109 12426
7/06 12597 12531 13340 11878 12165
8/06 12759 12691 13657 12249 12482
9/06 13041 12973 14008 12585 12808
10/06 13442 13364 14464 13028 13176
11/06 13644 13565 14739 13286 13509
12/06 13808 13726 14946 13331 13568
1/07 14099 14008 15172 13674 13897
2/07 13656 13565 14876 13417 13605
3/07 13877 13786 15042 13490 13730
4/07 14431 14329 15708 14125 14261
5/07 15016 14913 16256 14633 14773
6/07 14825 14711 15986 14415 14605
7/07 14392 14289 15491 14191 14419
8/07 14684 14571 15722 14417 14656
9/07 15509 15385 16310 15021 15515
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
10/07 16446 16310 16569 15533 16161
11/07 15811 15677 15876 14960 15516
12/07 15968 15827 15766 14906 15527
1/08 14477 14351 14821 13744 14104
2/08 14265 14140 14340 13471 13816
3/08 13812 13677 14278 13389 13687
4/08 14658 14521 14973 14092 14530
5/08 15202 15054 15167 14608 14957
6/08 14224 14080 13889 13556 13985
7/08 13933 13799 13773 13299 13702
8/08 13823 13679 13972 13442 13710
9/08 12282 12151 12728 11885 11970
10/08 10266 10151 10591 9793 9945
11/08 9521 9417 9831 9014 9005
12/08 9852 9746 9934 9177 9186
====================================================================================================================================
AIM V.I. LARGE CAP GROWTH FUND
AIM V.I. LARGE CAP GROWTH FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND The RUSSELL 1000--REGISTERED OTHER INFORMATION
TRADEMARK-- GROWTH INDEX measures the
Prices of equity securities change in performance of those Russell 1000 The Chartered Financial
response to many factors, including the companies with higher price-to-book ratios Analyst--REGISTERED TRADEMARK--
historical and prospective earnings of the and higher forecasted growth values. The (CFA--REGISTERED TRADEMARK--) designation
issuer, the value of its assets, general Russell 1000 Growth Index is a is a globally recognized standard for
economic conditions, interest rates, trademark/service mark of the Frank measuring the competence and integrity of
investor perceptions and market liquidity. Russell Company. Russell--REGISTERED investment professionals.
TRADEMARK-- is a trademark of the Frank
Foreign securities have additional Russell Company. The returns shown in management's
risks, including exchange rate changes, discussion of Fund performance are based
political and economic upheaval, relative The LIPPER VUF LARGE-CAP GROWTH FUNDS on net asset values calculated for
lack of information, relatively low market INDEX is an equally weighted shareholder transactions. Generally
liquidity, and the potential lack of representation of the largest variable accepted accounting principles require
strict financial and accounting controls insurance underlying funds in the Lipper adjustments to be made to the net assets
and standards. Large-Cap Growth Funds category. These of the Fund at period end for financial
funds typically have an above-average reporting purposes, and as such, the net
There is no guarantee that the price-to-earnings ratio, price-to-book asset values for shareholder transactions
investment techniques and risk analysis ratio and three-year sales-per-share and the returns based on those net asset
used by the Fund's portfolio managers will growth value compared to the S&P 500 values may differ from the net asset
produce the desired results. Index. values and returns reported in the
Financial Highlights. Additionally, the
The prices of securities held by the The Fund is not managed to track the returns and net asset values shown
Fund may decline in response to market performance of any particular index, throughout this report are at the Fund
risks. including the indexes defined here, and level only and do not include variable
consequently, the performance of the Fund product issuer charges. If such charges
ABOUT INDEXES USED IN THIS REPORT may deviate significantly from the were included, the total returns would be
performance of the indexes. lower.
The S&P 500--REGISTERED TRADEMARK-- INDEX
is a market capitalization-weighted index A direct investment cannot be made in Industry classifications used in this
covering all major areas of the U.S. an index. Unless otherwise indicated, report are generally according to the
economy. It is not the 500 largest index results include reinvested Global Industry Classification Standard,
companies, but rather the most widely held dividends, and they do not reflect sales which was developed by and is the
500 companies chosen with respect to charges. Performance of an index of funds exclusive property and a service mark of
market size, liquidity, and their reflects fund expenses; performance of a MSCI Inc. and Standard & Poor's.
industry. market index does not.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.34%
AEROSPACE & DEFENSE-9.81%
General Dynamics Corp. 12,330 $ 710,084
- -----------------------------------------------------------------------------
Lockheed Martin Corp. 38,401 3,228,756
- -----------------------------------------------------------------------------
Raytheon Co. 31,593 1,612,507
- -----------------------------------------------------------------------------
United Technologies Corp. 12,420 665,712
=============================================================================
6,217,059
=============================================================================
APPLICATION SOFTWARE-2.63%
Adobe Systems Inc.(b) 46,684 993,903
- -----------------------------------------------------------------------------
Intuit Inc.(b) 28,399 675,612
=============================================================================
1,669,515
=============================================================================
AUTOMOTIVE RETAIL-2.04%
AutoZone, Inc.(b) 9,267 1,292,469
=============================================================================
BIOTECHNOLOGY-8.22%
Amgen Inc.(b) 45,900 2,650,725
- -----------------------------------------------------------------------------
Genentech, Inc.(b) 10,182 844,190
- -----------------------------------------------------------------------------
Gilead Sciences, Inc.(b) 33,482 1,712,269
=============================================================================
5,207,184
=============================================================================
COMMUNICATIONS EQUIPMENT-1.46%
Cisco Systems, Inc.(b) 56,872 927,014
=============================================================================
COMPUTER HARDWARE-8.83%
Apple Inc.(b) 12,636 1,078,483
- -----------------------------------------------------------------------------
Hewlett-Packard Co. 90,511 3,284,644
- -----------------------------------------------------------------------------
International Business Machines Corp. 14,656 1,233,449
=============================================================================
5,596,576
=============================================================================
CONSTRUCTION & ENGINEERING-1.79%
Fluor Corp. 25,254 1,133,147
=============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.50%
Joy Global Inc. 13,753 314,806
=============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.83%
MasterCard, Inc.-Class A 3,683 526,411
=============================================================================
DISTILLERS & VINTNERS-1.93%
Diageo PLC (United Kingdom) 86,726 1,224,150
=============================================================================
DIVERSIFIED BANKS-0.70%
Unibanco-Uniao de Bancos Brasileiros S.A.-ADR
(Brazil) 6,826 441,096
=============================================================================
DIVERSIFIED METALS & MINING-0.30%
Rio Tinto PLC-ADR (United Kingdom) 2,164 192,401
=============================================================================
EDUCATION SERVICES-1.76%
Apollo Group Inc.-Class A(b) 14,588 1,117,733
=============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.92%
Waste Management, Inc. 17,603 583,363
=============================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.69%
Syngenta AG (Switzerland) 5,544 1,071,903
=============================================================================
FOOTWEAR-1.15%
NIKE, Inc.-Class B 14,302 729,402
=============================================================================
HEALTH CARE EQUIPMENT-6.49%
Bard (C.R.), Inc. 12,419 1,046,425
- -----------------------------------------------------------------------------
Baxter International Inc. 45,346 2,430,092
- -----------------------------------------------------------------------------
St. Jude Medical, Inc.(b) 19,257 634,711
=============================================================================
4,111,228
=============================================================================
HEALTH CARE SERVICES-0.93%
Express Scripts, Inc.(b) 10,680 587,186
=============================================================================
HEAVY ELECTRICAL EQUIPMENT-1.14%
ABB Ltd. (Switzerland) 47,837 719,669
=============================================================================
HOUSEHOLD PRODUCTS-1.51%
Procter & Gamble Co. (The) 15,464 955,984
=============================================================================
HYPERMARKETS & SUPER CENTERS-3.22%
Wal-Mart Stores, Inc. 36,375 2,039,182
=============================================================================
INSURANCE BROKERS-1.89%
Aon Corp. 26,287 1,200,790
=============================================================================
INTEGRATED OIL & GAS-5.08%
Exxon Mobil Corp. 12,071 963,628
- -----------------------------------------------------------------------------
Marathon Oil Corp. 19,172 524,546
- -----------------------------------------------------------------------------
Occidental Petroleum Corp. 28,909 1,734,251
=============================================================================
3,222,425
=============================================================================
INTERNET SOFTWARE & SERVICES-1.13%
Google Inc.-Class A(b) 2,327 715,902
=============================================================================
IT CONSULTING & OTHER SERVICES-3.96%
Accenture Ltd.-Class A 76,629 2,512,665
=============================================================================
LIFE & HEALTH INSURANCE-1.20%
Unum Group 40,928 761,261
=============================================================================
OIL & GAS DRILLING-0.80%
ENSCO International Inc. 17,933 509,118
=============================================================================
OIL & GAS EQUIPMENT & SERVICES-0.82%
National-Oilwell Varco Inc.(b) 21,202 518,177
=============================================================================
PHARMACEUTICALS-3.44%
Johnson & Johnson 36,438 2,180,086
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. LARGE CAP GROWTH FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-2.15%
Chubb Corp. (The) 26,703 $ 1,361,853
=============================================================================
RAILROADS-3.14%
Burlington Northern Santa Fe Corp. 9,400 711,674
- -----------------------------------------------------------------------------
Norfolk Southern Corp. 14,400 677,520
- -----------------------------------------------------------------------------
Union Pacific Corp. 12,600 602,280
=============================================================================
1,991,474
=============================================================================
RESTAURANTS-1.87%
McDonald's Corp. 19,062 1,185,466
=============================================================================
SEMICONDUCTORS-1.96%
Intel Corp. 35,840 525,414
- -----------------------------------------------------------------------------
Xilinx, Inc. 40,070 714,048
=============================================================================
1,239,462
=============================================================================
SOFT DRINKS-1.27%
PepsiCo, Inc. 14,651 802,435
=============================================================================
SYSTEMS SOFTWARE-9.12%
BMC Software, Inc.(b) 41,689 1,121,851
- -----------------------------------------------------------------------------
Microsoft Corp. 87,273 1,696,587
- -----------------------------------------------------------------------------
Oracle Corp.(b) 97,256 1,724,349
- -----------------------------------------------------------------------------
Symantec Corp.(b) 91,309 1,234,498
=============================================================================
5,777,285
=============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.66%
America Movil S.A.B. de C.V.-Series L-ADR (Mexico) 13,479 417,714
=============================================================================
Total Common Stocks & Other Equity Interests
(Cost $66,431,815) 61,053,591
=============================================================================
MONEY MARKET FUNDS-3.76%
Liquid Assets Portfolio-Institutional Class(c) 1,192,194 1,192,194
- -----------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 1,192,194 1,192,194
=============================================================================
Total Money Market Funds (Cost $2,384,388) 2,384,388
=============================================================================
TOTAL INVESTMENTS-100.10% (Cost $68,816,203) 63,437,979
=============================================================================
OTHER ASSETS LESS LIABILITIES-(0.10)% (60,926)
=============================================================================
NET ASSETS-100.00% $63,377,053
_____________________________________________________________________________
=============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$66,431,815) $ 61,053,591
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 2,384,388
======================================================
Total investments (Cost
$68,816,203) 63,437,979
======================================================
Receivables for:
Fund shares sold 2,118
- ------------------------------------------------------
Dividends 92,031
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 22,013
======================================================
Total assets 63,554,141
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 68,839
- ------------------------------------------------------
Accrued fees to affiliates 36,457
- ------------------------------------------------------
Accrued other operating expenses 39,689
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 32,103
======================================================
Total liabilities 177,088
======================================================
Net assets applicable to shares
outstanding $ 63,377,053
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 83,717,523
- ------------------------------------------------------
Undistributed net investment income 177,543
- ------------------------------------------------------
Undistributed net realized gain (loss) (15,139,614)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (5,378,399)
======================================================
$ 63,377,053
______________________________________________________
======================================================
NET ASSETS:
Series I $ 62,665,071
______________________________________________________
======================================================
Series II $ 711,982
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,405,822
______________________________________________________
======================================================
Series II 73,408
______________________________________________________
======================================================
Series I:
Net asset value per share $ 9.78
______________________________________________________
======================================================
Series II:
Net asset value per share $ 9.70
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $22,262) $ 1,121,019
- ------------------------------------------------------
Dividends from affiliated money market
funds 75,429
======================================================
Total investment income 1,196,448
======================================================
EXPENSES:
Advisory fees 672,316
- ------------------------------------------------------
Administrative services fees 283,401
- ------------------------------------------------------
Custodian fees 12,656
- ------------------------------------------------------
Distribution fees-Series II 2,382
- ------------------------------------------------------
Transfer agent fees 9,714
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 18,595
- ------------------------------------------------------
Other 59,870
======================================================
Total expenses 1,058,934
======================================================
Less: Fees waived (83,506)
======================================================
Net expenses 975,428
======================================================
Net investment income 221,020
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains from securities sold to
affiliates of $31,233) (5,333,693)
- ------------------------------------------------------
Foreign currencies 10,793
======================================================
(5,322,900)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (39,639,515)
- ------------------------------------------------------
Foreign currencies (167)
======================================================
(39,639,682)
======================================================
Net realized and unrealized gain (loss) (44,962,582)
======================================================
Net increase (decrease) in net assets
resulting from operations $(44,741,562)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 221,020 $ 129,670
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (5,322,900) 4,673,962
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (39,639,682) 13,025,734
========================================================================================================
Net increase (decrease) in net assets resulting from operations (44,741,562) 17,829,366
========================================================================================================
Distributions to shareholders from net investment income-Series I (10,393) (38,491)
________________________________________________________________________________________________________
========================================================================================================
Share transactions-net:
Series I (22,100,762) (9,305,183)
- --------------------------------------------------------------------------------------------------------
Series II (100,213) (929,004)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (22,200,975) (10,234,187)
========================================================================================================
Net increase (decrease) in net assets (66,952,930) 7,556,688
========================================================================================================
NET ASSETS:
Beginning of year 130,329,983 122,773,295
========================================================================================================
End of year (includes undistributed net investment income (loss) of
$177,543 and $(43,877), respectively) $ 63,377,053 $130,329,983
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. LARGE CAP GROWTH FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash in such affiliated money
market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$83,506.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $233,401 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs
AIM V.I. LARGE CAP GROWTH FUND
(Level 3) generally when market prices are not readily available or are
unreliable. Based on the valuation inputs the securities or other investments
are tiered into one of three levels. Changes in valuation methods may result in
transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $60,422,257
- --------------------------------------
Level 2 3,015,722
- --------------------------------------
Level 3 --
======================================
$63,437,979
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $160,237 and securities sales of $333,059,
which resulted in net realized gains of $31,233.
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,358
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
AIM V.I. LARGE CAP GROWTH FUND
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------
Distributions paid from ordinary income $10,393 $38,491
___________________________________________________________________________________________________
===================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 221,573
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (6,357,442)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (175)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (42,122)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (11,925,246)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (2,237,058)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 83,717,523
================================================================================================
Total net assets $ 63,377,053
________________________________________________________________________________________________
================================================================================================
</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 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.
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 to utilizing
$11,925,246 of capital loss carryforward in the fiscal year ending December 31,
2009.
The Fund has a capital loss carryforward as of December 31, 2008 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
- -----------------------------------------------------------------------------------------------
December 31, 2016 3,185,835
===============================================================================================
Total capital loss carryforward $11,925,246
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $38,726,646 and
$60,838,871, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 4,237,632
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (10,595,074)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $ (6,357,442)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $69,795,421.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions on December 31, 2008, undistributed net investment income was
increased by $10,793 and undistributed net realized gain (loss) was decreased by
$10,793. This reclassification had no effect on the net assets of the Fund.
AIM V.I. LARGE CAP GROWTH FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 671,040 $ 8,675,551 1,230,557 $ 18,519,621
- ------------------------------------------------------------------------------------------------------------------------
Series II 6,894 71,952 404 6,093
========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,089 10,393 2,379 38,491
- ------------------------------------------------------------------------------------------------------------------------
Series II -- -- -- --
========================================================================================================================
Reacquired:
Series I (2,408,114) (30,786,706) (1,902,716) (27,863,295)
- ------------------------------------------------------------------------------------------------------------------------
Series II (13,392) (172,165) (63,178) (935,097)
========================================================================================================================
Net increase (decrease) in share activity (1,742,483) $(22,200,975) (732,554) $(10,234,187)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. LARGE CAP GROWTH FUND
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS (LOSSES)
NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $15.85 $ 0.03(c) $(6.10) $(6.07) $(0.00) $ -- $(0.00) $ 9.78
Year ended 12/31/07 13.71 0.02 2.13 2.15 (0.01) -- (0.01) 15.85
Year ended 12/31/06 12.71 0.02 1.00 1.02 (0.02) -- (0.02) 13.71
Year ended 12/31/05 11.86 (0.01)(c) 0.88 0.87 -- (0.02) (0.02) 12.71
Year ended 12/31/04 10.90 (0.04)(e) 1.03 0.99 -- (0.03) (0.03) 11.86
- --------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 15.75 0.00(c) (6.05) (6.05) -- -- -- 9.70
Year ended 12/31/07 13.66 (0.04) 2.13 2.09 -- -- -- 15.75
Year ended 12/31/06 12.67 (0.01) 1.00 0.99 -- -- -- 13.66
Year ended 12/31/05 11.84 (0.03)(c) 0.88 0.85 -- (0.02) (0.02) 12.67
Year ended 12/31/04 10.90 (0.06)(e) 1.03 0.97 -- (0.03) (0.03) 11.84
________________________________________________________________________________________________________________________________
================================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
RETURN(A) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(B)
- --------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 (38.29)% $ 62,665 1.01%(d) 1.10%(d) 0.23%(d) 41%
Year ended 12/31/07 15.64 129,071 1.01 1.08 0.11 58
Year ended 12/31/06 8.05 120,825 1.02 1.23 0.06 76
Year ended 12/31/05 7.30 4,352 1.13 7.30 (0.06) 99
Year ended 12/31/04 9.08 596 1.33 9.88 (0.35)(e) 104
- --------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 (38.41) 712 1.26(d) 1.35(d) (0.02)(d) 41
Year ended 12/31/07 15.30 1,259 1.26 1.33 (0.14) 58
Year ended 12/31/06 7.81 1,949 1.27 1.48 (0.19) 76
Year ended 12/31/05 7.15 636 1.33 7.55 (0.26) 99
Year ended 12/31/04 8.89 594 1.48 10.13 (0.50)(e) 104
______________________________________________________________________________________________________________
==============================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $95,783 and
$953 for Series I and Series II shares, respectively.
(e) 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)% and $(0.08) and (0.66)% for Series I and Series II
shares, respectively.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $692.80 $4.30 $1,020.06 $5.13 1.01%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 692.40 5.36 1,018.80 6.39 1.26
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. LARGE CAP GROWTH FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. LARGE CAP GROWTH FUND
[INVESCO AIM LOGO] AIM V.I. LEISURE FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. LEISURE FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
holdings across a variety of
PERFORMANCE SUMMARY leisure-related stocks, including those of
cable television companies, satellite
The consumer discretionary sector was negatively affected by the credit contraction and programming companies, publishers, cruise
reduced consumer spending during the year. As a result, Series I shares of AIM V.I. lines, advertising agencies, hotels,
Leisure Fund, excluding variable product issuer charges, underperformed the broad casinos, electronic game and toy
market, as measured by the S&P 500 Index, for the year ended December 31, manufacturers, restaurants, retailers and
2008.(triangle) The majority of the Fund's underperformance relative to the S&P 500 entertainment companies.
Index resulted from our overweight exposure to the hotels, resorts and cruise line
industry and the casino and gambling industry. We consider selling or trimming a stock
when:
Your Fund's long-term performance appears later in this report.
o There is a change in the company's
FUND VS. INDEXES fundamental business prospects.
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. o A stock's valuation rises so that it is
If variable product issuer charges were included, returns would be lower. no longer attractive relative to other
investment opportunities.
Series I Shares -43.04%
Series II Shares -43.17 MARKET CONDITIONS AND YOUR FUND
S&P 500 Index(triangle) (Broad Market / Style-Specific Index) -36.99
Several factors contributed to the
(triangle) Lipper Inc. negative performance of most major market
======================================================================================= indexes for the fiscal year ended December
31, 2008.(1) The chief catalyst was the
HOW WE INVEST is based on a company's ongoing subprime loan crisis and its far
strategic plan, financial health reaching effects on overall credit
We focus on companies that profit from and competitive position. availability. Although inflation weighed
consumer spending on leisure activities -- heavily on the minds of consumers and
products or services purchased with We build a detailed financial model investors in the first half of 2008,
consumers' discretionary dollars. We focus that projects the next two to three years, falling home values and commodity prices
on such companies because we believe helping us determine an anticipated fair alleviated short-term inflationary
several long-term trends may potentially valuation based primarily on our pressures beginning mid-year as
lead to increased consumer spending in the expectations for free cash flow growth. unemployment and global economic
future. These trends include: These expectations are a direct result of instability took center stage.
the insight gained in our fundamental
o Demographic and income trends, research. The U.S. Federal Reserve Board (the
including rising household incomes, Fed) continued the monetary easing policy
increased spending on leisure goods and Ideal companies for inclusion in the it began in 2007. Since December 2007, the
services and boomers reaching their Fund generally have the following Fed cut the federal funds target rate from
peak spending years. characteristics: 4.25% to a range of zero to 0.25%(2) in an
effort to inject liquidity into weakening
o Technology innovation and integration, o Attractive valuation relative to credit markets. Real gross domestic
including new product introductions, estimated fair value product turned negative in the third
first-mover advantage and technology as quarter of 2008 and is expected to have
a strategic business tool. o Potential to capitalize on all contracted further in the fourth quarter.
identified themes This contraction was largely due to a
o Globalization of the industry, decrease in personal consumption and
providing the ability to access new o Improving industry or company dynamics residential investment. Inflation, as
markets. measured by the seasonally-adjusted
o Identifiable competitive advantage Consumer Price Index, virtually
Fundamental research is used to gain a
thorough understanding of each company's o A management team that fosters
potential to benefit from at least one of innovation
the three key themes we believe will drive
leisure industries' growth over the next Just as we look for managements with
two to three years. Our analysis long-term visions, we maintain a long-term
investment horizon, resulting in
relatively low portfolio turnover. We
manage risk by diversifying the Fund's
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES TOP 10 EQUITY HOLDINGS*
By sector
1. Movies & Entertainment 12.9% 1. Omnicom Group Inc. 6.1%
Consumer Discretionary 71.2% 2. Cable & Satellite 12.0 2. Comcast Corp.-Class A 4.7
Consumer Staples 16.4 3. Advertising 9.3 3. News Corp.-Class A 4.7
Information Technology 3.1 4. Hotels, Resorts & Cruise Lines 7.3 4. Walt Disney Co. (The) 4.2
Financials 2.0 5. Restaurants 7.2 5. Cablevision Systems Corp.-Class A 3.3
Money Market Funds Plus ========================================== 6. Diageo PLC 3.2
Other Assets Less Liabilities 7.3 7. PepsiCo, Inc. 2.8
========================================== 8. McDonald's Corp. 2.8
Total Net Assets $18.0 million 9. Time Warner Inc. 2.7
10. Kohl's Corp. 2.4
Total Number of Holdings* 71
========================================== ========================================== ==========================================
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
ground to a halt following sharp declines abroad as consumers sought to dine at less JUAN HARTSFIELD
in energy prices in the second half of the expensive, value eateries. Chartered Financial
year. However, unemployment trended higher [HARTSFIELD Analyst, portfolio
during the year and ultimately reached a We continued to review the portfolio PHOTO] manager, is lead manager
seasonally adjusted rate of 7.2% in for better insight into the companies we of AIM V.I. Leisure
December.(3) believe may do well over the next few Fund. He began his
years. In our view, this includes investment career in 2000 as an equity
Against this backdrop, consumer companies with access to capital, strong analyst and later was named a portfolio
staples, health care and utilities were balance sheets and the ability to survive manager. He joined Invesco Aim in 2004.
among the best performing sectors of the short-term volatility. It seemed that the Mr. Hartsfield earned a B.S. in petroleum
S&P 500 Index. Conversely, financials, best way to navigate the weak consumer engineering from The University of Texas
materials and IT were the worst performing discretionary sector, hurt by declining at Austin and an M.B.A. from the
sectors. consumer spending, was to look past University of Michigan. He joined the team
earnings results and instead focus on on Jan. 23, 2009, after the close of the
During the year and on an absolute companies' creditworthiness. reporting period.
basis, holdings in the movies and
entertainment industry, hotels, resorts At the close of the year, the Fund was JONATHAN MUELLER
and cruise lines industry and advertising positioned in line with its mandate; it Chartered Financial
industry were the largest detractors from had exposure to a variety of [MUELLER Advisor, portfolio
Fund performance. On the other hand, the leisure-related industries based on our PHOTO] manager, is co-manager
top contributor to Fund performance was bottom-up, stock-by-stock approach to of AIM V.I. Leisure
the restaurant industry. investing. We remind shareholders that our Fund. He joined Invesco
time horizon for the stocks in the Fund is Aim in 2001. Mr. Mueller earned a B.B.A.
Relative to the S&P 500 Index, the Fund two to three years. This long-term in accounting from Texas Christian
benefited from overweight exposure to the investment horizon is one reason for the University and an M.B.A. in finance from
restaurant industry, holdings in cable and Fund's relatively low portfolio turnover The University of Texas at Austin. He is
satellite television and a lack of rate. We believe that consumer a Certified Public Accountant. He joined
financial holdings. Conversely, the Fund's discretionary spending is likely to ebb the team on Jan. 23, 2009, after the close
overweight exposure to the hotels, resorts and flow over short-term periods; that is of the reporting period.
and cruise line industry and the casino why we maintain a long-term investment
and gambling industry hurt performance perspective and why we urge you to do the MARK GREENBERG left the team on Jan. 23,
relative to the index. same. 2009, after the close of the reporting
period.
As a result of deterioration in the As always, we thank you for your
global economic outlook, investors feared continued investment in AIM V.I. Leisure Assisted by the Leisure Team
business and consumer spending would Fund.
weaken. Indeed, the Fund's media stocks
were among the top detractors from (1) Lipper Inc.
performance. OMNICOM, a diversified (2) U.S. Federal Reserve
advertising, marketing and communications (3) Bureau of Labor Statistics
company, suffered as forecasters called
for sharp declines in advertising and The views and opinions expressed in
marketing spending. Shares of NEWS CORP., management's discussion of Fund
a diversified media company with performance are those of Invesco Aim
resources in filmed entertainment, the Advisors, Inc. These views and opinions
Internet, television and newspapers, are subject to change at any time based on
declined following the company's factors such as market and economic
acquisition of Dow Jones in 2007. Both conditions. These views and opinions may
Omnicom and News Corp. are long-time Fund not be relied upon as investment advice or
holdings. Although we slightly trimmed recommendations, or as an offer for a
exposure to the two companies, the Fund particular security. The information is
continued to hold these stocks at not a complete analysis of every aspect of
year-end. any market, country, industry, security or
the Fund. Statements of fact are from
ANHEUSER-BUSCH, the top contributor to sources considered reliable, but Invesco
Fund performance, received an unsolicited Aim Advisors, Inc. makes no representation
offer from Belgian brewer INBEV and or warranty as to their completeness or
Brazilian brewer AmBev, officially known accuracy. Although historical performance
as COMPANHIA DE BEBIDAS, during the year. is no guarantee of future results, these
We believed the merger, which closed in insights may help you understand our
November 2008, would accelerate cost investment management philosophy.
savings at InBev and AmBev and leverage
the Anheuser-Busch portfolio through their See important Fund and index disclosures
international distribution network. later in this report.
Restaurants, in general, performed well
relative to the broad market for the year.
In fact, MCDONALD'S, another top
contributor to Fund performance, benefited
from strong sales domestically and
AIM V.I. LEISURE FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000.
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 PRODUCTS. YOU CANNOT PURCHASE SHARES OF
effective than other types of charts in THE FUND DIRECTLY. PERFORMANCE FIGURES
illustrating CURRENT PERFORMANCE MAY BE LOWER OR GIVEN REPRESENT THE FUND AND ARE NOT
HIGHER. PLEASE CONTACT YOUR VARIABLE INTENDED TO REFLECT ACTUAL VARIABLE
========================================== PRODUCT ISSUER OR FINANCIAL ADVISOR FOR PRODUCT VALUES. THEY DO NOT REFLECT SALES
AVERAGE ANNUAL TOTAL RETURNS THE MOST RECENT MONTH-END VARIABLE PRODUCT CHARGES, EXPENSES AND FEES ASSESSED IN
As of 12/31/08 PERFORMANCE. PERFORMANCE FIGURES REFLECT CONNECTION WITH A VARIABLE PRODUCT. SALES
FUND EXPENSES, REINVESTED DISTRIBUTIONS CHARGES, EXPENSES AND FEES, WHICH ARE
SERIES I SHARES AND CHANGES IN NET ASSET VALUE. INVESTMENT DETERMINED BY THE VARIABLE PRODUCT
Inception (4/30/02) -2.16% RETURN AND PRINCIPAL VALUE WILL FLUCTUATE ISSUERS, WILL VARY AND WILL LOWER THE
5 Years -4.63 SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN TOTAL RETURN.
1 Year -43.04 YOU SELL SHARES.
THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARES THE NET ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
Inception -2.39% RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THE
5 Years -4.85 PROSPECTUS AS OF THE DATE OF THIS REPORT INVESCO AIM AUTOMATED INFORMATION LINE,
1 Year -43.17 FOR SERIES I AND SERIES II SHARES WAS 866 702 4402. AS MENTIONED ABOVE, FOR THE
========================================== 1.01% AND 1.26%, RESPECTIVELY.(1) THE MOST RECENT MONTH-END PERFORMANCE
TOTAL ANNUAL FUND OPERATING EXPENSE RATIO INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
SERIES II SHARES' INCEPTION DATE IS APRIL SET FORTH IN THE MOST RECENT FUND CONTACT YOUR VARIABLE PRODUCT ISSUER OR
30, 2004. RETURNS SINCE THAT DATE ARE PROSPECTUS AS OF THE DATE OF THIS REPORT FINANCIAL ADVISOR.
HISTORICAL. ALL OTHER RETURNS ARE THE FOR SERIES I AND SERIES II SHARES WAS
BLENDED RETURNS OF THE HISTORICAL 1.28% AND 1.53%, RESPECTIVELY. THE EXPENSE HAD THE ADVISOR NOT WAIVED FEES AND/OR
PERFORMANCE OF SERIES II SHARES SINCE RATIOS PRESENTED ABOVE MAY VARY FROM THE REIMBURSED EXPENSES, PERFORMANCE WOULD
THEIR INCEPTION AND THE RESTATED EXPENSE RATIOS PRESENTED IN OTHER SECTIONS HAVE BEEN LOWER.
HISTORICAL PERFORMANCE OF SERIES I SHARES OF THIS REPORT THAT ARE BASED ON EXPENSES
(FOR PERIODS PRIOR TO INCEPTION OF SERIES INCURRED DURING THE PERIOD COVERED BY THIS (1) Total annual operating expenses less
II SHARES) ADJUSTED TO REFLECT THE RULE REPORT. any contractual fee waivers and/or
12B-1 FEES APPLICABLE TO THE SERIES II expense reimbursements by the advisor
SHARES. THE INCEPTION DATE OF SERIES I AIM V.I. LEISURE FUND, A SERIES in effect through at least April 30,
SHARES IS APRIL 30, 2002. PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS, 2010. See current prospectus for more
IS CURRENTLY OFFERED THROUGH INSURANCE information.
THE PERFORMANCE OF THE FUND'S SERIES I COMPANIES ISSUING VARIABLE
AND SERIES II SHARE CLASSES WILL DIFFER
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
THE PERFORMANCE DATA QUOTED REPRESENT
PAST PERFORMANCE AND CANNOT GUARANTEE
COMPARABLE FUTURE RESULTS;
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
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
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
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 15171 15118
1/08 14429 14211
2/08 14226 13750
3/08 13903 13690
4/08 14202 14357
5/08 14513 14543
6/08 12741 13318
7/08 12417 13206
8/08 13016 13397
9/08 11483 12205
10/08 8944 10155
11/08 8046 9426
12/08 8645 9526
====================================================================================================================================
AIM V.I. LEISURE FUND
AIM V.I. LEISURE FUND'S INVESTMENT OBJECTIVE IS CAPITAL GROWTH.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT THE INDEX USED IN THIS REPORT OTHER INFORMATION
Prices of equity securities change in The S&P--REGISTERED TRADEMARK-- INDEX is a The Chartered Financial
response to many factors, including the market capitalization index covering all Analyst--REGISTERED TRADEMARK--
historical and prospective earnings of the major areas of the U.S. economy. It is (CFA--REGISTERED TRADEMARK--) designation
issuer, the value of its assets, general not the 500 largest companies, but rather is a globally recognized standard for
economic conditions, interest rates, the most widely held 500 companies chosen measuring the competence and integrity of
investor perceptions and market liquidity. with respect to market size, liquidity, investment professionals.
and their industry.
Foreign securities have additional CPA--REGISTERED TRADEMARK-- and
risks, including exchange rate changes, The Fund is not managed to track the Certified Public Accountant--REGISTERED
political and economic upheaval, relative performance of any particular index, TRADEMARK-- are trademarks owned by the
lack of information, relatively low market including the index defined here, and American Institute of Certified Public
liquidity, and the potential lack of consequently, the performance of the Fund Accountants.
strict financial and accounting controls may deviate significantly from the
and standards. performance of the index. The returns shown in management's
discussion of Fund performance are based
The leisure sector depends on consumer A direct investment cannot be made in on net asset values calculated for
discretionary spending, which generally an index. Unless otherwise indicated, shareholder transactions. Generally
falls during economic downturns. index results include reinvested accepted accounting principles require
dividends, and they do not reflect sales adjustments to be made to the net assets
There is no guarantee that the charges. Performance of an index of funds of the Fund at period end for financial
investment techniques and risk analysis reflects fund expenses; performance of a reporting purposes, and as such, the net
used by the Fund's portfolio managers will market index does not. asset values for shareholder transactions
produce the desired results. and the returns based on those net asset
values may differ from the net asset
The prices of securities held by the values and returns reported in the
Fund may decline in response to market Financial Highlights. Additionally, the
risks. returns and net asset values shown
throughout this report are at the Fund
The Fund's investments are concentrated level only and do not include variable
in a comparatively narrow segment of the product issuer charges. If such charges
economy. Consequently, the Fund may tend were included, the total returns would be
to be more volatile than other mutual lower.
funds, and the value of the Fund's
investments may tend to rise and fall more Industry classifications used in this
rapidly. report are generally according to the
Global Industry Classification Standard,
which was developed by and is the
exclusive property and a service mark of
MSCI Inc. and Standard & Poor's.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-92.74%
ADVERTISING-9.34%
Harte-Hanks, Inc. 5,931 $ 37,010
- ---------------------------------------------------------------------------
JC Decaux S.A. (France)(b) 8,683 150,226
- ---------------------------------------------------------------------------
Omnicom Group Inc. 41,120 1,106,950
- ---------------------------------------------------------------------------
WPP PLC (United Kingdom) 65,434 387,041
===========================================================================
1,681,227
===========================================================================
APPAREL RETAIL-2.27%
Abercrombie & Fitch Co.-Class A(b) 17,746 409,400
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-5.23%
Coach, Inc.(c) 15,551 322,994
- ---------------------------------------------------------------------------
Compagnie Financiere Richemont S.A.-Class A
(Switzerland) 7,508 145,474
- ---------------------------------------------------------------------------
Hanesbrands, Inc.(c) 11,066 141,092
- ---------------------------------------------------------------------------
Polo Ralph Lauren Corp. 7,110 322,865
- ---------------------------------------------------------------------------
Reinet Investments S.C.A. (Luxembourg)(c) 1,028 10,049
===========================================================================
942,474
===========================================================================
BREWERS-4.81%
Anheuser-Busch InBev N.V. (Belgium)(c) 3,040 17
- ---------------------------------------------------------------------------
Anheuser-Busch InBev N.V. (Belgium) 8,709 202,893
- ---------------------------------------------------------------------------
Carlsberg A.S.-Class B (Denmark) 2,260 74,556
- ---------------------------------------------------------------------------
Companhia de Bebidas das Americas-ADR (Brazil) 7,649 277,276
- ---------------------------------------------------------------------------
Heineken N.V. (Netherlands) 10,073 310,982
===========================================================================
865,724
===========================================================================
BROADCASTING-0.86%
CBS Corp.-Class A 3,396 27,983
- ---------------------------------------------------------------------------
CBS Corp.-Class B 3,397 27,822
- ---------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.-Class A 17,852 55,341
- ---------------------------------------------------------------------------
Television Broadcasts Ltd.-ADR (Hong Kong) 6,976 44,716
===========================================================================
155,862
===========================================================================
CABLE & SATELLITE-11.95%
Cablevision Systems Corp.-Class A 35,008 589,535
- ---------------------------------------------------------------------------
Comcast Corp.-Class A 50,501 852,457
- ---------------------------------------------------------------------------
DISH Network Corp.-Class A(c) 3,038 33,691
- ---------------------------------------------------------------------------
Liberty Global, Inc.-Class A(c) 4,158 66,195
- ---------------------------------------------------------------------------
Liberty Global, Inc.-Series C(b)(c) 8,650 131,307
- ---------------------------------------------------------------------------
Liberty Media Corp.-Entertainment-Series
A-Tracking Stock(c) 19,195 335,529
- ---------------------------------------------------------------------------
Scripps Networks Interactive, Inc.-Class A 6,508 143,176
===========================================================================
2,151,890
===========================================================================
CASINOS & GAMING-1.24%
International Game Technology 14,512 172,548
- ---------------------------------------------------------------------------
MGM Mirage(c) 3,691 50,788
===========================================================================
223,336
===========================================================================
CATALOG RETAIL-0.41%
Liberty Media Corp.-Interactive-Series A-Tracking
Stock(c) 23,896 74,556
===========================================================================
COMMUNICATIONS EQUIPMENT-0.21%
EchoStar Corp.-Class A(c) 2,497 37,130
===========================================================================
COMPUTER & ELECTRONICS RETAIL-2.72%
Best Buy Co., Inc. 8,512 239,272
- ---------------------------------------------------------------------------
GameStop Corp.-Class A(c) 4,746 102,799
- ---------------------------------------------------------------------------
hhgregg, Inc.(c) 17,072 148,185
===========================================================================
490,256
===========================================================================
CONSUMER ELECTRONICS-0.35%
Sony Corp.-ADR (Japan) 2,853 62,395
===========================================================================
DEPARTMENT STORES-2.43%
Kohl's Corp.(c) 12,070 436,934
===========================================================================
DISTILLERS & VINTNERS-4.94%
Diageo PLC (United Kingdom) 41,010 578,862
- ---------------------------------------------------------------------------
Pernod Ricard S.A. (France)(b) 4,170 310,729
===========================================================================
889,591
===========================================================================
FOOTWEAR-1.56%
NIKE, Inc.-Class B 5,510 281,010
===========================================================================
GENERAL MERCHANDISE STORES-1.42%
Target Corp. 7,403 255,626
===========================================================================
HOME ENTERTAINMENT SOFTWARE-1.14%
Electronic Arts Inc.(c) 3,222 51,681
- ---------------------------------------------------------------------------
Nintendo Co., Ltd. (Japan) 400 153,551
===========================================================================
205,232
===========================================================================
HOME IMPROVEMENT RETAIL-0.69%
Home Depot, Inc. (The) 2,430 55,938
- ---------------------------------------------------------------------------
Lowe's Cos., Inc. 3,165 68,111
===========================================================================
124,049
===========================================================================
HOTELS, RESORTS & CRUISE LINES-7.34%
Accor S.A. (France) 5,611 277,457
- ---------------------------------------------------------------------------
Carnival Corp.(c)(d) 10,901 265,112
- ---------------------------------------------------------------------------
InterContinental Hotels Group PLC (United Kingdom) 34,502 284,861
- ---------------------------------------------------------------------------
Marriott International, Inc.-Class A 5,166 100,479
- ---------------------------------------------------------------------------
Regal Hotels International Holdings Ltd. (Hong
Kong) 413,800 114,792
- ---------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. LEISURE FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
HOTELS, RESORTS & CRUISE LINES-(CONTINUED)
Rezidor Hotel Group A.B. (Sweden)(e) 2,734 $ 6,679
- ---------------------------------------------------------------------------
Rezidor Hotel Group A.B. (Sweden) 37,125 90,690
- ---------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.(b) 10,193 182,455
===========================================================================
1,322,525
===========================================================================
HYPERMARKETS & SUPER CENTERS-1.45%
Wal-Mart Stores, Inc. 4,646 260,455
===========================================================================
INTERNET SOFTWARE & SERVICES-1.76%
Google Inc.-Class A(c) 1,033 317,802
===========================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED FUNDS-1.96%
iShares Russell 3000 Index Fund 2,237 116,526
- ---------------------------------------------------------------------------
iShares S&P 500 Index Fund 1,303 117,843
- ---------------------------------------------------------------------------
S&P 500 Depositary Receipts Trust-Series 1 1,309 118,242
===========================================================================
352,611
===========================================================================
MOVIES & ENTERTAINMENT-12.92%
Liberty Media Corp.-Capital-Series A(c) 4,979 23,451
- ---------------------------------------------------------------------------
News Corp.-Class A 92,762 843,207
- ---------------------------------------------------------------------------
Time Warner Inc. 47,917 482,045
- ---------------------------------------------------------------------------
Viacom Inc.-Class A(c) 6,888 138,586
- ---------------------------------------------------------------------------
Viacom Inc.-Class B(c) 4,647 88,572
- ---------------------------------------------------------------------------
Walt Disney Co. (The) 33,060 750,131
===========================================================================
2,325,992
===========================================================================
PUBLISHING-1.29%
McGraw-Hill Cos., Inc. (The) 10,016 232,271
===========================================================================
RESTAURANTS-7.23%
Burger King Holdings Inc. 13,725 327,753
- ---------------------------------------------------------------------------
Jack in the Box Inc.(c) 8,604 190,062
- ---------------------------------------------------------------------------
McDonald's Corp. 8,092 503,241
- ---------------------------------------------------------------------------
Yum! Brands, Inc. 8,899 280,319
===========================================================================
1,301,375
===========================================================================
SOFT DRINKS-4.53%
Coca-Cola Femsa, S.A.B. de C.V.-ADR (Mexico) 7,017 305,309
- ---------------------------------------------------------------------------
PepsiCo, Inc. 9,323 510,621
===========================================================================
815,930
===========================================================================
SPECIALTY STORES-2.02%
PetSmart, Inc. 19,766 364,683
===========================================================================
TOBACCO-0.67%
British American Tobacco PLC (United Kingdom) 4,589 120,992
===========================================================================
Total Common Stocks & Other Equity Interests
(Cost $22,553,804) 16,701,328
===========================================================================
MONEY MARKET FUNDS-4.99%
Liquid Assets Portfolio-Institutional Class(f) 449,951 449,951
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 449,951 449,951
===========================================================================
Total Money Market Funds (Cost $899,902) 899,902
===========================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-97.73% (Cost $23,453,706) 17,601,230
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES
ON LOAN
MONEY MARKET FUNDS-4.80%
Liquid Assets Portfolio-Institutional Class (Cost
$863,767)(f)(g) 863,767 863,767
===========================================================================
TOTAL INVESTMENTS-102.53% (Cost $24,317,473) 18,464,997
===========================================================================
OTHER ASSETS LESS LIABILITIES-(2.53)% (456,504)
===========================================================================
NET ASSETS-100.00% $18,008,493
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) Each unit represents one common share and one trust share.
(e) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The value of this security at December
31, 2008 represented 0.04% of the Fund's Net Assets.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1J.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$22,553,804)* $16,701,328
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 1,763,669
======================================================
Total investments (Cost
$24,317,473) 18,464,997
======================================================
Foreign currencies, at value (Cost
$316,993) 310,961
- ------------------------------------------------------
Receivables for:
Fund shares sold 100,987
- ------------------------------------------------------
Dividends 45,346
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 8,715
======================================================
Total assets 18,931,006
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Collateral upon return of securities
loaned 863,767
- ------------------------------------------------------
Accrued fees to affiliates 12,439
- ------------------------------------------------------
Accrued other operating expenses 34,560
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 11,747
======================================================
Total liabilities 922,513
======================================================
Net assets applicable to shares
outstanding $18,008,493
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $25,783,348
- ------------------------------------------------------
Undistributed net investment income 329,467
- ------------------------------------------------------
Undistributed net realized gain (loss) (2,245,739)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (5,858,583)
======================================================
$18,008,493
______________________________________________________
======================================================
NET ASSETS:
Series I $18,002,797
______________________________________________________
======================================================
Series II $ 5,696
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 3,588,029
______________________________________________________
======================================================
Series II 1,135
______________________________________________________
======================================================
Series I:
Net asset value per share $ 5.02
______________________________________________________
======================================================
Series II:
Net asset value per share $ 5.02
______________________________________________________
======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $853,732 were on
loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $17,467) $ 616,129
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $17,500) 38,021
======================================================
Total investment income 654,150
======================================================
EXPENSES:
Advisory fees 226,890
- ------------------------------------------------------
Administrative services fees 125,510
- ------------------------------------------------------
Custodian fees 9,536
- ------------------------------------------------------
Distribution fees -- Series II 19
- ------------------------------------------------------
Transfer agent fees 1,561
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 16,608
- ------------------------------------------------------
Professional services fees 41,783
- ------------------------------------------------------
Other 11,665
======================================================
Total expenses 433,572
======================================================
Less: Fees waived and expense offset
arrangement(s) (128,927)
======================================================
Net expenses 304,645
======================================================
Net investment income 349,505
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (1,792,629)
- ------------------------------------------------------
Foreign currencies 7,855
======================================================
(1,784,774)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (14,038,952)
- ------------------------------------------------------
Foreign currencies (6,551)
======================================================
(14,045,503)
======================================================
Net realized and unrealized gain (loss) (15,830,277)
======================================================
Net increase (decrease) in net assets
resulting from operations $(15,480,772)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 349,505 $ 250,424
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (1,784,774) 5,418,001
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (14,045,503) (5,558,810)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (15,480,772) 109,615
========================================================================================================
Distributions to shareholders from net investment income:
Series I (301,961) (754,185)
- --------------------------------------------------------------------------------------------------------
Series II (66) (134)
========================================================================================================
Total distributions from net investment income (302,027) (754,319)
========================================================================================================
Distributions to shareholders from net realized gains:
Series I (4,987,772) (2,658,589)
- --------------------------------------------------------------------------------------------------------
Series II (1,573) (579)
========================================================================================================
Total distributions from net realized gains (4,989,345) (2,659,168)
========================================================================================================
Share transactions-net:
Series I (3,824,172) (6,922,866)
- --------------------------------------------------------------------------------------------------------
Series II 2,197 (3,987)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (3,821,975) (6,926,853)
========================================================================================================
Net increase (decrease) in net assets (24,594,119) (10,230,725)
========================================================================================================
NET ASSETS:
Beginning of year 42,602,612 52,833,337
========================================================================================================
End of year (includes undistributed net investment income of $329,467
and $(149,365) respectively) $ 18,008,493 $ 42,602,612
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is capital growth.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. LEISURE FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. OTHER RISKS -- 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.
The leisure sector depends on consumer discretionary spending, which
generally falls during economic downturns.
J. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. LEISURE FUND
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.
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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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 approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$128,746.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $75,510 for services provided by insurance companies.
AIM V.I. LEISURE FUND
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $15,370,004
- --------------------------------------
Level 2 3,094,993
- --------------------------------------
Level 3 --
======================================
$18,464,997
______________________________________
======================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of custodian credits which result
from periodic overnight cash balances at the custodian. For the year ended
December 31, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $181.
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,179
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
AIM V.I. LEISURE FUND
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 Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $ 770,666 $ 975,708
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 4,520,706 2,437,779
=======================================================================================================
Total distributions $5,291,372 $3,413,487
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -----------------------------------------------------------------------------------------------
Undistributed ordinary income $ 344,749
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (5,867,513)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (6,107)
- -----------------------------------------------------------------------------------------------
Temporary book/tax differences (15,282)
- -----------------------------------------------------------------------------------------------
Capital loss carryforward (850,432)
- -----------------------------------------------------------------------------------------------
Post-October deferrals (1,380,270)
- -----------------------------------------------------------------------------------------------
Shares of beneficial interest 25,783,348
===============================================================================================
Total net assets $18,008,493
_______________________________________________________________________________________________
===============================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $850,432
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $1,993,868 and $10,454,450,
respectively. Cost of investments on a tax basis includes the adjustments for
financial reporting purposes as of the most recently completed Federal income
tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,271,731
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,139,244)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(5,867,513)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $24,332,510.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of passive foreign
investment companies, foreign currency transactions and distributions, on
December 31, 2008, undistributed net investment income was increased by $431,354
and undistributed net realized gain (loss) was decreased by $431,354. This
reclassification had no effect on the net assets of the Fund.
AIM V.I. LEISURE FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
2008(a) 2007
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Series I 32,750 $ 235,861 26,829 $ 342,162
- ----------------------------------------------------------------------------------------------------------------------
Series II 60 571 -- --
======================================================================================================================
Issued as reinvestment of dividends:
Series I 1,102,028 5,289,732 256,214 3,412,774
- ----------------------------------------------------------------------------------------------------------------------
Series II 342 1,639 54 713
======================================================================================================================
Reacquired:
Series I (909,436) (9,349,765) (741,988) (10,677,802)
- ----------------------------------------------------------------------------------------------------------------------
Series II (2) (13) (315) (4,700)
======================================================================================================================
Net increase (decrease) in share activity 225,742 $(3,821,975) (459,206) $ (6,926,853)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund that 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, Invesco Aim and/or Invesco Aim
affiliates may make payments to this entity, which are considered to be
related to the Fund, for providing services to the Fund, Invesco Aim and or
Invesco Aim affiliates including but not limited to services such as,
securities brokerage, third party record keeping and account servicing and
administrative services. The Trust has no knowledge as to whether all or
any portion of the shares owned of record by this entity is also owned
beneficially.
AIM V.I. LEISURE FUND
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $12.67 $ 0.12(c) $(5.67) $(5.55) $(0.12) $(1.98) $(2.10)
Year ended 12/31/07 13.82 0.09 (0.15) (0.06) (0.24) (0.85) (1.09)
Year ended 12/31/06 11.86 0.07 2.83 2.90 (0.16) (0.78) (0.94)
Year ended 12/31/05 12.38 0.04 (0.19) (0.15) (0.14) (0.23) (0.37)
Year ended 12/31/04 10.96 0.00 1.47 1.47 (0.04) (0.01) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 12.63 0.09(c) (5.64) (5.55) (0.08) (1.98) (2.06)
Year ended 12/31/07 13.78 0.05 (0.15) (0.10) (0.20) (0.85) (1.05)
Year ended 12/31/06 11.84 0.04 2.82 2.86 (0.14) (0.78) (0.92)
Year ended 12/31/05 12.37 0.02 (0.19) (0.17) (0.13) (0.23) (0.36)
Year ended 12/31/04(e) 11.09 (0.02) 1.35 1.33 (0.04) (0.01) (0.05)
__________________________________________________________________________________________________________________________
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSET NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE
OF PERIOD RETURN(a) (000S OMITTED) ABSORBED ABSORBED NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $ 5.02 (43.04)% $18,003 1.01%(d) 1.44%(d) 1.15%(d)
Year ended 12/31/07 12.67 (0.79) 42,593 1.01 1.28 0.50
Year ended 12/31/06 13.82 24.61 52,820 1.01 1.26 0.54
Year ended 12/31/05 11.86 (1.19) 54,192 1.16 1.31 0.34
Year ended 12/31/04 12.38 13.40 55,967 1.29 1.34 0.00
- -----------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 5.02 (43.17) 6 1.26(d) 1.69(d) 0.90(d)
Year ended 12/31/07 12.63 (1.13) 9 1.26 1.53 0.25
Year ended 12/31/06 13.78 24.28 14 1.26 1.51 0.29
Year ended 12/31/05 11.84 (1.37) 11 1.36 1.56 0.14
Year ended 12/31/04(e) 12.37 11.98 11 1.45(f) 1.60(f) (0.16)(f)
_______________________________________________________________________________________________________________________
=======================================================================================================================
<Caption>
PORTFOLIO
TURNOVER(b)
- -------------------------------------------
SERIES I
Year ended 12/31/08 7%
Year ended 12/31/07 15
Year ended 12/31/06 14
Year ended 12/31/05 32
Year ended 12/31/04 15
- -------------------------------------------
SERIES II
Year ended 12/31/08 7
Year ended 12/31/07 15
Year ended 12/31/06 14
Year ended 12/31/05 32
Year ended 12/31/04(e) 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 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, if applicable.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $30,244 and
$8 for Series I and Series II shares, respectively.
(e) Commencement date of April 30, 2004.
(f) Annualized.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by
correspondence with the custodian and broker, provide a reasonable basis for our
opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $678.30 $4.26 $1,020.06 $5.13 1.01%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 677.10 5.31 1,018.80 6.39 1.26
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $4,520,706
Corporate Dividends Received Deduction* 44.59%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. LEISURE FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. LEISURE FUND
[INVESCO AIM LOGO] AIM V.I. MID CAP CORE EQUITY FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. MID CAP CORE EQUITY FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY MARKET CONDITIONS AND YOUR FUND
For the year ended December 31, 2008, Series I shares of AIM V.I. Mid Cap Core Equity The year ended December 31, 2008, was a
Fund, excluding variable product issuer charges, returned -28.52%, holding up better challenging time in the markets, but it is
than both the S&P 500 Index, which returned -36.99%, and the Russell Midcap Index, worth noting that Series I shares of AIM
which returned -41.46%.(triangle) V.I. Mid Cap Core Equity Fund, excluding
variable product issuer charges, held up
This was a very challenging year, but the Fund's comparative results were a source relatively well compared to the broad
of strength during these turbulent times. All sectors were down for the year, but the market and the Fund's peers, fulfilling
Fund benefited from the acquisition of several holdings by other companies. Select one of our goals -- to be a source of
holdings in financials and commodity-related sectors were some of the hardest hit. strength during turbulent times. It can be
difficult to maintain perspective during
Your Fund's long-term performance appears later in this report. times of crisis but we should all remember
that markets have gone through similarly
FUND VS. INDEXES difficult environments in the past and
have recovered. Today's challenges are
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. serious, but the government is taking
aggressive action. These challenges are
If variable product issuer charges were included, returns would be lower. not insurmountable, and we do not believe
this is the time to abandon your long-term
Series I Shares -28.52% investment strategy.
Series II Shares -28.68
S&P 500 Index(triangle) (Broad Market Index) -36.99 These days we are often asked, "How did
Russell Midcap Index(triangle) (Style-Specific Index) -41.46 our economy get into this mess?" It is not
Lipper VUF Mid-Cap Core Funds Index(triangle) (Peer Group Index) -38.52 a simple question to answer, but
essentially there was an excessive amount
(triangle)Lipper Inc. of leverage in the system -- too much debt
and not enough assets to back it up. For
======================================================================================= many years, financial institutions took on
too much risk in an effort to keep up with
HOW WE INVEST Financial analysis provides vital one another, and banks stretched beyond
insight into historical and potential their traditional revenue sources to keep
We manage your Fund as a conservative ROIC, a key indicator of business quality up with their competitors.
cornerstone, seeking to provide attractive and the caliber of management. Business
upside participation and stronger downside analysis allows us to identify key drivers This was part of our reasoning for
protection in difficult markets. As part of the company, understand industry moving out of financials several years
of a well-diversified asset allocation challenges and evaluate the sustainability ago, a decision that helped the Fund avoid
strategy, the Fund can serve as a of competitive advantages. Both the much of the turmoil we saw this year in
foundation to a portfolio and complement financial and business analyses serve as a the sector. Likewise, many consumers took
more aggressive or cyclical investments. basis to construct valuation models that on more and more risk through home equity
help us estimate a company's value. We use loans, credit cards and other forms of
We conduct fundamental research of three primary valuation techniques, credit. As our research began to uncover
companies to gain a thorough understanding including discounted cash flow, cracks in consumers' armor, we moved into
of their business prospects, appreciation traditional valuation multiples and net more attractive areas. While financial
potential and return on invested capital asset value. institutions and individual consumers are
(ROIC). The process we use to identify not exclusively behind the current crisis,
potential investments for the Fund We consider selling a stock when: they played a role, and our economy is now
includes three phases: going through the painful process of
o It exceeds our target price. "deleveraging."
o Financial analysis to evaluate ROIC and
capital allocation o We have not seen a demonstrable
improvement in fundamentals.
o Business analysis to determine
competitive positioning o A more compelling investment
opportunity exists.
o Valuation analysis to identify
attractively valued companies
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Information Technology 18.3% 1. Industrial Machinery 6.1% 1. People's United Financial Inc. 3.9%
Financials 15.6 2. Health Care Equipment 5.1 2. Symantec Corp. 2.8
Industrials 15.3 3. Specialty Chemicals 4.8 3. Henkel AG & Co. KGaA-Pfd. 2.8
Health Care 14.0 4. Life Sciences Tools & Services 4.7 4. Cadbury PLC 2.7
Consumer Staples 9.7 5. Property & Casualty Insurance 4.5 5. Sigma-Aldrich Corp. 2.6
Materials 6.9 ========================================== 6. Progressive Corp. (The) 2.5
Energy 5.1 7. International Flavors &
Consumer Discretionary 2.6 ========================================== Fragrances Inc. 2.3
Utilities 1.4 Total Net Assets $401.3 million 8. Republic Services, Inc. 2.2
Money Market Funds 9. Moody's Corp. 2.1
Plus Other Assets Less Liabilities 11.1 Total Number of Holdings* 71 10. Axis Capital Holdings Ltd. 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. MID CAP CORE EQUITY FUND
While the year ended with negative A primary detractor from returns was RONALD SLOAN
returns across all sectors of the our investment in the asset management Chartered Financial Analyst,
portfolio, acquisitions of several Fund firm LEGG MASON. The business has [SLOAN senior portfolio manager, is
holdings benefited the Fund during the relatively high margins and returns, PHOTO] lead manager of AIM V.I. Mid
year, including Dow Chemical's (not a Fund economies of scale and minimal capital Cap Core Equity Fund. Mr. Sloan
holding) acquisition of ROHM AND HAAS and intensity but has been challenged by weak has worked in the investment
the purchase of FOUNDRY NETWORKS by investment flows and the recent poor industry since 1971 and joined Invesco Aim
Brocade Communications Systems (not a Fund performance of some managers. The biggest in 1998. Mr. Sloan attended the University
holding). anchor on Legg's share price performance of Missouri, where he earned both a B.S.
was fear about subprime-related exposure in business administration and an M.B.A
Drug manufacturer BARR PHARMACEUTICALS in its money market division. We believe
was the top contributor to Fund that Legg has made intelligent moves to DOUGLAS ASIELLO
performance for the year. On July 18, TEVA manage this exposure, which is sizable but Chartered Financial Analyst,
PHARMACEUTICALS announced it would acquire manageable, in our estimation. But these [ASIELLO portfolio manager, is manager
Barr for more than $7 billion.(1) concerns helped push the share price well PHOTO] of AIM V.I. Mid Cap Core Equity
Following the acquisition, our Barr shares below our calculation of the company's Fund. He joined Invesco Aim in
were converted into Teva shares. value, and we added to our position 2001. Mr. Asiello graduated
throughout the year. summa cum laude with Phil Beta Kappa
We originally invested in Barr in early honors from Vanderbilt University, where
2007 when the company was working through Maintaining a conservative approach is he earned a B.A. in international
its acquisition of Pliva (not a Fund an enduring part of our investment relations and Spanish. He earned an M.B.A.
holding) and predicting lower earnings. strategy. We have capitalized on the with a concentration in finance from the
The market responded negatively, and market's volatility to make what we Wharton School at the University of
Barr's stock price fell to what we believe to be judicious long-term Pennsylvania. He also earned an M.A. in
considered an attractive valuation based investments in high-quality businesses international management from the Joseph
on our long-term perspective. The Pliva that are less dependent on external H. Lauder Institute of Management and
acquisition gave Barr a strong presence in sources of financing. At the end of the International Studies.
Europe and Russia and introduced year, our largest sector weightings were
cross-selling opportunities in the U.S. We health-care, IT and financials; we had BRIAN NELSON
viewed Barr as a high-margin business that minimal exposure to consumer discretionary Chartered Financial Analyst,
would work through its short-term and utilities. [NELSON portfolio manager, is manager
difficulties. They boasted a solid generic PHOTO] of AIM V.I. Mid Cap Core Equity
drug platform with reasonable competitive We continue to focus on good companies Fund. He began his investment
barriers, creating an attractive business with sound balance sheets, reliable career in 1988 and joined
profile. This perspective was affirmed by management teams and attractive Invesco Aim in 2004. He earned a B.A. from
Teva's acquisition. valuations. This is a long-term strategy the University of California-Santa Barbara
that facilitates our role as a and is a member of the Security Analyst
Just as important as where we invested conservative cornerstone within your Society of San Francisco.
was what we avoided. In early 2008, we broader asset allocation strategy.
took profits in many of our energy Assisted by the Mid/Large Cap Core Team
holdings as oil and natural gas prices Thank you for your continued trust and
rallied due to fundamental factors and investment in AIM V.I. Mid Cap Core Equity
speculative activity. We believed the Fund.
prices of many energy companies had
reached unjustified levels, reducing their (1) Reuters
attractiveness. As a result of our
actions, the Fund was underweight the The views and opinions expressed in
energy sector versus our style-specific management's discussion of Fund
index - a contrast to the notable performance are those of Invesco Aim
overweight position we had to energy for Advisors, Inc. These views and opinions
quite some time. It was a move that are subject to change at any time based on
benefited shareholders as energy factors such as market and economic
companies' share prices fell sharply conditions. These views and opinions may
beginning in the summer. not be relied upon as investment advice or
recommendations, or as an offer for a
The Fund held approximately 22% of its particular security. The information is
assets in cash at the beginning of 2008 not a complete analysis of every aspect of
because the number of attractive any market, country, industry, security or
investments from a risk-reward perspective the Fund. Statements of fact are from
had diminished. Over the year, we took sources considered reliable, but Invesco
advantage of market turmoil to invest in Aim Advisors, Inc. makes no representation
high-quality companies that we believed or warranty as to their completeness or
had been unduly punished -- namely, select accuracy. Although historical performance
holdings in financials, industrials and is no guarantee of future results, these
information technology (IT). The Fund's insights may help you understand our
cash position fell to approximately 11% at investment management philosophy.
the end of the year.
See important Fund and index disclosures
later in this report.
AIM V.I. MID CAP CORE EQUITY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS DISTRIBUTIONS AND CHANGES IN NET ASSET THROUGH INSURANCE COMPANIES ISSUING
As of 12/31/08 VALUE. INVESTMENT RETURN AND PRINCIPAL VARIABLE PRODUCTS. YOU CANNOT PURCHASE
VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE SHARES OF THE FUND DIRECTLY. PERFORMANCE
SERIES I SHARES A GAIN OR LOSS WHEN YOU SELL SHARES. FIGURES GIVEN REPRESENT THE FUND AND ARE
Inception (9/10/01) 3.62% NOT INTENDED TO REFLECT ACTUAL VARIABLE
5 Years 1.31 THE NET ANNUAL FUND OPERATING EXPENSE PRODUCT VALUES. THEY DO NOT REFLECT SALES
1 Year -28.52 RATIO SET FORTH IN THE MOST RECENT FUND CHARGES, EXPENSES AND FEES ASSESSED IN
SERIES II SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT CONNECTION WITH A VARIABLE PRODUCT. SALES
Inception (9/10/01) 3.38% FOR SERIES I AND SERIES II SHARES WAS CHARGES, EXPENSES AND FEES, WHICH ARE
5 Years 1.05 1.02% AND 1.27%, RESPECTIVELY.(1) THE DETERMINED BY THE VARIABLE PRODUCT
1 Year -28.68 TOTAL ANNUAL FUND OPERATING EXPENSE RATIO ISSUERS, WILL VARY AND WILL LOWER THE
========================================== SET FORTH IN THE MOST RECENT FUND TOTAL RETURN.
PROSPECTUS AS OF THE DATE OF THIS REPORT
THE PERFORMANCE OF THE FUND'S SERIES I AND FOR SERIES I AND SERIES II SHARES WAS THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARE CLASSES WILL DIFFER 1.04% AND 1.29%, RESPECTIVELY. THE EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. RATIOS PRESENTED ABOVE MAY VARY FROM THE PRODUCT CHARGES, IS AVAILABLE ON THE
EXPENSE RATIOS PRESENTED IN OTHER SECTIONS INVESCO AIM AUTOMATED INFORMATION LINE,
THE PERFORMANCE DATA QUOTED REPRESENT OF THIS REPORT THAT ARE BASED ON EXPENSES 866 702 4402. AS MENTIONED ABOVE, FOR THE
PAST PERFORMANCE AND CANNOT GUARANTEE INCURRED DURING THE PERIOD COVERED BY THIS MOST RECENT MONTH-END PERFORMANCE
COMPARABLE FUTURE RESULTS; CURRENT REPORT. INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CONTACT YOUR VARIABLE PRODUCT ISSUER OR
CONTACT YOUR VARIABLE PRODUCT ISSUER OR AIM V.I. MID CAP CORE EQUITY FUND, A FINANCIAL ADVISOR.
FINANCIAL ADVISOR FOR THE MOST RECENT SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
MONTH-END VARIABLE PRODUCT PERFORMANCE. FUNDS, IS CURRENTLY OFFERED (1) Total annual operating expenses less
PERFORMANCE FIGURES REFLECT FUND EXPENSES, contractual advisory fee waivers by
REINVESTED the advisor in effect through at
least April 30, 2010. See current
prospectus for more information.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASSES SINCE INCEPTION
Index data from 8/31/01, Fund data from 9/10/01
AIM V.I. AIM V.I.
Mid Cap Mid Cap Russell Lipper VUF
Core Equity Fund- Core Equity Fund- S&P 500 Midcap Mid-Cap Core
Date Series I Shares Series II Shares Index(1) Index(1) Funds Index(1)
- ------- ----------------- ----------------- -------- -------- --------------
8/31/01 $10000 $10000 $10000
9/01 $ 9560 $ 9560 9193 8794 8687
10/01 9920 9920 9368 9142 9186
11/01 10361 10361 10086 9908 9798
12/01 10738 10722 10175 10306 10331
1/02 10728 10722 10026 10245 10232
2/02 10849 10833 9833 10136 10228
3/02 11300 11284 10203 10744 10842
4/02 11150 11133 9585 10536 10707
5/02 11220 11204 9514 10417 10581
6/02 10529 10512 8837 9718 9837
7/02 9577 9561 8148 8770 8789
8/02 9797 9771 8201 8818 8832
9/02 9015 8991 7311 8004 8082
10/02 9356 9341 7954 8409 8442
11/02 9957 9932 8421 8993 9025
12/02 9547 9521 7927 8638 8650
1/03 9316 9291 7720 8464 8427
2/03 9166 9141 7604 8351 8251
3/03 9136 9100 7677 8434 8328
4/03 9687 9661 8309 9046 8935
5/03 10509 10471 8747 9874 9697
6/03 10639 10592 8858 9974 9828
7/03 10950 10902 9015 10303 10144
8/03 11350 11302 9190 10750 10612
9/03 11080 11032 9093 10616 10405
10/03 11561 11513 9607 11426 11212
11/03 11761 11703 9691 11747 11534
12/03 12155 12096 10199 12099 11885
1/04 12397 12329 10387 12450 12145
2/04 12619 12551 10531 12718 12422
3/04 12578 12510 10372 12721 12425
4/04 12649 12580 10209 12254 11981
5/04 12799 12731 10349 12558 12223
6/04 13142 13064 10550 12905 12593
7/04 12609 12529 10201 12341 11983
8/04 12558 12469 10242 12394 11910
9/04 12791 12701 10353 12797 12358
10/04 12993 12903 10511 13150 12646
11/04 13527 13427 10936 13951 13400
12/04 13835 13738 11308 14545 13900
1/05 13561 13465 11033 14185 13582
2/05 14036 13928 11265 14623 13967
3/05 13931 13822 11066 14508 13851
4/05 13488 13369 10856 14046 13233
5/05 13868 13749 11201 14719 13927
6/05 14090 13970 11217 15114 14361
7/05 14744 14613 11634 15911 15107
8/05 14764 14633 11528 15800 15121
9/05 14627 14496 11621 16009 15304
10/05 14184 14053 11427 15528 14759
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
11/05 14743 14590 11859 16217 15478
12/05 14889 14735 11863 16385 15671
1/06 15545 15389 12177 17227 16531
2/06 15415 15258 12210 17206 16479
3/06 15612 15443 12362 17632 16898
4/06 15732 15563 12528 17756 17111
5/06 15284 15106 12168 17158 16440
6/06 15152 14974 12184 17178 16451
7/06 14945 14778 12259 16802 16079
8/06 15175 14995 12551 17229 16364
9/06 15601 15420 12874 17541 16537
10/06 16049 15856 13293 18232 17135
11/06 16388 16183 13546 18888 17676
12/06 16563 16351 13736 18886 17717
1/07 16956 16729 13943 19524 18216
2/07 17017 16789 13671 19555 18276
3/07 17299 17058 13824 19712 18471
4/07 18022 17776 14436 20463 19147
5/07 18561 18300 14939 21235 19979
6/07 18231 17971 14691 20756 19685
7/07 17753 17507 14236 19983 18853
8/07 17483 17227 14449 20017 18868
9/07 17961 17690 14989 20676 19386
10/07 18537 18264 15227 21009 19772
11/07 18096 17825 14591 20006 18764
12/07 18147 17870 14490 19943 18656
1/08 17276 17005 13621 18643 17522
2/08 17338 17066 13179 18217 17150
3/08 17263 16993 13122 17953 16945
4/08 17848 17562 13760 19166 17954
5/08 18259 17957 13939 20035 18741
6/08 17176 16894 12765 18433 17434
7/08 17786 17501 12657 17964 17125
8/08 18035 17735 12840 18296 17423
9/08 16689 16400 11698 16053 15532
10/08 13539 13308 9733 12465 12241
11/08 12729 12504 9035 11196 11022
12/08 12965 12747 9130 11675 11470
====================================================================================================================================
AIM V.I. MID CAP CORE EQUITY FUND
AIM V.I. MID CAP CORE EQUITY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND less publicly available information, funds reflects fund expenses; performance
illiquidity, restricted resale or less of a market index does not.
To the extent the Fund holds cash or cash frequent trading.
equivalents rather than equity securities OTHER INFORMATION
for risk management purposes, the Fund may The prices of securities held by the The Chartered Financial
not achieve its investment objective. Fund may decline in response to market Analyst--REGISTERED TRADEMARK--
risks. (CFA--REGISTERED TRADEMARK--) designation
The values of convertible securities in is a globally recognized standard for
which the Fund invests may be affected by The Fund may invest in obligations measuring the competence and integrity of
market interest rates, the risk that the issued by agencies and instrumentalities investment professionals.
issuer may default on interest or of the U.S. government that may vary in
principal payments, and the value of the the level of support they receive from the The returns shown in management's
underlying common stock into which these U.S. government. The U.S. government may discussion of Fund performance are based
securities may be converted. choose not to provide financial support to on net asset values calculated for
U.S.-government-sponsored agencies or shareholder transactions. Generally
Credit risk is the risk of loss on an instrumentalities if it is not legally accepted accounting principles require
investment due to the deterioration of an obligated to do so. In this case, if the adjustments to be made to the net assets
issuer's financial health. Such a issuer defaulted, the underlying fund of the Fund at period end for financial
deterioration of financial health may holding securities of such an issuer might reporting purposes, and as such, the net
result in a reduction of the credit rating not be able to recover its investment from asset values for shareholder transactions
of the issuer's securities and may lead to the U.S. government. and the returns based on those net asset
the issuer's inability to honor its values may differ from the net asset
contractual obligations, including making ABOUT INDEXES USED IN THIS REPORT values and returns reported in the
timely payment of interest and principal. The S&P 500 --REGISTERED TRADEMARK-- INDEX Financial Highlights. Additionally, the
is a market capitalization-weighted index returns and net asset values shown
Prices of equity securities change in covering all major areas of the U.S. throughout this report are at the Fund
response to many factors, including the economy. It is not the 500 largest level only and do not include variable
historical and prospective earnings of the companies, but rather the most widely held product issuer charges. If such charges
issuer, the value of its assets, general 500 companies chosen with respect to were included, the total returns would be
economic conditions, interest rates, market size, liquidity, and their lower.
investor perceptions and market liquidity. industry.
Industry classifications used in this
Foreign securities have additional The RUSSELL MIDCAP--REGISTERED report are generally according to the
risks, including exchange rate changes, TRADEMARK-- INDEX measures the performance Global Industry Classification Standard,
political and economic upheaval, relative of the 800 smallest companies in the which was developed by and is the
lack of information, relatively low market Russell 1000--REGISTERED TRADEMARK-- exclusive property and a service mark of
liquidity, and the potential lack of Index, which represent approximately 30% MSCI Inc. and Standard & Poor's.
strict financial and accounting controls of the total market capitalization of the
and standards. Russell 1000 Index. The Russell Midcap
Index is a trademark/service mark of the
Interest rate risk refers to the risk Frank Russell Company. Russell--REGISTERED
that bond prices generally fall as TRADEMARK-- is a trademark of the Frank
interest rates rise and vice versa. Russell Company.
The Fund may use enhanced investment The LIPPER VUF MID-CAP CORE FUNDS
techniques such as leveraging and INDEX is an equally weighted
derivatives. Leveraging entails risks such representation of the largest variable
as magnifying changes in the value of the insurance underlying funds in the Lipper
portfolio's securities. Derivatives are Mid-Cap Core Funds category. These funds
subject to counterparty risk -- the risk have an average price-to-earnings ratio,
that the other party will not complete the price-to-book ratio and three-year
transaction with the Fund. sales-per-share growth value compared to
the S&P MidCap 400 Index.
There is no guarantee that the
investment techniques and risk analysis The Fund is not managed to track the
used by the Fund's portfolio managers will performance of any particular index,
produce the desired results. including the indexes defined here, and
consequently, the performance of the Fund
Small- and mid-cap companies tend to be may deviate significantly from the
more vulnerable to adverse developments performance of the indexes.
and more volatile than larger companies.
Investments in these sized companies may A direct investment cannot be made in
involve special risks, including those an index. Unless otherwise indicated,
associated with dependence on a small index results include reinvested
management group, little or no operating dividends, and they do not reflect sales
history, little or no track record of charges. Performance of an index of
success, limited product lines,
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-86.08%
AEROSPACE & DEFENSE-2.26%
Goodrich Corp. 114,825 $ 4,250,821
- -------------------------------------------------------------------------------
Precision Castparts Corp. 80,847 4,808,780
===============================================================================
9,059,601
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.91%
Polo Ralph Lauren Corp.(b) 80,206 3,642,154
===============================================================================
APPLICATION SOFTWARE-2.11%
Adobe Systems Inc.(c) 91,556 1,949,227
- -------------------------------------------------------------------------------
Amdocs Ltd.(c) 356,213 6,515,136
===============================================================================
8,464,363
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.48%
Legg Mason, Inc.(b) 271,402 5,946,418
===============================================================================
COMMUNICATIONS EQUIPMENT-1.62%
Motorola, Inc. 921,350 4,081,581
- -------------------------------------------------------------------------------
Polycom, Inc.(c) 179,708 2,427,855
===============================================================================
6,509,436
===============================================================================
COMPUTER STORAGE & PERIPHERALS-2.06%
NetApp, Inc.(b)(c) 282,862 3,951,582
- -------------------------------------------------------------------------------
QLogic Corp.(b)(c) 320,357 4,305,598
===============================================================================
8,257,180
===============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.29%
Joy Global Inc. 51,627 1,181,742
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.35%
Alliance Data Systems Corp.(b)(c) 116,774 5,433,494
===============================================================================
DISTRIBUTORS-1.58%
Genuine Parts Co. 167,230 6,331,328
===============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.77%
Rockwell Automation, Inc. 220,513 7,109,339
===============================================================================
ELECTRONIC MANUFACTURING SERVICES-2.56%
Molex Inc.(b) 443,053 6,419,838
- -------------------------------------------------------------------------------
Tyco Electronics Ltd. 238,012 3,858,174
===============================================================================
10,278,012
===============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-2.17%
Republic Services, Inc. 351,048 8,702,480
===============================================================================
FOOD RETAIL-1.15%
SUPERVALU, Inc. 316,623 4,622,696
===============================================================================
GAS UTILITIES-1.39%
UGI Corp. 228,287 5,574,769
===============================================================================
HEALTH CARE EQUIPMENT-5.07%
Hospira, Inc.(c) 181,670 4,872,389
- -------------------------------------------------------------------------------
Teleflex Inc. 103,324 5,176,532
- -------------------------------------------------------------------------------
Varian Medical Systems, Inc. 84,472 2,959,899
- -------------------------------------------------------------------------------
Zimmer Holdings, Inc.(c) 181,459 7,334,573
===============================================================================
20,343,393
===============================================================================
HEALTH CARE SERVICES-1.66%
Quest Diagnostics Inc. 128,362 6,663,271
===============================================================================
HEALTH CARE TECHNOLOGY-0.98%
IMS Health Inc. 259,629 3,935,976
===============================================================================
HOUSEHOLD PRODUCTS-1.40%
Energizer Holdings, Inc.(b)(c) 103,600 5,608,904
===============================================================================
INDUSTRIAL CONGLOMERATES-1.63%
Tyco International Ltd. 301,993 6,523,049
===============================================================================
INDUSTRIAL GASES-0.78%
Air Products and Chemicals, Inc. 62,310 3,132,324
===============================================================================
INDUSTRIAL MACHINERY-6.12%
Atlas Copco A.B.-Class A (Sweden)(b) 422,672 3,675,525
- -------------------------------------------------------------------------------
Danaher Corp. 56,624 3,205,485
- -------------------------------------------------------------------------------
Graco Inc.(b) 114,663 2,720,953
- -------------------------------------------------------------------------------
ITT Corp. 111,863 5,144,579
- -------------------------------------------------------------------------------
Pall Corp. 156,078 4,437,297
- -------------------------------------------------------------------------------
Parker Hannifin Corp. 126,668 5,388,457
===============================================================================
24,572,296
===============================================================================
INSURANCE BROKERS-1.19%
Marsh & McLennan Cos., Inc. 196,879 4,778,253
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-4.74%
PerkinElmer, Inc. 287,344 3,996,955
- -------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 154,179 4,472,733
- -------------------------------------------------------------------------------
Techne Corp. 53,605 3,458,595
- -------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(c) 126,768 4,318,986
- -------------------------------------------------------------------------------
Waters Corp.(c) 75,239 2,757,509
===============================================================================
19,004,778
===============================================================================
METAL & GLASS CONTAINERS-1.32%
Pactiv Corp.(c) 213,645 5,315,488
===============================================================================
MULTI-SECTOR HOLDINGS-0.13%
PICO Holdings, Inc.(b)(c) 18,997 504,940
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. MID CAP CORE EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
OFFICE ELECTRONICS-1.26%
Xerox Corp. 636,795 $ 5,075,256
===============================================================================
OFFICE SERVICES & SUPPLIES-1.05%
Pitney Bowes Inc. 164,696 4,196,454
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-1.48%
BJ Services Co. 507,999 5,928,348
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.15%
Chesapeake Energy Corp. 115,758 1,871,807
- -------------------------------------------------------------------------------
Newfield Exploration Co.(c) 171,833 3,393,702
- -------------------------------------------------------------------------------
Penn West Energy Trust (Canada)(b) 412,064 4,582,152
- -------------------------------------------------------------------------------
Pioneer Natural Resources Co. 79,358 1,284,012
- -------------------------------------------------------------------------------
Whiting Petroleum Corp.(c) 45,627 1,526,679
===============================================================================
12,658,352
===============================================================================
OIL & GAS STORAGE & TRANSPORTATION-0.52%
Williams Cos., Inc. (The) 143,749 2,081,486
===============================================================================
PACKAGED FOODS & MEATS-3.34%
Cadbury PLC (United Kingdom) 1,224,820 10,879,887
- -------------------------------------------------------------------------------
Del Monte Foods Co. 356,368 2,544,468
===============================================================================
13,424,355
===============================================================================
PERSONAL PRODUCTS-0.97%
Avon Products, Inc. 162,037 3,893,749
===============================================================================
PHARMACEUTICALS-1.57%
Allergan, Inc. 78,427 3,162,177
- -------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR (Israel) 73,697 3,137,265
===============================================================================
6,299,442
===============================================================================
PROPERTY & CASUALTY INSURANCE-4.49%
Axis Capital Holdings Ltd. 270,818 7,886,220
- -------------------------------------------------------------------------------
Progressive Corp. (The)(c) 683,638 10,124,679
===============================================================================
18,010,899
===============================================================================
REGIONAL BANKS-2.26%
BB&T Corp.(b) 161,758 4,441,875
- -------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 94,072 4,609,528
===============================================================================
9,051,403
===============================================================================
SEMICONDUCTORS-3.32%
Linear Technology Corp.(b) 340,481 7,531,440
- -------------------------------------------------------------------------------
Microchip Technology Inc.(b) 119,195 2,327,878
- -------------------------------------------------------------------------------
Xilinx, Inc. 195,180 3,478,108
===============================================================================
13,337,426
===============================================================================
SPECIALIZED CONSUMER SERVICES-0.08%
Hillenbrand, Inc. 18,416 307,179
===============================================================================
SPECIALIZED FINANCE-2.12%
Moody's Corp.(b) 422,816 8,494,373
===============================================================================
SPECIALTY CHEMICALS-4.84%
International Flavors & Fragrances Inc. 302,721 8,996,868
- -------------------------------------------------------------------------------
Sigma-Aldrich Corp.(b) 247,001 10,433,322
===============================================================================
19,430,190
===============================================================================
SYSTEMS SOFTWARE-3.99%
McAfee Inc.(c) 136,043 4,703,006
- -------------------------------------------------------------------------------
Symantec Corp.(c) 835,380 11,294,338
===============================================================================
15,997,344
===============================================================================
THRIFTS & MORTGAGE FINANCE-3.92%
People's United Financial Inc. 882,521 15,735,349
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $442,300,963) 345,417,289
===============================================================================
PREFERRED STOCKS-2.81%
HOUSEHOLD PRODUCTS-2.81%
Henkel AG & Co. KGaA(Germany)-Pfd. (Cost
$14,502,569)(b) 349,737 11,267,467
===============================================================================
MONEY MARKET FUNDS-10.80%
Liquid Assets Portfolio-Institutional Class(d) 21,681,581 21,681,581
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 21,681,581 21,681,581
===============================================================================
Total Money Market Funds (Cost $43,363,162) 43,363,162
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.69% (Cost $500,166,694) 400,047,918
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-10.76%
Liquid Assets Portfolio-Institutional Class (Cost
$43,165,299)(d)(e) 43,165,299 43,165,299
===============================================================================
TOTAL INVESTMENTS-110.45% (Cost $543,331,993) 443,213,217
===============================================================================
OTHER ASSETS LESS LIABILITIES-(10.45)% (41,935,903)
===============================================================================
NET ASSETS-100.00% $401,277,314
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</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 Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1I.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$456,803,532)* $ 356,684,756
- -------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 86,528,461
=======================================================
Total investments (Cost
$543,331,993) 443,213,217
=======================================================
Foreign currencies, at value (Cost
$1,039,033) 1,040,929
- -------------------------------------------------------
Receivables for:
Fund shares sold 265,215
- -------------------------------------------------------
Dividends 885,385
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 16,070
=======================================================
Total assets 445,420,816
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Investments purchased 58,561
- -------------------------------------------------------
Fund shares reacquired 229,886
- -------------------------------------------------------
Foreign currency contracts
outstanding 290,079
- -------------------------------------------------------
Collateral upon return of securities
loaned 43,165,299
- -------------------------------------------------------
Accrued fees to affiliates 288,928
- -------------------------------------------------------
Accrued other operating expenses 52,193
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 58,556
=======================================================
Total liabilities 44,143,502
=======================================================
Net assets applicable to shares
outstanding $ 401,277,314
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 503,647,264
- -------------------------------------------------------
Undistributed net investment income 5,536,478
- -------------------------------------------------------
Undistributed net realized gain (loss) (7,499,954)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (100,406,474)
=======================================================
$ 401,277,314
_______________________________________________________
=======================================================
NET ASSETS:
Series I $ 352,788,233
_______________________________________________________
=======================================================
Series II $ 48,489,081
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 41,083,406
_______________________________________________________
=======================================================
Series II 5,694,163
_______________________________________________________
=======================================================
Series I:
Net asset value per share $ 8.59
_______________________________________________________
=======================================================
Series II:
Net asset value per share $ 8.52
_______________________________________________________
=======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $42,937,067 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $270,518) $ 7,994,812
- -------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $464,104) 3,364,990
=======================================================
Total investment income 11,359,802
=======================================================
EXPENSES:
Advisory fees 3,992,365
- -------------------------------------------------------
Administrative services fees 1,504,321
- -------------------------------------------------------
Custodian fees 32,635
- -------------------------------------------------------
Distribution fees -- Series II 162,316
- -------------------------------------------------------
Transfer agent fees 23,623
- -------------------------------------------------------
Trustees' and officers' fees and
benefits 31,738
- -------------------------------------------------------
Other 134,024
=======================================================
Total expenses 5,881,022
=======================================================
Less: Fees waived (140,714)
- -------------------------------------------------------
Net expenses 5,740,308
=======================================================
Net investment income 5,619,494
=======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains from securities sold to
affiliates of $186,129) (10,017,835)
- -------------------------------------------------------
Foreign currencies 53,692
- -------------------------------------------------------
Foreign currency contracts 2,960,773
=======================================================
(7,003,370)
=======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (172,154,312)
- -------------------------------------------------------
Foreign currencies 3,234
- -------------------------------------------------------
Foreign currency contracts (290,079)
=======================================================
(172,441,157)
=======================================================
Net realized and unrealized gain (loss) (179,444,527)
=======================================================
Net increase (decrease) in net assets
resulting from operations $(173,825,033)
_______________________________________________________
=======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 5,619,494 $ 8,238,981
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (7,003,370) 62,335,612
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (172,441,157) (10,812,599)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (173,825,033) 59,761,994
=========================================================================================================
Distributions to shareholders from net investment income:
Series I (7,372,511) (1,301,490)
- ---------------------------------------------------------------------------------------------------------
Series II (829,282) (37,603)
=========================================================================================================
Total distributions from net investment income (8,201,793) (1,339,093)
=========================================================================================================
Distributions to shareholders from net realized gains:
Series I (53,615,148) (8,489,530)
- ---------------------------------------------------------------------------------------------------------
Series II (7,340,647) (1,129,701)
=========================================================================================================
Total distributions from net realized gains (60,955,795) (9,619,231)
=========================================================================================================
Share transactions-net:
Series I (19,282,609) (40,138,176)
- ---------------------------------------------------------------------------------------------------------
Series II (1,143,742) 18,100,448
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (20,426,351) (22,037,728)
=========================================================================================================
Net increase (decrease) in net assets (263,408,972) 26,765,942
_________________________________________________________________________________________________________
=========================================================================================================
NET ASSETS:
Beginning of year 664,686,286 637,920,344
=========================================================================================================
End of year (includes undistributed net investment income of $5,536,478
and $8,055,236, respectively) $ 401,277,314 $664,686,286
_________________________________________________________________________________________________________
=========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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. 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. MID CAP CORE EQUITY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. MID CAP CORE EQUITY FUND
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.
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. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The Advisor did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$140,714.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $137,071 for accounting and fund administrative
services and reimbursed $1,367,250 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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. MID CAP CORE EQUITY FUND
IADI 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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES OTHER INVESTMENTS*
- ----------------------------------------------------------------------------------------------------------
Level 1 $417,390,339 $(290,079)
- ----------------------------------------------------------------------------------------------------------
Level 2 25,822,878 --
- ----------------------------------------------------------------------------------------------------------
Level 3 -- --
==========================================================================================================
$443,213,217 $(290,079)
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
* Other investments include foreign currency contracts, which are included at
unrealized appreciation/(depreciation).
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, 2008, the Fund
engaged in securities purchases of $221,130 and securities sales of $744,287,
which resulted in net realized gains of $186,129.
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $4,600
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
AIM V.I. MID CAP CORE EQUITY FUND
NOTE 7--FOREIGN CURRENCY CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- -----------------------------------------------------------------------------------------------------------------
CONTRACT TO UNREALIZED
SETTLEMENT ---------------------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------
3/04/09 GBP 3,550,000 USD 5,304,581 $5,171,740 $ 132,841
- -----------------------------------------------------------------------------------------------------------------
3/10/09 EUR 4,100,000 USD 5,290,681 $5,713,601 $(422,920)
=================================================================================================================
Total open foreign
currency contracts $(290,079)
=================================================================================================================
</Table>
<Table>
Currency Abbreviations:
EUR - Euro
GBP - British Pound Sterling
USD - U.S. Dollar
</Table>
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $14,978,987 $ 1,339,093
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 54,178,601 9,619,231
========================================================================================================
Total distributions $69,157,588 $10,958,324
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 5,602,349
- ------------------------------------------------------------------------------------------------
Undistributed long-term gain 5,561,435
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (102,623,116)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 2,382
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (65,871)
- ------------------------------------------------------------------------------------------------
Post-October Capital loss deferral (10,847,129)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 503,647,264
================================================================================================
Total net assets $ 401,277,314
________________________________________________________________________________________________
================================================================================================
</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 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 at period end.
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, 2008 was $301,453,962 and
$283,190,825, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 11,437,751
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (114,060,867)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(102,623,116)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $545,836,333.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, proxy costs and distributions on December 31, 2008, undistributed
net investment income was increased by $63,541, undistributed net realized gain
(loss) was decreased by $38,600 and shares of beneficial interest decreased by
$24,941. This reclassification had no effect on the net assets of the Fund.
AIM V.I. MID CAP CORE EQUITY FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
2008(a) 2007
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,980,935 $ 25,879,573 3,861,535 $ 56,702,650
- -------------------------------------------------------------------------------------------------------------------------
Series II 2,495,197 33,372,144 2,574,352 37,303,201
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 7,277,763 60,987,657 658,441 9,791,025
- -------------------------------------------------------------------------------------------------------------------------
Series II 983,144 8,169,929 79,139 1,167,305
=========================================================================================================================
Reacquired:
Series I (8,365,253) (106,149,839) (7,309,460) (106,631,851)
- -------------------------------------------------------------------------------------------------------------------------
Series II (3,256,102) (42,685,815) (1,410,426) (20,370,058)
=========================================================================================================================
Net increase (decrease) in share activity 1,115,684 $ (20,426,351) (1,546,419) $ (22,037,728)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 76% of the
outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with these
entities whereby these entities sell units of interest in separate accounts
funding variable products that are invested in the Fund. The Fund, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
AIM V.I. MID CAP CORE EQUITY FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $14.57 $ 0.14(c) $(4.33) $(4.19) $(0.22) $(1.57) $(1.79) $ 8.59
Year ended 12/31/07 13.52 0.19 1.11 1.30 (0.04) (0.21) (0.25) 14.57
Year ended 12/31/06 13.61 0.14 1.39 1.53 (0.14) (1.48) (1.62) 13.52
Year ended 12/31/05 13.11 0.06 0.94 1.00 (0.07) (0.43) (0.50) 13.61
Year ended 12/31/04 12.06 0.03(c) 1.63 1.66 (0.02) (0.59) (0.61) 13.11
- ---------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 14.45 0.10(c) (4.28) (4.18) (0.18) (1.57) (1.75) 8.52
Year ended 12/31/07 13.42 0.13 1.12 1.25 (0.01) (0.21) (0.22) 14.45
Year ended 12/31/06 13.52 0.10 1.38 1.48 (0.10) (1.48) (1.58) 13.42
Year ended 12/31/05 13.04 0.03 0.92 0.95 (0.04) (0.43) (0.47) 13.52
Year ended 12/31/04 12.01 (0.00)(c) 1.62 1.62 (0.00) (0.59) (0.59) 13.04
_________________________________________________________________________________________________________________________________
=================================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
RETURN(a) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(b)
- -----------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 (28.52)% $352,788 1.01%(d) 1.04%(d) 1.05%(d) 62%
Year ended 12/31/07 9.55 585,608 1.00 1.01 1.23 62
Year ended 12/31/06 11.24 581,154 1.04 1.04 0.93 83
Year ended 12/31/05 7.62 584,860 1.03 1.03 0.50 70
Year ended 12/31/04 13.82 496,606 1.04 1.04 0.25 55
- -----------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 (28.68) 48,489 1.26(d) 1.29(d) 0.80(d) 62
Year ended 12/31/07 9.29 79,079 1.25 1.26 0.98 62
Year ended 12/31/06 10.98 56,766 1.29 1.29 0.68 83
Year ended 12/31/05 7.27 50,380 1.28 1.28 0.25 70
Year ended 12/31/04 13.57 33,495 1.29 1.29 (0.00) 55
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $487,554
and $64,926 for Series I and Series II Class shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $755.20 $4.46 $1,020.06 $5.13 1.01%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 754.40 5.56 1,018.80 6.39 1.26
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $54,178,601
Corporate Dividends Received Deduction* 35.16%
</Table>
* The above percentages are 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. MID CAP CORE EQUITY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. MID CAP CORE EQUITY FUND
[INVESCO AIM LOGO] AIM V.I. MONEY MARKET FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. MONEY MARKET FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY Following his election, President Barack
Obama pledged to act boldly to stimulate
Yields on shares of AIM V.I. Money Market Fund declined during the year ended the U.S. economy.
December 31, 2008. The seven-day SEC yield on the Fund's Series I shares was
4.16% at the beginning of the year and 0.76% at its close. The seven-day SEC The Fed's aggressive rate cutting - as
yield on the Fund's Series II shares was 3.91% at the beginning of the year and well as investor preference for
0.52% at its close. cash-equivalent investments rather than
riskier and more volatile stocks - drove
As of December 31, 2008, the Fund's total net assets stood at $51.2 million and the down yields on money market funds and
Fund's weighted average maturity was 39 days. other short-term instruments. Yields on
======================================================================================= three-month Treasuries declined
significantly in 2008, falling from
HOW WE INVEST Evidence of economic distress abounded 3.39%(7) at the start of the year to
in 2008. 0.11%(7) at its close. Because money
The Fund invests only in high-quality U.S. market funds invest in short-term
dollar-denominated short-term debt Gross domestic product, a measure of securities, this decline meant the yield
obligations, including: the nation's overall economic output, you earned on your investment in the Fund
contracted in the third and fourth fell during the year.
o Securities issued by the U.S. quarters of 2008.(1) Unemployment rose
government and its agencies. sharply in 2008, from 4.9%(2) to 7.2%(2); At year end, the yield curve was
during the year an estimated 2.6 positive, meaning that short-term yields
o Bankers' acceptances, certificates of million(3) Americans lost their jobs. As were lower than longer-term yields. (A
deposit and time deposits from U.S. and represented by the S&P 500 Index, the U.S. yield curve is a graph that shows the
foreign banks. stock market returned -36.99%(4) in 2008, yields of similarly rated fixed income
its steepest decline since 1937.(5) Seeing investments according to their
o Repurchase agreements. the value of their homes and investments maturities.) While no one can predict the
decline, U.S. consumers cut back their future performance of the economy,
o Commercial paper. spending, which led to weak retail sales positive yield curves historically have
during the holiday shopping season. portended relative health and expansion.
o Taxable municipal securities
Throughout 2008, the U.S. Federal Thank you for your investment in AIM
o Master notes. Reserve (the Fed) moved aggressively to V.I. Money Market Fund.
cut short-term interest rate targets in an
o Cash equivalents. effort to stimulate the economy and inject (1) Bureau of Economic Analysis
much-needed liquidity into the credit (2) Bureau of Labor Statistics
The Fund may invest a portion of its markets. Since December 2007, the Fed cut (3) CNN.com
assets in U.S. dollar-denominated foreign its short-term interest rate target from (4) Lipper Inc.
securities. The Fund invests in accordance 4.25% to a range of zero to 0.25%.(6) (5) Reuters
with industry-standard requirements for During the second half of 2008, the Fed, (6) U.S. Federal Reserve
money market funds for the quality, the U.S. Department of the Treasury and (7) Barclays Capital
maturity and diversification of other federal agencies took unprecedented
investments. In selecting securities for action to rescue the troubled financials The views and opinions expressed in
the Fund, we focus on securities that sector (and, later, the domestic management's discussion of Fund
offer safety, liquidity and a competitive automobile industry) and increase credit performance are those of Invesco Aim
yield. market liquidity. Advisors, Inc. These views and opinions
are subject to change at any time based on
MARKET CONDITIONS AND YOUR FUND In October, the administration and factors such as market and economic
Congress enacted a plan, the Troubled conditions. These views and opinions may
At the close of 2007, there was Assets Relief Program, authorizing the not be relied upon as investment advice or
considerable uncertainty about what lay U.S. Department of the Treasury to recommendations, or as an offer for a
ahead for the economy in 2008,(4) we wrote purchase up to $700 billion in troubled particular security. The information is
in last year's AIM V.I. Money Market Fund mortgage-related assets - the largest and not a complete analysis of every aspect of
annual report. What came to pass was one most direct effort to resolve a credit any market, country, industry, security or
of the most difficult years on record for crisis in the last half century. In the Fund. Statements of fact are from
investors. concert with other central banks, these sources considered reliable, but Invesco
initiatives were intended to restore Aim Advisors, Inc. makes no representation
At the start of 2008, we saw warning investor confidence, expand lending and or warranty as to their completeness or
signs of increasing economic trouble: a mitigate the effects of the global credit accuracy. Although historical performance
weakening housing market, rising inflation crisis. is no guarantee of future results, these
and slowing job growth, among others. In insights may help you understand our
the spring, credit-related concerns came investment management philosophy.
to the forefront - leading to the collapse
or forced merger of several venerable Team managed by Invesco Aim Advisors, Inc.
financial firms and causing major stock
market averages to begin a long, painful
decline.
PERFORMANCE QUOTED IS PAST PERFORMANCE AND CANNOT GUARANTEE AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE
COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
HIGHER. VISIT invescoaim.com FOR THE MOST RECENT MONTH-END AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR
PERFORMANCE. INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN THE FUND.
AIM V.I. MONEY MARKET FUND
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.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND municipal security may be affected by agencies or instrumentalities if it is not
constitutional amendments, legislative legally obligated to do so. In this case,
Credit risk is the risk of loss on an enactments, executive orders, if the issuer defaulted, the underlying
investment due to the deterioration of an administrative regulations, voter fund holding securities of such an issuer
issuer's financial health. Such a initiatives and the economics of the might not be able to recover its
deterioration of financial health may regions where the issuers in which the investment from the U.S. government.
result in a reduction of the credit rating Fund invests are located.
of the issuer's securities and may lead to ABOUT THE INDEX USED IN THIS REPORT
the issuer's inability to honor its If the seller of a repurchase agreement
contractual obligations, including making in which the Fund invests defaults on its The S&P 500--REGISTERED TRADEMARK-- INDEX
timely payment of interest and principal. obligation or declares bankruptcy, the is a market capitalization-weighted index
Fund may experience delays in selling the covering all major areas of the U.S.
U.S.-dollar-denominated securities that securities underlying the repurchase economy. It is not the 500 largest
carry foreign-credit exposure may be agreement. companies, but rather the most widely held
affected by unfavorable political, 500 companies chosen with respect to
economic or government developments that To the extent that the Fund is market size, liquidity, and their
could affect the repayment of principal or concentrated in securities of issuers in industry.
the payment of interest. the banking and financial services
industries, the Fund's performance will The Fund is not managed to track the
Interest rate risk refers to the risk depend to a greater extent on the overall performance of any particular index,
that bond prices generally fall as condition of those industries. The value including the index defined here, and
interest rates rise and vice versa. of these securities can be sensitive to consequently, the performance of the Fund
changes in government regulation, interest may deviate significantly from the
There is no guarantee that the rates and economic downturns in the U.S. performance of the index.
investment techniques and risk analysis and abroad.
used by the Fund's portfolio managers will A direct investment cannot be made in
produce the desired results. The Fund may invest in obligations an index. Unless otherwise indicated,
issued by agencies and instrumentalities index results include reinvested
The prices of securities held by the of the U.S. government that may vary in dividends, and they do not reflect sales
Fund may decline in response to market the level of support they receive from the charges. Performance of an index of funds
risks. U.S. government. The U.S. government may reflects fund expenses; performance of a
choose not to provide financial support to market index does not.
The value of, payment of interest on U.S.-government-sponsored
and repayment of principal for the Fund as
well as the Fund's ability to sell a
========================================== PRODUCT ISSUER OR FINANCIAL ADVISOR FOR EXPENSES AND FEES ASSESSED IN CONNECTION
PORTFOLIO COMPOSITION THE MOST RECENT MONTH-END VARIABLE PRODUCT WITH A VARIABLE PRODUCT. SALES CHARGES,
PERFORMANCE. PERFORMANCE FIGURES REFLECT EXPENSES AND FEES, WHICH ARE DETERMINED BY
Maturity distribution of Fund holdings, in FUND EXPENSES, REINVESTED DISTRIBUTIONS THE VARIABLE PRODUCT ISSUERS, WILL VARY
days, as of 12/31/08 AND CHANGES IN NET ASSET VALUE. INVESTMENT AND WILL LOWER THE TOTAL RETURN.
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE
1-7 31.0% SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN THE MOST RECENT MONTH-END PERFORMANCE
8-30 28.1 YOU SELL SHARES. DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
31-90 30.7 PRODUCT CHARGES, IS AVAILABLE ON THE
91-180 8.3 AIM V.I. MONEY MARKET FUND, A SERIES INVESCO AIM AUTOMATED INFORMATION LINE,
181+ 1.9 PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS, 866 702 4402. AS MENTIONED ABOVE, FOR THE
========================================== IS CURRENTLY OFFERED THROUGH INSURANCE MOST RECENT MONTH-END PERFORMANCE
COMPANIES ISSUING VARIABLE PRODUCTS. YOU INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
The number of days to maturity of each CANNOT PURCHASE SHARES OF THE FUND CONTACT YOUR VARIABLE PRODUCT ISSUER OR
holding is determined in accordance with DIRECTLY. PERFORMANCE FIGURES GIVEN FINANCIAL ADVISOR.
the provisions of Rule 2a-7 of the REPRESENT THE FUND AND ARE NOT INTENDED TO
Investment Company Act of 1940. REFLECT ACTUAL VARIABLE PRODUCT VALUES.
THEY DO NOT REFLECT SALES CHARGES,
THE PERFORMANCE DATA QUOTED REPRESENT PAST
PERFORMANCE AND CANNOT GUARANTEE
COMPARABLE FUTURE RESULTS; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
SEE YOUR VARIABLE
SCHEDULE OF INVESTMENTS
December 31, 2008
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- ---------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER-70.09%(a)
=========================================================================================================
ASSET-BACKED SECURITIES-COMMERCIAL LOANS/LEASES-3.84%
Amstel Funding Corp.(b)(c) 1.50% 01/13/09 $ 971 $ 970,515
- ---------------------------------------------------------------------------------------------------------
Amstel Funding Corp.(b)(c) 2.70% 02/02/09 1,000 997,600
=========================================================================================================
1,968,115
=========================================================================================================
ASSET-BACKED SECURITIES-CONSUMER RECEIVABLES-3.90%
Thunder Bay Funding, LLC(b) 1.10% 01/13/09 2,000 1,999,267
=========================================================================================================
ASSET-BACKED SECURITIES-FULLY SUPPORTED BANK-16.76%
Concord Minutemen Capital Co., LLC-Series A,
(Multi CEP's-Liberty Hampshire Co., LLC;
agent)(b) 2.40% 01/14/09 2,000 1,998,267
- ---------------------------------------------------------------------------------------------------------
Crown Point Capital Co., LLC-Series A, (Multi
CEP's-Liberty Hampshire Co., LLC; agent)(b) 2.40% 01/15/09 2,000 1,998,133
- ---------------------------------------------------------------------------------------------------------
Grampian Funding Ltd./LLC (Multi CEP's-HBOS
PLC)(b)(c) 0.35% 01/02/09 2,000 1,999,981
- ---------------------------------------------------------------------------------------------------------
Lexington Parker Capital Co., LLC (Multi
CEP's-Liberty Hampshire Co., LLC; agent)(b) 2.00% 01/15/09 2,000 1,998,444
- ---------------------------------------------------------------------------------------------------------
Lexington Parker Capital Co., LLC (Multi
CEP's-Liberty Hampshire Co., LLC; agent)(b) 1.40% 02/02/09 600 599,253
=========================================================================================================
8,594,078
=========================================================================================================
ASSET-BACKED SECURITIES-MULTI-PURPOSE-19.10%
Chariot Funding, LLC/Ltd.(b) 1.40% 01/07/09 1,200 1,199,720
- ---------------------------------------------------------------------------------------------------------
Clipper Receivables Co., LLC(b) 0.85% 01/02/09 2,000 1,999,953
- ---------------------------------------------------------------------------------------------------------
Gemini Securitization Corp., LLC(b) 0.60% 02/17/09 1,000 999,217
- ---------------------------------------------------------------------------------------------------------
Gemini Securitization Corp., LLC(b) 1.05% 03/16/09 1,500 1,496,762
- ---------------------------------------------------------------------------------------------------------
Mont Blanc Capital Corp.(b)(c) 0.75% 01/16/09 1,500 1,499,531
- ---------------------------------------------------------------------------------------------------------
Thames Asset Global Securitization No. 1,
Inc.(b)(c) 2.00% 01/08/09 700 699,728
- ---------------------------------------------------------------------------------------------------------
Thames Asset Global Securitization No. 1,
Inc.(b)(c) 0.75% 03/09/09 1,900 1,897,348
=========================================================================================================
9,792,259
=========================================================================================================
ASSET-BACKED SECURITIES-SECURITIES-12.84%
Aspen Funding Corp.(b) 1.90% 02/03/09 2,000 1,996,517
- ---------------------------------------------------------------------------------------------------------
Cancara Asset Securitization Ltd./LLC(b)(c) 1.00% 03/23/09 2,000 1,995,500
- ---------------------------------------------------------------------------------------------------------
Tempo Finance Ltd/Corp.(b)(c) 1.00% 02/20/09 600 599,167
- ---------------------------------------------------------------------------------------------------------
Tempo Finance Ltd/Corp.(b)(c) 1.85% 03/02/09 2,000 1,993,833
=========================================================================================================
6,585,017
=========================================================================================================
CONSUMER FINANCE-3.90%
Toyota Motor Credit Corp. 2.10% 01/22/09 2,000 1,997,550
=========================================================================================================
DIVERSIFIED BANKS-5.85%
ING (US) Funding LLC(c) 1.81% 01/02/09 2,000 1,999,899
- ---------------------------------------------------------------------------------------------------------
National Australia Funding Delaware Inc.(b)(c) 0.58% 02/10/09 1,000 999,356
=========================================================================================================
2,999,255
=========================================================================================================
LIFE & HEALTH INSURANCE-3.90%
Metlife Short Term Funding LLC(b) 1.82% 01/06/09 2,000 1,999,494
=========================================================================================================
Total Commercial Paper (Cost $35,935,035) 35,935,035
=========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. MONEY MARKET FUND
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- ---------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT-16.58%
Banco Bilbao Vizcaya Argentaria, S.A. 2.63% 03/09/09 $ 1,000 $ 1,000,018
- ---------------------------------------------------------------------------------------------------------
BNP Paribas 1.74% 06/18/09 1,500 1,500,069
- ---------------------------------------------------------------------------------------------------------
Calyon S.A. 2.00% 04/20/09 2,000 2,000,000
- ---------------------------------------------------------------------------------------------------------
HSBC Bank PLC (United Kingdom)(c) 1.03% 04/02/09 1,000 1,000,025
- ---------------------------------------------------------------------------------------------------------
Royal Bank of Canada(d) 2.12% 12/16/09 2,000 2,000,000
- ---------------------------------------------------------------------------------------------------------
Toronto-Dominion Bank 1.90% 10/02/09 1,000 1,000,075
=========================================================================================================
Total Certificates of Deposit (Cost
$8,500,187) 8,500,187
=========================================================================================================
MEDIUM-TERM NOTES-3.90%
Rabobank Nederland-Series 1537A, Sr. Unsec.
Unsub. Floating Rate MTN(b)(c)(d) (Cost
$2,000,006) 4.77% 01/15/09 2,000 2,000,006
=========================================================================================================
VARIABLE RATE DEMAND NOTES-1.90%(d)(e)
LETTER OF CREDIT ENHANCED-1.90%(F)
Albany (City of), New York Industrial
Development Agency (Albany Medical Center
Hospital); Series 2006 B, Taxable IDR
(LOC-RBS Citizens, N.A.) (Cost $975,000) 3.50% 05/01/35 975 975,000
=========================================================================================================
TOTAL INVESTMENTS (excluding Repurchase
Agreements)-92.47% (Cost $47,410,228) 47,410,228
=========================================================================================================
<Caption>
REPURCHASE
AMOUNT
REPURCHASE AGREEMENTS-12.80%(g)
RBC Capital Markets Corp., Joint agreement dated
12/31/08 aggregate maturing value
$1,000,005,556 (collateralized by U.S.
Government sponsored agency obligations
valued at $1,020,000,000; 4.79-7.00%,
09/01/23-09/01/38), (Cost $6,562,766) 0.10% 01/02/09 6,562,802 6,562,766
=========================================================================================================
TOTAL INVESTMENTS-105.27% (Cost $53,972,994)(h)(i) 53,972,994
=========================================================================================================
OTHER ASSETS LESS LIABILITIES-(5.27)% (2,703,090)
=========================================================================================================
NET ASSETS-100.00% $51,269,904
_________________________________________________________________________________________________________
=========================================================================================================
</Table>
Investment Abbreviations:
<Table>
CEP - Credit Enhancement Provider
IDR - Industrial Development Revenue Bonds
LOC - Letter of Credit
MTN - Medium-Term Notes
Sr. - Senior
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(a) Security 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 purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at December 31, 2008 was $33,937,592, which represented 66.19% of the
Fund's Net Assets.
(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: 19.6%; United Kingdom: 14.8%; other countries less
than 5% each: 1.9%.
(d) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2008.
(e) 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, 2008.
(f) Principal and interest payments are fully enhanced by a letter of credit
from the bank listed or a predecessor bank, branch or subsidiary.
(g) Principal amount equals value at period end. See Note 1I.
(h) Also represents cost for federal income tax purposes.
(i) 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
-------------------------------------------------------------------------
Lexington Parker Capital Co., LLC 5.1%
-------------------------------------------------------------------------
Tempo Finance Ltd/Corp. 5.1
-------------------------------------------------------------------------
Thames Asset Global Sec No. 1, Inc. 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, 2008
<Table>
ASSETS:
Investments, excluding repurchase
agreements, at value and cost $47,410,228
- ------------------------------------------------------
Repurchase agreements, at value and cost 6,562,766
======================================================
Total investments, at value and
cost 53,972,994
======================================================
Interest receivable 32,465
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 28,415
- ------------------------------------------------------
Other assets 7,080
======================================================
Total assets 54,040,954
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 2,000,100
- ------------------------------------------------------
Fund shares reacquired 671,177
- ------------------------------------------------------
Dividends 32
- ------------------------------------------------------
Accrued fees to affiliates 26,507
- ------------------------------------------------------
Accrued other operating expenses 36,943
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 36,291
======================================================
Total liabilities 2,771,050
======================================================
Net assets applicable to shares
outstanding $51,269,904
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $51,262,767
- ------------------------------------------------------
Undistributed net investment income 7,137
======================================================
$51,269,904
______________________________________________________
======================================================
NET ASSETS:
Series I $49,004,344
______________________________________________________
======================================================
Series II $ 2,265,560
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 49,003,200
______________________________________________________
======================================================
Series II 2,265,278
______________________________________________________
======================================================
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, 2008
<Table>
INVESTMENT INCOME:
Interest $1,473,982
=====================================================
EXPENSES:
Advisory fees 204,982
- -----------------------------------------------------
Administrative services fees 144,277
- -----------------------------------------------------
Custodian fees 8,212
- -----------------------------------------------------
Distribution fees -- Series II 5,805
- -----------------------------------------------------
Transfer agent fees 5,537
- -----------------------------------------------------
Trustees' and officers' fees and
benefits 17,095
- -----------------------------------------------------
Professional services fees 39,363
- -----------------------------------------------------
Other 20,710
=====================================================
Total expenses 445,981
=====================================================
Net investment income 1,028,001
=====================================================
Net increase in net assets resulting
from operations $1,028,001
_____________________________________________________
=====================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,028,001 $ 2,114,184
=======================================================================================================
Distributions to shareholders from net investment income:
Series I (986,413) (2,016,504)
- -------------------------------------------------------------------------------------------------------
Series II (41,588) (97,680)
=======================================================================================================
Total distributions from net investment income (1,028,001) (2,114,184)
=======================================================================================================
Share transactions-net:
Series I 2,512,068 2,924,198
- -------------------------------------------------------------------------------------------------------
Series II (249,612) 173,554
=======================================================================================================
Net increase in net assets resulting from share transactions 2,262,456 3,097,752
=======================================================================================================
Net increase in net assets 2,262,456 3,097,752
_______________________________________________________________________________________________________
=======================================================================================================
NET ASSETS:
Beginning of year 49,007,448 45,909,696
=======================================================================================================
End of year (includes undistributed net investment income of $7,137 and
$6,344, respectively) $51,269,904 $49,007,448
_______________________________________________________________________________________________________
=======================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 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 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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- The Fund's securities are 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.
Because of the inherent uncertainties of valuation, the values reflected
in the financial statements may materially differ from the value received
upon actual sale of those investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income, adjusted for amortization of premiums and accretion
of discounts on investments, is recorded on the accrual basis from
settlement date. Paydown gains and losses on mortgage and asset-backed
securities are recorded as adjustments to interest income.
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized gain (loss) from
investment securities reported in the Statement of Operations and the
Statement of Changes in Net Assets and the realized net gains (losses) on
securities per share in the Financial Highlights. Transaction costs are
included in the calculation of the Fund's net asset value and,
accordingly, they reduce the Fund's total returns. These transaction costs
are not considered operating expenses and are not reflected in net
investment income reported in the Statement of Operations and Statement of
Changes in Net Assets, or the net investment income per share and ratios
of expenses and net investment income reported in the Financial
Highlights, nor are they limited by any expense limitation arrangements
between the Fund and the advisor.
The Fund allocates realized and unrealized capital gains and losses to a
class based on the relative net assets of each class. The Fund allocates
income to a class based on the relative value of the settled shares of
each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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
AIM V.I. MONEY MARKET FUND
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. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The Advisor 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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $94,277 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
AIM V.I. MONEY MARKET FUND
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $ --
- --------------------------------------
Level 2 53,972,994
- --------------------------------------
Level 3 --
======================================
$53,972,994
______________________________________
======================================
</Table>
NOTE 4--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,210
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The Bank of New York Mellon, 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 Invesco Aim, not
to exceed the contractually agreed upon rate.
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Distributions paid from ordinary income $1,028,001 $2,114,184
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -----------------------------------------------------------------------------------------------
Undistributed ordinary income $ 56,362
- -----------------------------------------------------------------------------------------------
Temporary book/tax differences (49,225)
- -----------------------------------------------------------------------------------------------
Shares of beneficial interest 51,262,767
===============================================================================================
Total net assets $51,269,904
_______________________________________________________________________________________________
===============================================================================================
</Table>
AIM V.I. MONEY MARKET FUND
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 at period-end.
NOTE 7--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of proxy costs, on
December 31, 2008, undistributed net investment income was increased by $793 and
shares of beneficial interest decreased by $793. This reclassification had no
effect on the net assets of the Fund.
NOTE 8--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
2008(a) 2007
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 34,854,533 $ 34,854,533 33,843,692 $ 33,843,692
- -------------------------------------------------------------------------------------------------------------------------
Series II 277,951 277,951 611,826 611,826
=========================================================================================================================
Issued as reinvestment of dividends:
Series I 986,376 986,376 2,016,467 2,016,467
- -------------------------------------------------------------------------------------------------------------------------
Series II 41,587 41,587 97,676 97,676
=========================================================================================================================
Reacquired:
Series I (33,328,841) (33,328,841) (32,935,961) (32,935,961)
- -------------------------------------------------------------------------------------------------------------------------
Series II (569,150) (569,150) (535,948) (535,948)
=========================================================================================================================
Net increase in share activity 2,262,456 $ 2,262,456 3,097,752 $ 3,097,752
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 88% 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
NOTE 9--SIGNIFICANT EVENT
On October 6, 2008, the Board of Trustees approved the participation of the Fund
in the U.S. Department of Treasury's Temporary Guarantee Program for Money
Market Funds (the "Program"). Under the Program, the Treasury Department will
guarantee shareholders in a Fund that they will receive $1 for each Fund share
held by them as of the close of business on September 19, 2008, in the event
that such Fund (in which they were invested as of September 19, 2008) liquidates
and the per share value at the time of liquidation is less than $0.995.
Participation in the Program requires a payment to the Treasury Department in
the amount of 0.01% of the share value of the Fund as of September 19, 2008. The
Fund will bear this expense without regard to any expense limitation currently
in effect.
The Program was initially in effect until December 18, 2008, and the Treasury
recently extended it until April 30, 2009. The Secretary of the Treasury may
extend the Program beyond April 30, 2009 through the close of business on
September 19, 2009. If extended, the Fund, if eligible, will consider whether to
continue to participate in the Program, which may require further payment.
AIM V.I. MONEY MARKET FUND
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET ASSET DIVIDENDS RATIO OF
VALUE, NET FROM NET NET ASSET NET ASSETS, EXPENSES
BEGINNING INVESTMENT INVESTMENT VALUE, END TOTAL END OF PERIOD TO AVERAGE
OF PERIOD INCOME INCOME OF PERIOD RETURN(a) (000S OMITTED) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $1.00 $0.02(b) $(0.02) $1.00 2.04% $49,004 0.86%(c)
Year ended 12/31/07 1.00 0.04 (0.04) 1.00 4.54 46,492 0.86
Year ended 12/31/06 1.00 0.04 (0.04) 1.00 4.27 43,568 0.90
Year ended 12/31/05 1.00 0.02 (0.02) 1.00 2.51 44,923 0.82
Year ended 12/31/04 1.00 0.01 (0.01) 1.00 0.69 54,008 0.75
- ---------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 1.00 0.02(b) (0.02) 1.00 1.78 2,266 1.11(c)
Year ended 12/31/07 1.00 0.04 (0.04) 1.00 4.28 2,515 1.11
Year ended 12/31/06 1.00 0.04 (0.04) 1.00 4.01 2,341 1.15
Year ended 12/31/05 1.00 0.02 (0.02) 1.00 2.26 3,080 1.07
Year ended 12/31/04 1.00 0.00 (0.00) 1.00 0.44 6,076 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
<Caption>
RATIO OF NET
INVESTMENT
INCOME
TO AVERAGE
NET ASSETS
- ---------------------------------------------
SERIES I
Year ended 12/31/08 2.02%(c)
Year ended 12/31/07 4.45
Year ended 12/31/06 4.20
Year ended 12/31/05 2.46
Year ended 12/31/04 0.67
- ---------------------------------------------
SERIES II
Year ended 12/31/08 1.77(c)
Year ended 12/31/07 4.20
Year ended 12/31/06 3.95
Year ended 12/31/05 2.21
Year ended 12/31/04 0.42
_____________________________________________
=============================================
</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) Calculated using average shares outstanding.
(c) Ratios are based on average daily net assets (000's omitted) of $48,924 and
$2,322 for Series I and Series II shares, respectively.
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $1,007.90 $4.34 $1,020.81 $4.37 0.86%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 1,006.50 5.60 1,019.56 5.63 1.11
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
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. 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. MONEY MARKET FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment The Bank of New York
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. 2 Hanson Place
2600 One Commerce Square Frankel LLP P.O. Box 4739 Brooklyn, NY 11217-1431
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739
Americas
New York, NY 10036-2714
AIM V.I. MONEY MARKET FUND
[INVESCO AIM LOGO] AIM V.I. POWERSHARES ETF ALLOCATION FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. POWERSHARES ETF ALLOCATION FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY STEP THREE -- PORTFOLIO STRATEGY
Since inception on October 24, 2008, AIM V.I. PowerShares ETF Allocation Fund Series I IMAS directly maps the probabilities to
returned 12.78%, excluding variable product issuer charges, and outperformed both its express the relative attractiveness of any
broad market benchmark, represented by the MSCI World Index, and its style-specific investment decision within the Fund's
index, the Custom V.I. PowerShares ETF Allocation Index. (triangle),(square) Over the specified allocation ranges. Ranges around
brief time period covered in this report, relative fund performance was exceptional, target allocations for each decision are
and not sustainable over longer time periods. The Custom V.I. PowerShares ETF determined through IMAS's proprietary
Allocation Index approximates the broad asset allocation of the Fund over time. allocation budgeting process that is based
Outperformance was primarily driven by the Fund's allocation to emerging markets debt, on the number of available of decisions,
Treasury securities and emerging markets equities. the amount of expected aggregate portfolio
outperformance and the risk
Your Fund's performance appears later in this report. characteristics of each available
decision. Generally speaking, riskier
FUND VS. INDEXES asset decisions will have smaller ranges,
while less risky, low correlation asset
Cumulative total returns for Fund from 10/24/08 to 12/31/08, excluding variable decisions will tend to have larger ranges.
product issuer charges. If variable product issuer charges were included, Fund
returns would be lower. Cumulative total returns for indexes from 10/31/08 to MARKET CONDITIONS AND YOUR FUND
12/31/08.
The Fund began operation late in 2008
Series I Shares 12.78% -- nearly a third of the way through the
Series II Shares 12.56 fourth quarter. The launch of the Fund
MSCI World Index(triangle) (Broad Market Index) -3.47 began against a backdrop of aggressive
Custom V.I. PowerShares ETF Allocation Index(square) (Style-Specific Index) 1.13 efforts to revive the economy by the U.S.
Lipper VUF Global Core Equity Index(triangle) (Peer Group Index) -3.15 Federal Reserve (the Fed). The Fed
continued the monetary easing policy it
(triangle) Lipper Inc.; (square) Invesco Aim, Lipper Inc. began in 2007 in an attempt to increase
======================================================================================= liquidity and revive lending. Since
December 2007, the federal funds target
HOW WE INVEST STEP TWO -- QUANTITATIVE MODELING rate was lowered from 4.25% to a range of
zero to 0.25%.(1) Real gross domestic
Invesco Multiple Asset Strategy's (IMAS) Fundamental research from step one is used product (GDP) decreased to an annual rate
investment process is a quantitative to create quantitative models focusing on of -0.5% in the third quarter of 2008.(2)
actively managed three-step investment valuation and dynamics. The decrease in production was primarily
strategy designed to generate a unique the result of a decrease in personal
source of excess returns from a macro o To address valuation, IMAS determines consumption and residential investment.
based, multi-asset investment discipline. if competing investment alternatives Inflation, as measured by a
are cheap or expensive relative to seasonally-adjusted Consumer Price Index,
STEP ONE -- FUNDAMENTAL RESEARCH their underlying fundamentals. virtually ground to a halt following sharp
Valuation focuses on the longer term, declines in energy prices in the second
Fundamental research is used to identify secular influences on each asset and half of the year. However, unemployment
the key drivers of relative performance suggests that there is a mean trended higher during the year and
for asset class, country, and other reverting, long-term, or equilibrium ultimately reached a seasonally adjusted
investment decision models. This research relationship between prices and rate of 7.2% by the end of December.(3)
includes the following: fundamentals.
The Fund's absolute and relative
o An analysis of markets to determine the o Dynamics reconciles the short-run performance versus its custom index
distinctive characteristics of each behavior of asset prices with their benefited primarily from strong
market relative to its comparison long-run behavior and recognizes that performance from the PowerShares Emerging
universe. these mis-valuations may not correct Markets Sovereign Debt Portfolio. This
instantaneously. emerging markets debt ETF rose
o The generation of hypotheses about how significantly since the Fund's inception,
various economic events will interact The output of the modeling is expressed as riskier assets began to rebound
with the characteristics and affect in the form of probabilities that one following a year of depressed results.
relative performance. asset will outperform another, resulting
in a quantitative expression of IMAS's While riskier assets staged a rebound,
o Confirmation or revision of hypothesis fundamental investment process in a Treasuries were also a positive absolute
through empirical research. mathematical-based approach. and relative contributor as the demand for
the safety of U.S. Treasury securities
======================================================================================= remained strong. PowerShares 1-30 Laddered
PORTFOLIO COMPOSITION Treasury Portfolio represented our
exposure and was our largest position at
Target % of Total Net Assets the close of the reporting period.
Asset Class Allocation Range As of 12/31/08
- ----------- ---------------- --------------------- In equities, emerging market stocks
Asia ex-Japan Equity 0-14% 6.52% also aided absolute and relative
Domestic Equity Large Cap 0-20 8.89 performance, highlighted by PowerShares
Domestic Equity Small-Mid-Cap 0-14 6.61 FTSE RAFI Emerging Markets Portfolio.
Emerging Markets Equity Small-Mid-Cap 0-12 5.73 Strong
Emerging Markets Fixed-Income 0-20 8.38
European Equity 0-16 7.34
Foreign Equity Small-Mid-Cap 0-16 7.35
High Yield Fixed Income 0-12 5.63
Investment Grade Fixed-Income 15-45 31.73
Japanese Equity 0-16 7.45
Money Market Funds Plus Other Assets Less
Liabilities n/a 4.37
Total Net Assets $537.2 thousand
=======================================================================================
AIM V.I. POWERSHARES ETF ALLOCATION FUND
performance resulted from a recovery in The views and opinions expressed in ment management career in 1996. Mr.
emerging equity markets that had become management's discussion of Fund Devine earned a B.A. in economics from
cheap following the steep declines seen performance are those of Invesco Aim Wake Forest University and an M.B.A. from
earlier in 2008. Advisors, Inc. These views and opinions the University of Georgia.
are subject to change at any time based on
Fund performance weakness was found factors such as market and economic SCOTT HIXON
primarily in the U.S., where both conditions. These views and opinions may
large-cap and small-cap issues struggled. not be relied upon as investment advice or Chartered Financial Analyst, portfolio
Power-Shares FTSE RAFI US 1000 and recommendations, or as an offer for a manger, is manager of AIM V.I.
Power-Shares FTSE RAFI US 1500 Small-Mid particular security. The information is Power-Shares ETF Allocation Fund. Mr.
Portfolio were the primary detractors. An not a complete analysis of every aspect of Hixon joined Invesco in 1994. He is
underweight position relative to our any market, country, industry, security or responsible for the fundamental research,
custom index did aid relative performance. the Fund. Statements of fact are from quantitative modeling and portfolio
sources considered reliable, but Invesco investment decisions for asset classes and
Another detractor from Fund performance Aim Advisors, Inc. makes no representation currencies. Mr. Hixon began his investment
was high yield bonds, represented by or warranty as to their completeness or management career in 1992. He earned a
PowerShares High Yield Corporate Bond accuracy. Although historical performance B.B.A. in finance, graduating magna cum
Portfolio. High yield bonds posted is no guarantee of future results, these laude, from Georgia Southern University.
negative returns under the weight of the insights may help you understand our He earned an M.B.A. in Finance from
credit crisis with forced selling leading investment management philosophy. Georgia State University.
to further underperformance relative to
Treasuries.(4) Our overweight position See important Fund and index disclosures SCOTT WOLLE
versus our custom index detracted from later in this report.
relative returns versus the custom index. Chartered Financial Analyst, portfolio
MARK AHNRUD manager, is manager of AIM V.I.
From a tactical perspective, the Fund Power-Shares ETF Allocation Fund. Mr.
remained underweight riskier assets in Chartered Financial Analyst, portfolio Wolle joined Invesco in 1999. He is
favor of U.S. Treasuries, with the only manager, is manager of AIM V.I. responsible for the fundamental research,
exception being a modest overweight to PowerShares ETF Allocation Fund. Mr. quantitative modeling and portfolio
Asia ex-Japan, which we favored as we Ahnrud joined Invesco in 2000. His investment decisions for country
believe these economies may benefit from responsibilities include fundamental allocations and commodities. Mr. Wolle
improved market stability and eventual research, quantitative modeling and began his investment management career in
economic recovery. portfolio investment decisions for asset 1991. He earned a B.S. in finance from
classes -- fixed-income market Virginia Tech University, graduating magna
Thank you for your investment in AIM allocations. Mr. Ahnrud began his cum laude. He earned an M.B.A. from the
V.I. PowerShares ETF Allocation Fund. investment career in 1985. He earned a Fuqua School of Business at Duke
B.S. in finance and investments from University where he earned the distinction
(1) U.S. Federal Reserve Babson College and an M.B.A. degree from of Fuqua Scholar.
(2) Bureau of Economic Analysis the Fuqua School of Business at Duke
(3) Bureau of Labor Statistics University. Assisted by Invesco Multiple Asset
(4) Lipper Inc. Strategies Team
CHRIS DEVINE
Chartered Financial Analyst, portfolio
manager, is manager of AIM V.I.
PowerShares ETF Allocation Fund. Mr.
Devine joined Invesco in 1998. He is
responsible for portfolio construction,
risk management, and trading. He began his
invest-
YOUR FUND'S PERFORMANCE
==========================================
CUMULATIVE TOTAL RETURNS YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL ANCE FIGURES GIVEN REPRESENT THE FUND AND
As of 12/31/08 SHARES. ARE NOT INTENDED TO REFLECT ACTUAL
VARIABLE PRODUCT VALUES. THEY DO NOT
SERIES I SHARES THE NET ANNUAL FUND OPERATING EXPENSE REFLECT SALES CHARGES, EXPENSES AND FEES
Inception (10/24/08) 12.78% RATIO SET FORTH IN THE MOST RECENT FUND ASSESSED IN CONNECTION WITH A VARIABLE
PROSPECTUS AS OF THE DATE OF THIS REPORT PRODUCT. SALES CHARGES, EXPENSES AND FEES,
SERIES II SHARES FOR SERIES I AND SERIES II SHARES WAS WHICH ARE DETERMINED BY THE VARIABLE
Inception (10/24/08) 12.56% 0.74% AND 0.99%, RESPECTIVELY.(1) THE PRODUCT ISSUERS, WILL VARY AND WILL LOWER
========================================== TOTAL ANNUAL FUND OPERATING EXPENSE RATIO THE TOTAL RETURN.
SET FORTH IN THE MOST RECENT FUND
THE PERFORMANCE OF THE FUND'S SERIES I AND PROSPECTUS AS OF THE DATE OF THIS REPORT THE MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARE CLASSES WILL DIFFER FOR SERIES I AND SERIES II SHARES WAS DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. 2.12% AND 2.37%, RESPECTIVELY. THE EXPENSE PRODUCT CHARGES, IS AVAILABLE ON THE
RATIOS PRESENTED ABOVE MAY VARY FROM THE INVESCO AIM AUTOMATED INFORMATION LINE,
THE PERFORMANCE DATA QUOTED REPRESENT EXPENSE RATIOS PRESENTED IN OTHER SECTIONS 866 702 4402. AS MENTIONED ABOVE, FOR THE
PAST PERFORMANCE AND CANNOT GUARANTEE OF THIS REPORT THAT ARE BASED ON EXPENSES MOST RECENT MONTH-END PERFORMANCE
COMPARABLE FUTURE RESULTS; CURRENT INCURRED DURING THE PERIOD COVERED BY THIS INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE REPORT. CONTACT YOUR VARIABLE PRODUCT ISSUER OR
CONTACT YOUR VARIABLE PRODUCT ISSUER OR FINANCIAL ADVISOR.
FINANCIAL ADVISOR FOR THE MOST RECENT AIM V.I. POWERSHARES ETF ALLOCATION
MONTH-END VARIABLE PRODUCT PERFORMANCE. FUND, A SERIES PORTFOLIO OF AIM VARIABLE HAD THE ADVISOR NOT WAIVED FEES AND/OR
PERFORMANCE FIGURES REFLECT FUND EXPENSES, INSURANCE FUNDS, IS CURRENTLY OFFERED REIMBURSED EXPENSES, PERFORMANCE WOULD
REINVESTED DISTRIBUTIONS AND CHANGES IN THROUGH INSURANCE COMPANIES ISSUING HAVE BEEN LOWER.
NET ASSET VALUE. INVESTMENT RETURN AND VARIABLE PRODUCTS. YOU CANNOT PURCHASE
PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES OF THE FUND DIRECTLY. PERFORM- (1) Total annual operating expenses less
any contractual fee waivers and/or
expense reimbursements by the advisor
in effect through at least April 30,
2010. See current prospectus for more
information
AIM V.I. POWERSHARES ETF ALLOCATION FUND
AIM V.I. POWERSHARES ETF ALLOCATION FUND'S INVESTMENT OBJECTIVE IS TOTAL RETURN CONSISTENT WITH A MODERATE LEVEL OF RISK RELATIVE TO
THE BROAD STOCK MARKET.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND reduction of the credit rating of the bond prices generally fall as interest
issuer's securities and may lead to the rates rise and vice versa.
The Fund pursues its investment objectives issuer's inability to honor its
by investing its assets primarily in contractual obligations, including The Fund may use enhanced investment
underlying PowerShares ETFs rather than making timely payment of interest and techniques such as leveraging and
investing directly in stocks, bonds, cash principal. derivatives. Leveraging entails risks such
or other investments. The Fund's as magnifying changes in the value of the
investment performance depends on the Investing in developing countries can portfolio's securities. Derivatives are
investment performance of the underlying add additional risk, such as high rates of subject to counterparty risk-the risk
PowerShares ETFs and other underlying inflation or sharply devalued currencies that the other party will not complete the
funds and securities in which it invests. against the U.S. dollar. Transaction costs transaction with the Fund.
An investment in the Fund, because it is a are often higher, and there may be delays
fund of funds, is subject to the risks in settlement procedures. A majority of the Fund's assets are
associated with investments in the likely to be invested in loans and
underlying funds in which the Fund Government obligors in emerging market securities that are less liquid than those
invests. The Fund will indirectly pay a countries are among the world's largest rated on national exchanges.
proportional share of the asset-based fees debtors to commercial banks, other
of the underlying PowerShares ETFs in governments, international financial There is no guarantee that the
which the Fund invests. There is risk that organizations and other financial investment techniques and risk analysis
the advisor's evaluations and assumptions institutions. Historically, certain used by the Fund's portfolio managers will
regarding the Fund's asset classes may be issuers of the government debt securities produce the desired results.
out of favor and under perform other have experienced substantial difficulties
segments; or that the Fund will vary from in meeting their external debt Small- and mid-cap companies tend to be
the target asset class due to factors such obligations, resulting in defaults on more vulnerable to adverse developments
as market fluctuations. There can be no certain obligations and the restructuring and more volatile than larger companies.
assurance that the underlying PowerShares of certain indebtedness. Investments in these sized companies may
ETFs and any other underlying funds will involve special risks, including those
achieve their investment objectives, and Prices of equity securities change in associated with dependence on a small
the performance of the underlying response to many factors, including the management group, little or no operating
PowerShares ETFs and any other underlying historical and prospective earnings of the history, little or no track record of
funds may be lower than that of the asset issuer, the value of its assets, general success, limited product lines, less
classes they represent. The underlying economic conditions, interest rates, publicly available information,
PowerShares ETFs and any other underlying investor perceptions and market liquidity. illiquidity, restricted resale or less
funds may change their investment frequent trading.
objectives or policies without the Foreign securities have additional
approval of the Fund. If that were to risks, including exchange rate changes, The prices of securities held by the
occur, the Fund might be forced to political and economic upheaval, relative Fund may decline in response to market
withdraw its investments from an lack of information, relatively low market risks.
underlying PowerShares ETF and/or any liquidity, and the potential lack of
other underlying funds at an unfavorable strict financial and accounting controls Nondiversification increases the risk
time. The advisor has the ability to and standards. that the value of the Fund's shares may
select and substitute the underlying funds vary more widely, and the Fund may be
in which the Fund invests and may be High-coupon, U.S. government agency subject to greater investment and credit
subject to potential conflicts of interest mortgage-backed securities provide a risk than if it invested more broadly.
in selecting underlying PowerShares ETFs higher coupon than current prevailing
and other affiliated underlying funds market interest rates, and the Fund may The ability of an issuer of a floating
because the advisor and/or PowerShares may purchase such securities at a premium. If rate loan or debt security to repay
receive higher fees from certain these securities experience a principal prior to maturity can limit the
underlying PowerShares ETFs and other faster-than-expected principal prepayment potential for gains by the Fund.
affiliated underlying funds than others. rate, both the market value and income
However, as a fiduciary of the Fund, the from such securities will decrease. Reinvestment risk is the risk that a
advisor is required to act in the Fund's bond's cash flows will be reinvested at an
best interest when selecting the Lower rated securities may be more interest rate below that of the original
underlying funds. susceptible to real or perceived adverse bond.
economic and competitive industry
Credit risk is the risk of loss on an conditions, and the secondary markets in Sovereign debt securities are subject
investment due to the deterioration of an which lower rated securities are traded to the additional risk that-under some
issuer's financial health. Such a may be less liquid than higher grade political, diplomatic, social or economic
deterioration of financial health may securities. The loans in which the Fund circumstances-some developing countries
result in a may invest are typically that issue lower quality debt securities
noninvestment-grade and involve a greater may be unable or unwilling to make
risk of default on interest and principal principal or interest payments as they
payments and of price changes due to the come due.
changes in the credit quality of the
issuer. The Fund may invest in obligations
issued by agencies and instrumentalities
Interest rate risk refers to the risk of the U.S. government that may vary in
that the level of support they receive from the
AIM V.I. POWERSHARES ETF ALLOCATION FUND
U.S. government. The U.S. government may OTHER INFORMATION
choose not to provide financial support to
U.S.-government-sponsored agencies or The Chartered Financial
instrumentalities if it is not legally Analyst--REGISTERED TRADEMARK--
obligated to do so. In this case, if the (CFA--REGISTERED TRADEMARK--) designation
issuer defaulted, the underlying fund is a globally recognized standard for
holding securities of such an issuer might measuring the competence and integrity of
not be able to recover its investment from investment professionals.
the U.S. government.
The returns shown in management's
ABOUT INDEXES USED IN THIS REPORT discussion of Fund performance are based
on net asset values calculated for
The MSCI WORLD INDEX--SERVICE MARK-- is a shareholder transactions. Generally
free float-adjusted market capitalization accepted accounting principles require
index that is designed to measure global adjustments to be made to the net assets
developed market equity performance. of the Fund at period end for financial
reporting purposes, and as such, the net
The CUSTOM V.I. POWERSHARES ETF asset values for shareholder transactions
ALLOCATION INDEX, created by Invesco Aim and the returns based on those net asset
to serve as a benchmark for AIM V.I. Power values may differ from the net asset
Shares ETF Allocation Fund, is composed of values and returns reported in the
the following indexes: MSCI World (54%) Financial Highlights. Additionally, the
and Barclays Capital U.S. Universal (46%). returns and net asset values shown
The MSCI World Index is a free throughout this report are at the Fund
float-adjusted market capitalization index level only and do not include variable
that is designed to measure global product issuer charges. If such charges
developed market equity performance. The were included, the total returns would be
Barclays Capital U.S. Universal Index is lower.
composed of the following Barclays Capital
indexes: U.S. Aggregate Index, U.S.
High-Yield Corporate, 144A, Eurodollar,
Emerging Markets and the non-ERISA portion
of CMBS.
The LIPPER VUF GLOBAL CORE EQUITY INDEX
is an equally weighted representation of
the largest variable insurance underlying
funds in the Lipper Global Core Funds
category. These funds typically invest at
least 75% of their equity assets in
companies both inside and outside of the
U.S. Core funds typically have an average
price-to-cash flow ratio, price-to-book
ratio, and three year sales-per-share
growth value compared to the S&P/Citigroup
World BMI.
The Fund is not managed to track the
performance of any particular index,
including the indexes defined here, and
consequently, the performance of the Fund
may deviate significantly from the
performance of the indexes.
A direct investment cannot be made in
an index. Unless otherwise indicated,
index results include reinvested
dividends, and they do not reflect sales
charges. Performance of an index of funds
reflects fund expenses; performance of a
market index does not.
SCHEDULE OF INVESTMENTS
December 31, 2008
SCHEDULE OF INVESTMENTS IN AFFILIATED ISSUERS-(A)101.73%
<Table>
<Caption>
% OF UNREALIZED
NET VALUE PURCHASES PROCEEDS APPRECIATION REALIZED DIVIDEND SHARES VALUE
ASSETS 12/31/07 AT COST FROM SALES (DEPRECIATION) GAIN (LOSS) INCOME 12/31/08 12/31/08
- --------------------------------------------------------------------------------------------------------------------------------
DOMESTIC EQUITY ETFS-15.50%
PowerShares FTSE
RAFI US 1000
Portfolio 8.89% $-- $ 46,498 $ -- $ 1,256 $ -- $ 429 1,400 $ 47,754
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares FTSE
RAFI US 1500 Small
Mid Portfolio 6.61% -- 33,669 -- 1,836 -- 166 1,103 35,505
================================================================================================================================
Total Domestic
Equity ETFs -- 80,167 -- 3,092 -- 595 83,259
================================================================================================================================
FIXED-INCOME ETFS-45.74%
PowerShares 1-30
Laddered Treasury
Portfolio 31.73% -- 157,059 -- 13,407 -- 620 5,506 170,466
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares Emerging
Markets Sovereign
Debt Portfolio 8.38% -- 42,291 (5,615) 7,785 563 476 2,240 45,024
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares High
Yield Corporate
Bond Portfolio 5.63% -- 29,239 (422) 1,459 (59) 480 1,885 30,217
================================================================================================================================
Total Fixed-Income
Funds -- 228,589 (6,037) 22,651 504 1,576 245,707
================================================================================================================================
FOREIGN EQUITY ETFS-34.39%
iShares MSCI Japan
Index Fund(b) 4.52% -- 21,788 -- 2,519 -- 175 2,532 24,307
- --------------------------------------------------------------------------------------------------------------------------------
iShares S&P/TOPIX
150 Index Fund(b) 2.93% -- 14,522 (182) 1,392 (7) 127 379 15,725
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares FTSE
RAFI Asia Pacific
ex-Japan Portfolio 6.52% -- 31,962 -- 3,053 -- 421 1,223 35,015
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares FTSE
RAFI Developed
Markets ex-US
Small- Mid
Portfolio 7.35% -- 36,169 -- 3,311 -- 177 2,806 39,480
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares FTSE
RAFI Emerging
Markets Portfolio 5.73% -- 26,500 -- 4,302 -- 488 2,216 30,802
- --------------------------------------------------------------------------------------------------------------------------------
PowerShares FTSE
RAFI Europe
Portfolio 7.34% -- 36,668 -- 2,766 -- 149 1,544 39,434
================================================================================================================================
Total Foreign
Equity ETFs -- 167,609 (182) 17,343 (7) 1,537 184,763
================================================================================================================================
MONEY MARKET FUNDS-6.10%
Liquid Assets
Portfolio-Institu-
tional Class 3.05% -- 231,634 (215,257) -- -- 69 16,377 16,377
- --------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institu-
tional Class 3.05% -- 231,634 (215,257) -- -- 65 16,377 16,377
================================================================================================================================
Total Money Market
Funds -- 463,268 (430,514) -- -- 134 32,754 32,754
================================================================================================================================
TOTAL INVESTMENTS IN
AFFILIATED MUTUAL
FUNDS (Cost
$503,397) 101.73% $-- $939,633 $(436,733) $43,086 $497 $3,842 $546,483
================================================================================================================================
OTHER ASSETS LESS
LIABILITIES (1.73)% (9,316)
================================================================================================================================
NET ASSETS 100.00% $537,167
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
Investment Abbreviations:
<Table>
ETF-Exchange-Traded Fund
</Table>
Notes to Schedule of Investments:
(a) Unless otherwise indicated, each exchange-traded fund or mutual fund and
the Fund are affiliated by either having the same investment advisor or an
investment advisor under common control with the Fund's investment
advisor.
(b) Non-affiliate of the Fund or its investment advisor.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments -- non affiliates at value (Cost $36,121) $ 40,032
- ----------------------------------------------------------------------------
Investments -- affiliates, at value (Cost $467,276) 506,451
============================================================================
Total investments (Cost $503,397) 546,483
============================================================================
Receivables for:
Fund shares sold 10,560
- ----------------------------------------------------------------------------
Dividends from affiliates 62
- ----------------------------------------------------------------------------
Fund expenses absorbed 15,192
- ----------------------------------------------------------------------------
Investment for trustee deferred compensation 288
- ----------------------------------------------------------------------------
Other assets 11,903
============================================================================
Total assets 584,488
____________________________________________________________________________
============================================================================
LIABILITIES:
Payables for:
Investments purchased -- affiliates 1,530
- ----------------------------------------------------------------------------
Investments purchased -- non affiliates 18,199
- ----------------------------------------------------------------------------
Accrued fees to affiliates 163
- ----------------------------------------------------------------------------
Accrued other operating expenses 27,141
- ----------------------------------------------------------------------------
Trustee deferred compensation 288
============================================================================
Total liabilities 47,321
============================================================================
Net assets applicable to shares outstanding $537,167
____________________________________________________________________________
============================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $489,831
- ----------------------------------------------------------------------------
Undistributed net investment income 3,753
- ----------------------------------------------------------------------------
Undistributed net realized gain 497
- ----------------------------------------------------------------------------
Unrealized appreciation 43,086
============================================================================
$537,167
____________________________________________________________________________
============================================================================
NET ASSETS:
Series I $141,050
____________________________________________________________________________
============================================================================
Series II $396,117
____________________________________________________________________________
============================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Series I 12,724
____________________________________________________________________________
============================================================================
Series II 35,793
____________________________________________________________________________
============================================================================
Series I:
Net asset value per share $ 11.09
____________________________________________________________________________
============================================================================
Series II:
Net asset value per share $ 11.07
____________________________________________________________________________
============================================================================
</Table>
STATEMENT OF OPERATIONS
For the period October 24, 2008 (commencement date) through December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends -- non affiliates $ 308
- ----------------------------------------------------------------------------
Dividends -- affiliates 3,540
============================================================================
Total investment income 3,848
============================================================================
EXPENSES:
Advisory fees 437
- ----------------------------------------------------------------------------
Administrative services fees 9,467
- ----------------------------------------------------------------------------
Custodian fees 1,484
- ----------------------------------------------------------------------------
Distribution fees -- Series II 101
- ----------------------------------------------------------------------------
Transfer agent fees 32
- ----------------------------------------------------------------------------
Trustees' and officers' fees and benefits 3,731
- ----------------------------------------------------------------------------
Reports to shareholders 5,670
- ----------------------------------------------------------------------------
Professional services fees 30,746
- ----------------------------------------------------------------------------
Other 144
============================================================================
Total expenses 51,812
============================================================================
Less: Fees waived and expenses reimbursed (51,597)
============================================================================
Net expenses 215
============================================================================
Net investment income 3,633
============================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities -- non affiliates (7)
- ----------------------------------------------------------------------------
Investment securities -- affiliates 504
============================================================================
497
============================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities -- non affiliates 3,911
- ----------------------------------------------------------------------------
Investment securities -- affiliates 39,175
============================================================================
43,086
============================================================================
Net realized and unrealized gain 43,583
============================================================================
Net increase in net assets resulting from operations $ 47,216
____________________________________________________________________________
============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period October 24, 2008 (commencement date) through December 31, 2008
<Table>
OPERATIONS:
Net investment income $ 3,633
- ----------------------------------------------------------------------------------------------
Net realized gain 497
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation 43,086
==============================================================================================
Net increase in net assets resulting from operations 47,216
==============================================================================================
Distributions to shareholders from net investment income:
Series I (2,420)
- ----------------------------------------------------------------------------------------------
Series II (5,746)
==============================================================================================
Total distributions from net investment income (8,166)
==============================================================================================
Share transactions-net:
Series I 127,430
- ----------------------------------------------------------------------------------------------
Series II 370,687
==============================================================================================
Net increase in net assets resulting from share transactions 498,117
==============================================================================================
Net increase in net assets 537,167
==============================================================================================
NET ASSETS:
Beginning of year --
==============================================================================================
End of year (includes undistributed net investment income of $3,753) $537,167
______________________________________________________________________________________________
==============================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. PowerShares ETF Allocation 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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is to provide total return consistent with a
moderate level of risk relative to the broad stock market.
The Fund primarily invests in exchange-traded funds ("underlying funds")
advised by Invesco PowerShares Capital Management LLC ("Invesco PowerShares").
The Fund may also invest in affiliated mutual funds advised by Invesco Aim
Advisors (the "Advisor" or "Invesco Aim"); in unaffiliated mutual funds and
exchange-traded funds and in other securities. Invesco Aim and Invesco
PowerShares are affiliates of each other as they are indirect wholly owned
subsidiaries of Invesco Ltd. ("Invesco"). Invesco Aim may change the Fund's
asset class allocations, the underlying funds or the target weightings in the
underlying funds without shareholder approval. The underlying funds may engage
in a number of investment techniques and practices, which involve certain risks.
Each underlying fund's accounting policies are outlined in the underlying fund's
financial statements and the affiliated underlying funds are available upon
request.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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. Distributions from income from underlying funds, if any, are
recorded as dividend income on ex-dividend date. Distributions from net
realized capital gains from underlying funds, if any, are recorded as
realized gains on the ex-dividend date. Interest income is recorded on the
accrual basis from settlement date.
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. 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.
D. 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 up to three years after the filing of the return
for the tax period.
E. 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.
F. 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 by a
significant amount.
G. 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 the
Advisor. Under the terms of the investment advisory agreement, the Fund pays an
advisory fee to the Advisor based on the annual rate of the Fund's average daily
net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.67%
- -------------------------------------------------------------------
Next $250 million 0.655%
- -------------------------------------------------------------------
Next $500 million 0.64%
- -------------------------------------------------------------------
Next $1.5 billion 0.625%
- -------------------------------------------------------------------
Next $2.5 billion 0.61%
- -------------------------------------------------------------------
Next $2.5 billion 0.595%
- -------------------------------------------------------------------
Next $2.5 billion 0.58%
- -------------------------------------------------------------------
Over $10 billion 0.565%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement between the Advisor and
each of 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., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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 0.18% and Series
II shares to 0.43% of average daily net assets, through at least April 30, 2010.
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;
AIM V.I. POWERSHARES ETF ALLOCATION FUND
(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 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.
Also, the Advisor has contractually agreed, through at least April 30, 2010,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the period October 24, 2008 (commencement date) to December 31, 2008, the
Advisor waived advisory fees of $437 and reimbursed Fund expenses of $51,160.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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 period October 24,
2008 (commencement date) to December 31, 2008, Invesco Aim was paid $9,426 for
accounting and fund administrative services and reimbursed $41 for services
provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the period October 24, 2008 (commencement
date) to December 31, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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 period October 24, 2008 (commencement
date) to December 31, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------------------------------------------------------------
Level 1 $546,483
- --------------------------------------------------------------------------------------------
Level 2 --
- --------------------------------------------------------------------------------------------
Level 3 --
============================================================================================
$546,483
____________________________________________________________________________________________
============================================================================================
</Table>
AIM V.I. POWERSHARES ETF ALLOCATION FUND
NOTE 4--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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 period October 24, 2008 (commencement date) to December 31, 2008,
the Fund paid legal fees of $252 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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE PERIOD OCTOBER
24, 2008 (COMMENCEMENT DATE) TO DECEMBER 31, 2008:
<Table>
<Caption>
2008
- ---------------------------------------------------------------------------------------------
Ordinary income $8,166
_____________________________________________________________________________________________
=============================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ----------------------------------------------------------------------------------------------
Undistributed ordinary income $ 4,736
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation -- investments 43,020
- ----------------------------------------------------------------------------------------------
Temporary book/tax differences (420)
- ----------------------------------------------------------------------------------------------
Shares of beneficial interest 489,831
==============================================================================================
Total net assets $537,167
______________________________________________________________________________________________
==============================================================================================
</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 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 at period-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the period October 24, 2008 (commencement date) to December 31,
2008 was $476,365 and $6,218, respectively. Cost of investments on a tax basis
includes the adjustments for financial reporting purposes as of the most
recently completed Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ---------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $43,020
- ---------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities --
=============================================================================================
Net unrealized appreciation of investment securities $43,020
_____________________________________________________________________________________________
=============================================================================================
Cost of investments for tax purposes is 503,463.
</Table>
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of cost incurred during
the startup period of the Fund, on December 31, 2008, undistributed net
investment income was increased by $8,286 and shares of beneficial interest
decreased by $8,286. This reclassification had no effect on the net assets of
the Fund.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------
OCTOBER 24, 2008
(COMMENCEMENT DATE) TO
DECEMBER 31, 2008(a)
-----------------------------------
SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
Sold:
Series I 12,501 $125,010
- -------------------------------------------------------------------------------------------------------------
Series II 35,270 365,022
=============================================================================================================
Issued as reinvestment of dividends:
Series I 223 2,420
- -------------------------------------------------------------------------------------------------------------
Series II 530 5,746
=============================================================================================================
Reacquired:
Series I -- --
- -------------------------------------------------------------------------------------------------------------
Series II (7) (81)
=============================================================================================================
Net increase in share activity 48,517 $498,117
_____________________________________________________________________________________________________________
=============================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund that owns 46% 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
sells units of interest in separate accounts funding variable products
that are invested in the Fund. The Fund, Invesco Aim and/or Invesco Aim
affiliates may make payments to this entity, which is considered to be
related to the Fund, for providing services to the Fund, Invesco Aim and
or Invesco Aim affiliates including but not limited to services such as,
securities brokerage, third party record keeping and account servicing and
administrative services. The Trust has no knowledge as to whether all or
any portion of the shares owned of record by this entity are also owned
beneficially.
In addition, 52% of the outstanding shares of the Fund are owned by
Invesco Aim or an investment advisor under common control of Invesco Aim.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET ON SECURITIES DIVIDENDS
VALUE, NET (BOTH TOTAL FROM FROM NET NET ASSET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT VALUE, END TOTAL
OF PERIOD INCOME(A) UNREALIZED) OPERATIONS INCOME OF PERIOD RETURN(B)
- ---------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08(d) $10.00 $0.11 $1.17 $1.28 $(0.19) $11.09 12.88%
- ---------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08(d) 10.00 0.11 1.15 1.26 (0.19) 11.07 12.66
_____________________________________________________________________________________________________________________
=====================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE NET TO AVERAGE NET RATIO OF NET
ASSETS WITH ASSETS WITHOUT INVESTMENT
NET ASSETS, FEE WAIVERS FEE WAIVERS INCOME
END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(C)
- -----------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08(d) $141 0.17%(e) 79.26%(e) 5.72%(e) 6%
- -----------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08(d) 396 0.42(e) 79.51(e) 5.47(e) 6
___________________________________________________________________________________________________________
===========================================================================================================
</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, if applicable and do not reflect charges assessed in connection with
a variable product, which if included would reduce total returns.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Commencement date of October 24, 2008.
(e) Ratios are annualized and based on average daily net assets (000's omitted)
of $132 and $214 for Series I and Series II shares, respectively.
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Variable Insurance Funds and
Shareholders of AIM V.I. PowerShares ETF Allocation 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. PowerShares ETF Allocation
Fund (one of the funds constituting AIM Variable Insurance Funds, hereafter
referred to as the "Fund") at December 31, 2008 and the results of its
operations, the changes in its net assets and the financial highlights for the
period October 24, 2008 (commencement date) through December 31, 2008, 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 audit. We conducted our audit 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, 2008 by
correspondence with the custodian and broker, provide a reasonable basis for our
opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
Houston, Texas
AIM V.I. POWERSHARES ETF ALLOCATION 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 actual ending account value and expenses of Series I
and Series II shares in the below example are based on an investment of $1,000
invested on October 24, 2008 (the date the share classes commenced sales) and
held through December 31, 2008. The hypothetical ending account value and
expenses in the below example are based on an investment of $1,000 invested at
the beginning of the period and held for the entire six month period July 1,
2008, through December 31, 2008.
In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the underlying
funds in which your Fund invests. The amount of fees and expenses incurred
indirectly by your Fund will vary because the underlying funds have varied
expenses and fee levels and the Fund may own different proportions of the
underlying funds at different times. Estimated underlying fund expenses are not
expenses that are incurred directly by your Fund. They are expenses that are
incurred directly by the underlying funds and are deducted from the value of the
funds your Fund invests in. The effect of the estimated underlying fund expenses
that you bear indirectly are included in your Fund's total return.
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 the period, (October 24, 2008, through
December 31, 2008 for Series I and Series II shares). Because the actual ending
account value and expense information in the example is not based upon a six
month period, the ending account value and expense information may not provide a
meaningful comparison to mutual funds that provide such information for a full
six month 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 only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $1,127.80 $0.91 $1,024.28 $0.87 0.17%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 1,125.56 2.24 1,023.03 2.14 0.42
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period October 24, 2008, through December 31, 2008, 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 69
(October 24, 2008, through December 31, 2008)/366 to reflect the most recent
fiscal half year. Because Series I and Series II shares have not been in
existence for a full six month period, the actual ending account value and
expense information shown may not provide a meaningful comparison to fund
expense information of classes that show such data for a full six month
period and, because the actual ending account value and expense information
in the expense example covers a short time period, return and expense data
may not be indicative of return and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Series I and Series II shares of the Fund and other funds because such data
is based on a full six month period.
AIM V.I. POWERSHARES ETF ALLOCATION 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Corporate Dividends Received Deduction* 2.49%
</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 2008. Subsequently, certain of these estimates have been corrected.
Listed below are the corrected sources of this distribution, determined in
accordance with generally accepted accounting principles ("GAAP").
<Table>
<Caption>
GAIN FROM SALE OF
NET INCOME SECURITIES RETURN OF PRINCIPAL TOTAL DISTRIBUTION
- -------------------------------------------------------------------------------------------------------------------------
12/16/08 Series I $0.0874 $0.000 $0.1062 $0.1936
- -------------------------------------------------------------------------------------------------------------------------
12/16/08 Series II $0.0853 $0.000 $0.1063 $0.1916
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 2008 calendar year. This
information is being provided to comply with certain U.S. Securities and
Exchange Commission requirements.
AIM V.I. POWERSHARES ETF ALLOCATION 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. POWERSHARES ETF ALLOCATION FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. POWERSHARES ETF ALLOCATION FUND
[INVESCO AIM LOGO] AIM V.I. SMALL CAP EQUITY FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. SMALL CAP EQUITY FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY We consider selling a stock when it no
longer meets our investment criteria.
For the year ended December 31, 2008, Series I shares of AIM V.I. Small Cap Equity Fund For example:
had negative returns but, excluding variable product issuer charges, fared better than
the Fund's style-specific index, the Russell 2000 Index.(triangle) Performance versus o Our original investment thesis is not
the Russell 2000 Index was driven by better stock selection across sectors. valid because the fundamentals are no
longer intact.
Excluding variable product issuer charges, the Fund's Series I shares also fared
better than the broad market, as measured by the S&P 500 Index.(triangle) Small-cap o The price target set at purchase is
stocks generally outperformed large-cap stocks in 2008(triangle); the S&P 500 Index is exceeded.
heavily oriented to large-cap stocks.
o The company's timeliness profile
Your Fund's long-term performance appears later in this report. deteriorates.
FUND VS. INDEXES MARKET CONDITIONS AND YOUR FUND
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. Many factors contributed to sharp negative
If variable product issuer charges were included, returns would be lower. performance of most major market indexes
for the year ended December 31, 2008.(1)
Series I Shares -31.31% The chief catalyst was the ongoing
Series II Shares -31.40 subprime loan crisis and its far-reaching
S&P 500 Index(triangle) (Broad Market Index) -36.99 effects on credit availability.
Russell 2000 Index(triangle) (Style-Specific Index) -33.79 Additionally, record-high crude oil
Lipper VUF Small-Cap Core Funds Index(triangle) (Peer Group Index) -34.62 prices,(2) falling home values and the
weak U.S. dollar placed significant
(triangle) Lipper Inc. pressure on the purchasing power of
======================================================================================= consumers. Later in the year, consumer
confidence fell and market volatility
HOW WE INVEST o Valuation analysis. Identifying increased dramatically due to growing
attractively valued stocks given concerns of a global recession.
Our investment process seeks to identify their growth potential over a one- to
attractively valued small-cap companies two-year horizon. To facilitate the orderly functioning
with high growth potential, demonstrated of credit markets and possibly prevent a
by consistent and accelerating revenue and o Timeliness analysis. Identifying the more severe economic downturn, in early
earnings growth. "timeliness" of a stock purchase. We October Congress enacted a $700 billion
review trading volume characteristics rescue plan -- the Troubled Assets Relief
We begin with a quantitative model and trend analysis to make sure there Program. In addition, the U.S. Federal
that ranks companies based on a set of are no signs of stock deterioration. Reserve, in concert with other central
fundamental, valuation and timeliness This also serves as a risk management banks, dramatically lowered short-term
factors. This proprietary model provides measure that helps us confirm our interest rate targets.
an objective approach to identifying new high conviction candidates.
investment opportunities, as the highest In this environment, the Fund's
ranked stocks become the primary focus of Portfolio construction plays an Series I shares, excluding variable
our research efforts. important role in risk management. We product issuer charges, had double-digit
align the Fund with the S&P SmallCap 600 negative performance but fared better than
Our stock selection process is based Index, the benchmark we believe represents the Russell 2000 Index. Performance was
on a rigorous three-step process that the small-cap-growth asset class. We seek driven primarily by stock selection in
includes fundamental, valuation and to control risk by keeping the Fund's several sectors, including industrials,
timeliness analysis: sector weightings in line with the health care, consumer discretionary and
benchmark by staying fully diversified in materials.
o Fundamental analysis. Building all those sectors. We also seek to limit
financial models and conducting stock-specific risk by investing,
in-depth interviews with company typically, in 100-120 holdings.
management.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Industrials 18.4% 1. Regional Banks 8.1% 1. Alberto-Culver Co. 1.7%
Financials 17.2 2. Trucking 3.9 2. ViroPharma Inc. 1.6
Information Technology 16.3 3. Environmental & Facilities 3. Community Trust Bancorp, Inc. 1.5
Health Care 14.5 Services 3.8 4. KBW Inc. 1.5
Consumer Discretionary 11.4 4. Health Care Equipment 3.3 5. Marten Transport, Ltd. 1.5
Consumer Staples 5.6 5. Industrial Machinery 3.3 6. Capella Education Co. 1.5
Energy 4.9 ========================================== 7. CACI International Inc.-Class A 1.5
Materials 4.2 8. Comtech Telecommunications Corp. 1.4
Telecommunication Services 2.7 ========================================== 9. TreeHouse Foods, Inc. 1.4
Utilities 2.6 Total Net Assets $157.9 million 10. ABM Industries Inc. 1.4
Money Market Funds Plus Total Number of Holdings* 102
Other Assets Less Liabilities 2.2 ========================================== ==========================================
==========================================
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 outperformed its the year. In addition, stock selection in JULIET ELLIS
style-specific index by the widest margin the diversified financials and insurance Chartered Financial Analyst,
in the industrials sector, largely due to industries detracted from performance. [ELLIS senior portfolio manager, is
stock selection in the transportation PHOTO] lead manager of AIM V.I.
industry. The top contributor to Fund The energy sector also experienced Small Cap Equity Fund. Before
performance was ALLEGIANT TRAVEL, a considerable volatility in 2008, and joining Invesco Aim in 2004,
company that provides airline detracted from Fund performance. After Ms. Ellis served as senior portfolio
transportation from smaller cities to rising early in the year, the price of oil manager of two small-cap funds with more
tourist destinations. Other transportation fell sharply due to weakening demand than $2 billion in assets at another firm.
holdings that made positive contributions caused by the global economic slowdown, She began her investment career in 1981.
included truckload carriers MARTEN negatively affecting many companies in the She is a cum laude and Phi Beta Kappa
TRANSPORT and OLD DOMINION FREIGHT. energy sector. Three of the Fund's top graduate of Indiana University with a B.A.
five detractors were energy holdings: in economics and political science.
Outperformance in the health care NATCO GROUP, VENOCO and PARALLEL
sector was also due to stock selection. PETROLEUM. JUAN HARTSFIELD
Key contributors to Fund performance [HARTSFIELD Chartered Financial Analyst,
included home health care services The Fund also underperformed in the PHOTO] portfolio manager, is manager
provider GENTIVA HEALTH SERVICES and utilities sector, due to both stock of AIM V.I. Small Cap Equity
pharmaceutical manufacturer VIROPHARMA. selection and an underweight position. Key Fund. He began his investment career in
detractors included ENERGEN and CASCAL 2000 as an equity analyst and later was
The Fund also outperformed the N.V. named a portfolio manager. He joined
Russell 2000 Index in the consumer Invesco Aim in 2004. Mr. Hartsfield
discretionary sector, driven by stock The most significant changes to earned a B.S. in petroleum engineering
selection and an underweight position. The overall positioning of the Fund included from The Univer-sityof Texas at Austin and
Fund's underweight position was a benefit reductions in the information technology an M.B.A. from the University of Michigan.
during the year as many consumer and materials sectors and additions in the
discretionary stocks were weak due to financials, health care and utilities Assisted by the Small Cap Core/Growth Team
significant reductions in consumer sectors. All changes to the Fund were
spending. Specifically, the Fund avoided based on our bottom-up stock selection
companies in the automobiles and process of identifying high quality growth
components industry, many of which companies trading at what we believe are
performed poorly. attractive valuations.
Another area of strength for the Fund We thank you for your commitment to
was the materials sector, where the Fund AIM V.I. Small Cap Equity Fund.
benefited from solid stock selection. One
holding that made a key contribution to (1) Lipper Inc.
Fund performance was salt producer COMPASS
MINERALS INTERNATIONAL. (2) Bloomberg L.P.
Underperformance versus the Russell The views and opinions expressed in
2000 Index was concentrated in four management's discussion of Fund
sectors: financials, energy, information performance are those of Invesco Aim
technology and utilities. The Fund Advisors, Inc. These views and opinions
underperformed by the widest margin in the are subject to change at any time based on
financials sector. The financials sector factors such as market and economic
experienced significant volatility during conditions. These views and opinions may
the year, as the credit crisis intensified not be relied upon as investment advice or
and a liquidity crunch emerged. recommendations, or as an offer for a
Underperformance in this sector was particular security. The information is
driven largely by an underweight position not a complete analysis of every aspect of
in the bank industry, as many small-cap any market, country, industry, security or
bank stocks rallied late in the Fund. Statements of fact are from
sources considered reliable, but Invesco
Aim 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.
See important Fund and index disclosures
later in this report.
AIM V.I. SMALL CAP EQUITY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS FIGURES REFLECT FUND EXPENSES, REINVESTED AND ARE NOT INTENDED TO REFLECT ACTUAL
As of 12/31/08 DISTRIBUTIONS AND CHANGES IN NET ASSET VARIABLE PRODUCT VALUES. THEY DO NOT
VALUE. INVESTMENT RETURN AND PRINCIPAL REFLECT SALES CHARGES, EXPENSES AND FEES
SERIES I SHARES VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE ASSESSED IN CONNECTION WITH A VARIABLE
Inception (8/29/03) 2.53% A GAIN OR LOSS WHEN YOU SELL SHARES. PRODUCT. SALES CHARGES, EXPENSES AND FEES,
5 Years 0.07 WHICH ARE DETERMINED BY THE VARIABLE
1 Year -31.31 THE TOTAL ANNUAL FUND OPERATING PRODUCT ISSUERS, WILL VARY AND WILL LOWER
EXPENSE RATIO SET FORTH IN THE MOST RECENT THE TOTAL RETURN.
SERIES II SHARES FUND PROSPECTUS AS OF THE DATE OF THIS
Inception (8/29/03) 2.32% REPORT FOR SERIES I AND SERIES II SHARES THE MOST RECENT MONTH-END PERFORMANCE
5 Years -0.13 WAS 1.13% AND 1.38%, RESPECTIVELY. THE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
1 Year -31.40 EXPENSE RATIOS PRESENTED ABOVE MAY VARY PRODUCT CHARGES, IS AVAILABLE ON THE
========================================== FROM THE EXPENSE RATIOS PRESENTED IN OTHER INVESCO AIM AUTOMATED INFORMATION LINE,
SECTIONS OF THIS REPORT THAT ARE BASED ON 866 702 4402. AS MENTIONED ABOVE, FOR THE
THE PERFORMANCE OF THE FUND'S SERIES I AND EXPENSES INCURRED DURING THE PERIOD MOST RECENT MONTH-END PERFORMANCE
SERIES II SHARE CLASSES WILL DIFFER COVERED BY THIS REPORT. INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES. CONTACT YOUR VARIABLE PRODUCT ISSUER OR
AIM V.I. SMALL CAP EQUITY FUND, A FINANCIAL ADVISOR.
THE PERFORMANCE DATA QUOTED REPRESENT SERIES PORTFOLIO OF AIM VARIABLE INSURANCE
PAST PERFORMANCE AND CANNOT GUARANTEE FUNDS, IS CURRENTLY OFFERED THROUGH HAD THE ADVISOR NOT WAIVED FEES AND/OR
COMPARABLE FUTURE RESULTS; CURRENT INSURANCE COMPANIES ISSUING VARIABLE REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE PRODUCTS. YOU CANNOT PURCHASE SHARES OF PERFORMANCE WOULD HAVE BEEN LOWER.
CONTACT YOUR VARIABLE PRODUCT ISSUER OR THE FUND DIRECTLY. PERFORMANCE FIGURES
FINANCIAL ADVISOR FOR THE MOST RECENT GIVEN REPRESENT THE FUND
MONTH-END VARIABLE PRODUCT PERFORMANCE.
PERFORMANCE
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASSES SINCE INCEPTION
Fund data from 8/29/03, index data from 8/31/03
AIM V.I. AIM V.I.
Small Cap Small Cap Lipper VUF
Equity Fund- Equity Fund- Small-Cap Core Funds
Date Series I Shares Series II Shares S&P 500 Index(1) Russell 2000 Index(1) Index(1)
- ------- --------------- ---------------- ---------------- --------------------- --------------------
8/29/03 $10000 $10000
8/03 10000 10000 $10000 $10000 $10000
9/03 9830 9830 9894 9815 9777
10/03 10650 10650 10454 10640 10478
11/03 10990 10990 10545 11017 10862
12/03 11393 11387 11098 11241 11196
1/04 11713 11707 11302 11729 11517
2/04 11964 11958 11459 11834 11707
3/04 12074 12068 11286 11945 11793
4/04 11563 11548 11109 11336 11334
5/04 11694 11678 11261 11516 11478
6/04 12034 12018 11480 12001 11916
7/04 11183 11167 11100 11193 11197
8/04 10732 10717 11145 11135 11091
9/04 11163 11137 11265 11658 11562
10/04 11433 11418 11437 11888 11742
11/04 12224 12208 11900 12919 12619
12/04 12465 12439 12305 13301 12956
1/05 12065 12038 12005 12746 12464
2/05 12445 12419 12257 12962 12785
3/05 12185 12158 12041 12591 12506
4/05 11484 11458 11812 11870 11845
5/05 12205 12168 12188 12647 12508
6/05 12506 12469 12205 13135 12887
7/05 13066 13028 12659 13967 13607
8/05 12916 12879 12544 13708 13398
9/05 13105 13069 12645 13751 13454
10/05 12875 12829 12434 13324 13006
11/05 13565 13509 12904 13971 13612
12/05 13475 13429 12909 13907 13533
1/06 14506 14440 13251 15154 14553
2/06 14566 14501 13286 15112 14479
3/06 14976 14901 13452 15845 15096
4/06 15257 15181 13632 15843 15164
5/06 14925 14861 13240 14953 14409
6/06 14806 14730 13258 15049 14359
7/06 14406 14329 13340 14560 13909
8/06 14777 14689 13657 14991 14195
9/06 14917 14829 14008 15115 14316
10/06 15537 15439 14464 15986 15019
11/06 16028 15930 14739 16406 15465
12/06 15825 15728 14946 16461 15508
1/07 16054 15947 15172 16737 15776
2/07 16138 16030 14876 16604 15737
3/07 16252 16134 15042 16782 15927
4/07 16680 16561 15708 17083 16284
5/07 17389 17259 16256 17784 16932
6/07 17243 17102 15986 17523 16721
7/07 16325 16195 15491 16324 15772
8/07 16720 16581 15722 16694 15965
9/07 17200 17060 16310 16981 16232
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
10/07 17637 17486 16569 17468 16589
11/07 16658 16507 15876 16214 15474
12/07 16645 16487 15766 16203 15370
1/08 15317 15170 14821 15098 14451
2/08 14963 14827 14340 14539 14080
3/08 15241 15096 14278 14600 14044
4/08 15948 15791 14973 15211 14619
5/08 16623 16456 15167 15910 15266
6/08 15873 15706 13889 14685 14152
7/08 16024 15857 13773 15228 14354
8/08 16399 16232 13972 15779 14783
9/08 15005 14840 12728 14521 13537
10/08 12219 12085 10591 11501 10757
11/08 11008 10885 9831 10140 9540
12/08 11428 11306 9934 10729 10049
====================================================================================================================================
AIM V.I. SMALL CAP EQUITY FUND
AIM V.I. SMALL CAP EQUITY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Since a large percentage of the Fund's The S&P 500--REGISTERED TRADEMARK-- INDEX The Chartered Financial
assets may be invested in securities of a is a market capitalization-weighted index Analyst--REGISTERED TRADEMARK--
limited number of companies, each covering all major areas of the U.S. (CFA--REGISTERED TRADEMARK--) designation
investment has a greater effect on the economy. It is not the 500 largest is a globally recognized standard for
Fund's overall performance, and any change companies, but rather the most widely held measuring the competence and integrity of
in the value of those securities could 500 companies chosen with respect to investment professionals.
significantly affect the value of your market size, liquidity, and their
investment in the Fund. industry. The returns shown in management's
discussion of Fund performance are based
The values of convertible securities in on net asset values calculated for
which the Fund invests may be affected by The RUSSELL 2000--REGISTERED shareholder transactions. Generally
market interest rates, the risk that the TRADEMARK-- INDEX measures the accepted accounting principles require
issuer may default on interest or performance of the 2,000 smallest adjustments to be made to the net assets
principal payments, and the value of the companies in the Russell 3000--REGISTERED of the Fund at period end for financial
underlying common stock into which these TRADEMARK-- Index, which represents reporting purposes, and as such, the net
securities may be converted. approximately 8% of the total market asset values for shareholder transactions
capitalization of the Russell 3000 Index. and the returns based on those net asset
Prices of equity securities change in The Russell 2000 Index and the Russell values may differ from the net asset
response to many factors, including the 3000 Index are trademarks/service marks of values and returns reported in the
historical and prospective earnings of the the Frank Russell Company. Financial Highlights. Additionally, the
issuer, the value of its assets, general Russell--REGISTERED TRADEMARK-- is a returns and net asset values shown
economic conditions, interest rates, trademark of the Frank Russell Company. throughout this report are at the Fund
investor perceptions and market liquidity. level only and do not include variable
The LIPPER VUF SMALL-CAP CORE FUNDS product issuer charges. If such charges
Foreign securities have additional INDEX is an equally weighted were included, the total returns would be
risks, including exchange rate changes, representation of the largest variable lower.
political and economic upheaval, relative insurance underlying funds in the Lipper
lack of information, relatively low market Small-Cap Core Funds category. These funds Industry classifications used in this
liquidity, and the potential lack of typically have an average report are generally according to the
strict financial and accounting controls price-to-earnings ratio, price-to-book Global Industry Classification Standard,
and standards. ratio and three-year sales-per-share which was developed by and is the
growth value compared to the S&P SmallCap exclusive property and a service mark of
There is no guarantee that the 600 Index. MSCI Inc. and Standard & Poor's.
investment techniques and risk analysis
used by the Fund's portfolio managers will The S&P SMALLCAP 600 INDEX is a
produce the desired results. market-value weighted index that consists
of 600 small cap domestic stocks chosen
The prices of securities held by the for market size, liquidity, and industry
Fund may decline in response to market group representation.
risks.
The Fund is not managed to track the
Investing in a fund that invests in performance of any particular index,
smaller companies involves risks not including the indexes defined here, and
associated with investing in more consequently, the performance of the Fund
established companies, such as business may deviate significantly from the
risk, stock price fluctuations and performance of the indexes.
illiquidity.
A direct investment cannot be made in
an index. Unless otherwise indicated,
index results include reinvested
dividends, and they do not reflect sales
charges. Performance of an index of funds
reflects fund expenses; performance of a
market index does not.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.84%
AEROSPACE & DEFENSE-3.07%
AAR Corp.(b)(c) 96,268 $ 1,772,294
- -------------------------------------------------------------------------------
Aerovironment Inc.(c) 42,102 1,549,775
- -------------------------------------------------------------------------------
Curtiss-Wright Corp. 45,540 1,520,580
===============================================================================
4,842,649
===============================================================================
AIRLINES-1.16%
Allegiant Travel Co.(b)(c) 37,648 1,828,563
===============================================================================
APPAREL RETAIL-2.13%
Citi Trends Inc.(c) 127,921 1,882,997
- -------------------------------------------------------------------------------
J. Crew Group, Inc.(b)(c) 121,911 1,487,314
===============================================================================
3,370,311
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.56%
Carter's, Inc.(c) 74,912 1,442,805
- -------------------------------------------------------------------------------
Volcom, Inc.(c) 93,362 1,017,646
===============================================================================
2,460,451
===============================================================================
APPLICATION SOFTWARE-1.86%
Blackbaud, Inc. 106,750 1,441,125
- -------------------------------------------------------------------------------
Parametric Technology Corp.(c) 118,363 1,497,292
===============================================================================
2,938,417
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.33%
Affiliated Managers Group, Inc.(c) 22,927 961,100
- -------------------------------------------------------------------------------
GAMCO Investors, Inc.-Class A 41,443 1,132,223
===============================================================================
2,093,323
===============================================================================
BIOTECHNOLOGY-0.37%
InterMune, Inc.(b)(c) 55,875 591,157
===============================================================================
COMMUNICATIONS EQUIPMENT-2.83%
Arris Group Inc.(c) 277,544 2,206,475
- -------------------------------------------------------------------------------
Comtech Telecommunications Corp.(c) 49,361 2,261,721
===============================================================================
4,468,196
===============================================================================
CONSTRUCTION & ENGINEERING-1.22%
Northwest Pipe Co.(c) 45,367 1,933,088
===============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.46%
Titan International, Inc. 87,778 724,168
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.28%
CyberSource Corp.(c) 144,710 1,735,073
- -------------------------------------------------------------------------------
Euronet Worldwide, Inc.(b)(c) 76,116 883,707
- -------------------------------------------------------------------------------
Wright Express Corp.(c) 77,504 976,550
===============================================================================
3,595,330
===============================================================================
DIVERSIFIED CHEMICALS-0.92%
FMC Corp. 32,585 1,457,527
===============================================================================
DIVERSIFIED METALS & MINING-1.11%
Compass Minerals International, Inc. 30,021 1,761,032
===============================================================================
DIVERSIFIED SUPPORT SERVICES-0.17%
EnerNOC, Inc.(b)(c) 36,286 269,968
===============================================================================
EDUCATION SERVICES-1.50%
Capella Education Co.(b)(c) 40,234 2,364,150
===============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.38%
Belden Inc. 68,932 1,439,300
- -------------------------------------------------------------------------------
General Cable Corp.(c) 41,579 735,533
===============================================================================
2,174,833
===============================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.25%
OSI Systems, Inc.(c) 74,656 1,033,985
- -------------------------------------------------------------------------------
Rofin-Sinar Technologies, Inc.(c) 45,610 938,654
===============================================================================
1,972,639
===============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-3.80%
ABM Industries Inc. 117,023 2,229,288
- -------------------------------------------------------------------------------
Team, Inc.(c) 74,725 2,069,883
- -------------------------------------------------------------------------------
Waste Connections, Inc.(c) 53,878 1,700,928
===============================================================================
6,000,099
===============================================================================
FOOD RETAIL-1.38%
Ruddick Corp. 78,637 2,174,313
===============================================================================
GAS UTILITIES-1.59%
Energen Corp. 32,599 956,128
- -------------------------------------------------------------------------------
UGI Corp. 63,897 1,560,365
===============================================================================
2,516,493
===============================================================================
GENERAL MERCHANDISE STORES-1.36%
Pantry, Inc. (The)(c) 100,159 2,148,411
===============================================================================
HEALTH CARE DISTRIBUTORS-0.95%
Owens & Minor, Inc. 40,036 1,507,355
===============================================================================
HEALTH CARE EQUIPMENT-3.31%
Cardiac Science Corp.(c) 167,196 1,253,970
- -------------------------------------------------------------------------------
Invacare Corp.(b) 137,672 2,136,669
- -------------------------------------------------------------------------------
Quidel Corp.(c) 139,880 1,828,232
===============================================================================
5,218,871
===============================================================================
HEALTH CARE FACILITIES-1.03%
Skilled Healthcare Group Inc.-Class A(c) 193,257 1,631,089
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
HEALTH CARE SERVICES-1.32%
Gentiva Health Services, Inc.(c) 70,986 $ 2,077,050
===============================================================================
HEALTH CARE SUPPLIES-1.13%
Haemonetics Corp.(c) 31,608 1,785,852
===============================================================================
HEALTH CARE TECHNOLOGY-1.15%
Omnicell, Inc.(c) 148,117 1,808,509
===============================================================================
HOTELS, RESORTS & CRUISE LINES-0.19%
Red Lion Hotels Corp.(c) 124,825 297,083
===============================================================================
HOUSEHOLD APPLIANCES-1.14%
Snap-on Inc. 45,623 1,796,634
===============================================================================
INDUSTRIAL MACHINERY-3.27%
Chart Industries, Inc.(c) 61,727 656,158
- -------------------------------------------------------------------------------
Kadant Inc.(c) 102,112 1,376,470
- -------------------------------------------------------------------------------
RBC Bearings Inc.(c) 65,560 1,329,557
- -------------------------------------------------------------------------------
Valmont Industries, Inc. 29,242 1,794,289
===============================================================================
5,156,474
===============================================================================
INSURANCE BROKERS-1.21%
Arthur J. Gallagher & Co. 73,913 1,915,086
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.72%
Alaska Communications Systems Group Inc.(b) 209,720 1,967,173
- -------------------------------------------------------------------------------
Cincinnati Bell Inc.(c) 615,974 1,188,830
- -------------------------------------------------------------------------------
NTELOS Holdings Corp. 46,115 1,137,196
===============================================================================
4,293,199
===============================================================================
INTERNET SOFTWARE & SERVICES-2.54%
Ariba Inc.(c) 280,206 2,020,285
- -------------------------------------------------------------------------------
Open Text Corp. (Canada)(b)(c) 65,896 1,985,447
===============================================================================
4,005,732
===============================================================================
INVESTMENT BANKING & BROKERAGE-1.50%
KBW Inc.(b)(c) 103,273 2,375,279
===============================================================================
IT CONSULTING & OTHER SERVICES-1.47%
CACI International Inc.-Class A(c) 51,571 2,325,336
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-2.46%
Bio-Rad Laboratories, Inc.-Class A(c) 23,442 1,765,417
- -------------------------------------------------------------------------------
Dionex Corp.(c) 26,766 1,200,455
- -------------------------------------------------------------------------------
eResearch Technology, Inc.(c) 139,581 925,422
===============================================================================
3,891,294
===============================================================================
METAL & GLASS CONTAINERS-1.12%
AptarGroup, Inc. 50,007 1,762,247
===============================================================================
MOVIES & ENTERTAINMENT-1.12%
World Wrestling Entertainment, Inc.-Class A(b) 159,657 1,769,000
===============================================================================
MULTI-UTILITIES-0.73%
Avista Corp. 59,766 1,158,265
===============================================================================
OFFICE REIT'S-0.84%
Alexandria Real Estate Equities, Inc. 21,924 1,322,894
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.51%
Complete Production Services, Inc.(c) 89,566 729,963
- -------------------------------------------------------------------------------
Lufkin Industries, Inc. 30,482 1,051,629
- -------------------------------------------------------------------------------
NATCO Group Inc.-Class A(c) 57,365 870,800
- -------------------------------------------------------------------------------
Oceaneering International, Inc.(c) 45,049 1,312,728
===============================================================================
3,965,120
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.41%
Comstock Resources, Inc.(c) 36,305 1,715,411
- -------------------------------------------------------------------------------
Parallel Petroleum Corp.(c) 160,187 321,976
- -------------------------------------------------------------------------------
Penn Virginia Corp. 56,533 1,468,727
- -------------------------------------------------------------------------------
Venoco Inc.(c) 109,187 295,897
===============================================================================
3,802,011
===============================================================================
PACKAGED FOODS & MEATS-2.60%
Flowers Foods, Inc. 76,411 1,861,372
- -------------------------------------------------------------------------------
TreeHouse Foods, Inc.(c) 82,361 2,243,514
===============================================================================
4,104,886
===============================================================================
PERSONAL PRODUCTS-1.67%
Alberto-Culver Co. 107,284 2,629,531
===============================================================================
PHARMACEUTICALS-2.80%
ViroPharma Inc.(c) 188,199 2,450,351
- -------------------------------------------------------------------------------
VIVUS, Inc.(b)(c) 370,279 1,969,884
===============================================================================
4,420,235
===============================================================================
PROPERTY & CASUALTY INSURANCE-2.21%
Assured Guaranty Ltd. 120,439 1,373,005
- -------------------------------------------------------------------------------
FPIC Insurance Group, Inc.(c) 48,486 2,122,717
===============================================================================
3,495,722
===============================================================================
REGIONAL BANKS-8.08%
BancFirst Corp. 30,958 1,638,297
- -------------------------------------------------------------------------------
Commerce Bancshares, Inc.(b) 43,328 1,904,266
- -------------------------------------------------------------------------------
Community Trust Bancorp, Inc. 64,991 2,388,419
- -------------------------------------------------------------------------------
First Financial Bankshares, Inc.(b) 39,879 2,201,720
- -------------------------------------------------------------------------------
MB Financial, Inc. 64,113 1,791,958
- -------------------------------------------------------------------------------
Texas Capital Bancshares, Inc.(c) 101,643 1,357,951
- -------------------------------------------------------------------------------
Whitney Holding Corp. 91,856 1,468,777
===============================================================================
12,751,388
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
RESTAURANTS-2.44%
DineEquity, Inc. 54,765 $ 633,084
- -------------------------------------------------------------------------------
Papa John's International, Inc.(c) 76,532 1,410,485
- -------------------------------------------------------------------------------
Sonic Corp.(c) 148,208 1,803,691
===============================================================================
3,847,260
===============================================================================
SEMICONDUCTOR EQUIPMENT-1.91%
ATMI, Inc.(c) 94,818 1,463,042
- -------------------------------------------------------------------------------
MKS Instruments, Inc.(c) 104,492 1,545,436
===============================================================================
3,008,478
===============================================================================
SEMICONDUCTORS-2.07%
Power Integrations, Inc. 72,633 1,443,944
- -------------------------------------------------------------------------------
Semtech Corp.(c) 162,391 1,830,147
===============================================================================
3,274,091
===============================================================================
SPECIALIZED REIT'S-2.00%
LaSalle Hotel Properties(b) 61,648 681,211
- -------------------------------------------------------------------------------
Senior Housing Properties Trust 59,946 1,074,232
- -------------------------------------------------------------------------------
Universal Health Realty Income Trust 42,489 1,398,313
===============================================================================
3,153,756
===============================================================================
SPECIALTY CHEMICALS-1.00%
Zep, Inc. 81,957 1,582,590
===============================================================================
TECHNOLOGY DISTRIBUTORS-0.10%
PC Mall, Inc.(c) 40,029 160,516
===============================================================================
TRUCKING-3.85%
Landstar System, Inc. 49,993 1,921,231
- -------------------------------------------------------------------------------
Marten Transport, Ltd.(c) 124,936 2,368,787
- -------------------------------------------------------------------------------
Old Dominion Freight Line, Inc.(c) 62,862 1,789,052
===============================================================================
6,079,070
===============================================================================
WATER UTILITIES-0.26%
Cascal N.V. (United Kingdom) 101,136 406,567
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $194,377,091) 154,463,588
===============================================================================
MONEY MARKET FUNDS-1.28%
Liquid Assets Portfolio-Institutional Class(d) 1,006,296 1,006,296
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 1,006,297 1,006,297
===============================================================================
Total Money Market Funds (Cost $2,012,593) 2,012,593
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.12% (Cost $196,389,684) 156,476,181
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-10.72%
Liquid Assets Portfolio-Institutional Class (Cost
$16,922,495)(d)(e) 16,922,495 16,922,495
===============================================================================
TOTAL INVESTMENTS-109.84% (Cost $213,312,179) 173,398,676
===============================================================================
OTHER ASSETS LESS LIABILITIES-(9.84)% (15,531,338)
===============================================================================
NET ASSETS-100.00% $157,867,338
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1I.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$194,377,091)* $154,463,588
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 18,935,088
======================================================
Total investments (Cost
$213,312,179) 173,398,676
======================================================
Receivables for:
Investments sold 866,429
- ------------------------------------------------------
Fund shares sold 482,255
- ------------------------------------------------------
Dividends 208,300
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 15,745
======================================================
Total assets 174,971,405
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 7,842
- ------------------------------------------------------
Collateral upon return of securities
loaned 16,922,495
- ------------------------------------------------------
Accrued fees to affiliates 103,125
- ------------------------------------------------------
Accrued other operating expenses 48,290
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 22,315
======================================================
Total liabilities 17,104,067
======================================================
Net assets applicable to shares
outstanding $157,867,338
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $215,678,589
- ------------------------------------------------------
Undistributed net investment income 261,903
- ------------------------------------------------------
Undistributed net realized gain (loss) (18,159,651)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (39,913,503)
======================================================
$157,867,338
______________________________________________________
======================================================
NET ASSETS:
Series I $152,310,381
______________________________________________________
======================================================
Series II $ 5,556,957
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 14,337,022
______________________________________________________
======================================================
Series II 528,941
______________________________________________________
======================================================
Series I:
Net asset value per share $ 10.62
______________________________________________________
======================================================
Series II:
Net asset value per share $ 10.51
______________________________________________________
======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $16,703,939 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $2,546) $ 1,783,068
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $262,710) 458,161
======================================================
Total investment income 2,241,229
======================================================
EXPENSES:
Advisory fees 1,331,810
- ------------------------------------------------------
Administrative services fees 496,916
- ------------------------------------------------------
Custodian fees 24,394
- ------------------------------------------------------
Distribution fees -- Series II 4,532
- ------------------------------------------------------
Transfer agent fees 15,021
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 20,625
- ------------------------------------------------------
Other 76,023
======================================================
Total expenses 1,969,321
======================================================
Less: Fees waived and expense offset
arrangement(s) (9,899)
- ------------------------------------------------------
Net expenses 1,959,422
- ------------------------------------------------------
Net investment income 281,807
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains from securities sold to
affiliates of $1,100,712) (17,937,668)
- ------------------------------------------------------
Foreign currencies 5
======================================================
(17,937,663)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (52,374,291)
- ------------------------------------------------------
Foreign currencies (8)
======================================================
(52,374,299)
======================================================
Net realized and unrealized gain (loss) (70,311,962)
======================================================
Net increase (decrease) in net assets
resulting from operations $(70,030,155)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 281,807 $ (91,276)
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (17,937,663) 4,840,940
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (52,374,299) (528,972)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (70,030,155) 4,220,692
=========================================================================================================
Distributions to shareholders from net investment income -- Series 1 -- (69,477)
=========================================================================================================
Distributions to shareholders from net realized gains:
Series I (660,008) (4,648,828)
- ---------------------------------------------------------------------------------------------------------
Series II (21,507) (761)
=========================================================================================================
Total distributions from net realized gains (681,515) (4,649,589)
=========================================================================================================
Share transactions-net:
Series I 53,423,230 75,616,355
- ---------------------------------------------------------------------------------------------------------
Series II 6,837,898 (897,270)
=========================================================================================================
Net increase in net assets resulting from share transactions 60,261,128 74,719,085
=========================================================================================================
Net increase (decrease) in net assets (10,450,542) 74,220,711
_________________________________________________________________________________________________________
=========================================================================================================
NET ASSETS:
Beginning of year 168,317,880 94,097,169
=========================================================================================================
End of year (includes undistributed net investment income (loss) of
$261,903 and $(22,863), respectively) $157,867,338 $168,317,880
_________________________________________________________________________________________________________
=========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is long-term growth of capital.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. SMALL CAP EQUITY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. SMALL CAP EQUITY FUND
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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.745%
- -------------------------------------------------------------------
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The Advisor did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Further, the Advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to 100%
of the net advisory fees the Advisor receives from the affiliated money market
funds on investments by the Fund of uninvested cash (excluding investments of
cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$8,907.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $446,916 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
AIM V.I. SMALL CAP EQUITY FUND
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $173,398,676
- --------------------------------------
Level 2 --
- --------------------------------------
Level 3 --
======================================
$173,398,676
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $2,042,425 and securities sales of
$4,052,754, which resulted in net realized gains of $1,100,712.
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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $992.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,511
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. SMALL CAP EQUITY FUND
NOTE 7--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -----------------------------------------------------------------------------------------------------
Ordinary income $566,079 $1,375,449
- -----------------------------------------------------------------------------------------------------
Long-term capital gain 115,436 3,343,617
=====================================================================================================
Total distributions $681,515 $4,719,066
_____________________________________________________________________________________________________
=====================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 289,581
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (40,493,084)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (27,678)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (5,386,430)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (12,193,640)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 215,678,589
================================================================================================
Total net assets $157,867,338
________________________________________________________________________________________________
================================================================================================
</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 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.
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, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $12,193,640
_______________________________________________________________________________________________
===============================================================================================
</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, 2008 was $160,198,305 and
$96,693,037, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 10,311,015
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (50,804,099)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(40,493,084)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $213,891,760.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, proxy costs and distribution on December 31, 2008, undistributed
net investment income was increased by $2,959, undistributed net realized gain
(loss) was increased by $3,255 and shares of beneficial interest decreased by
$6,214. This reclassification had no effect on the net assets of the Fund.
AIM V.I. SMALL CAP EQUITY FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 7,106,974 $ 99,325,405 5,013,005 $ 80,543,288
- ------------------------------------------------------------------------------------------------------------------------
Series II 581,209 7,454,266 2,377 39,660
========================================================================================================================
Issued as reinvestment of dividends:
Series I 64,391 660,008 294,710 4,718,304
- ------------------------------------------------------------------------------------------------------------------------
Series II 2,121 21,507 48 761
========================================================================================================================
Issued in connection with acquisition:(b)
Series I -- -- 1,275,124 20,411,826
- ------------------------------------------------------------------------------------------------------------------------
Series II -- -- 12,068 191,836
========================================================================================================================
Reacquired:
Series I (3,672,675) (46,562,183) (1,881,501) (30,057,063)
- ------------------------------------------------------------------------------------------------------------------------
Series II (56,485) (637,875) (68,936) (1,129,527)
========================================================================================================================
Net increase in share activity 4,025,535 $ 60,261,128 4,646,895 $ 74,719,085
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 84% of the
outstanding shares of the Fund. The Fund and the Fund's principal
underwriter or advisor, are parties to participation agreements with these
entities whereby these entities sell units of interest in separate accounts
funding variable products that are invested in the Fund. The Fund, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco 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
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 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(a) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $15.53 $ 0.02 $(4.88) $(4.86) $ -- $(0.05) $(0.05)
Year ended 12/31/07 15.19 (0.01) 0.81 0.80 (0.01) (0.45) (0.46)
Year ended 12/31/06 13.46 (0.01) 2.37 2.36 -- (0.63) (0.63)
Year ended 12/31/05 12.45 (0.06) 1.07 1.01 -- -- --
Year ended 12/31/04 11.38 (0.06) 1.13 1.07 (0.00) -- (0.00)
- --------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 15.39 0.00 (4.83) (4.83) -- (0.05) (0.05)
Year ended 12/31/07 15.10 (0.05) 0.79 0.74 -- (0.45) (0.45)
Year ended 12/31/06 13.41 (0.04) 2.36 2.32 -- (0.63) (0.63)
Year ended 12/31/05 12.43 (0.08) 1.06 0.98 -- -- --
Year ended 12/31/04 11.38 (0.08) 1.13 1.05 (0.00) -- (0.00)
__________________________________________________________________________________________________________________________
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE NET INVESTMENT
NET ASSETS ASSETS WITHOUT INCOME
NET ASSET NET ASSETS, WITH FEE WAIVERS FEE WAIVERS (LOSS)
VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
OF PERIOD RETURN(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $10.62 (31.31)% $152,310 1.09%(d) 1.09%(d) 0.16%(d) 55%
Year ended 12/31/07 15.53 5.19 168,286 1.12 1.15 (0.07) 45
Year ended 12/31/06 15.19 17.44 93,243 1.15 1.33 (0.06) 52
Year ended 12/31/05 13.46 8.11 42,752 1.22 1.57 (0.44) 70
Year ended 12/31/04 12.45 9.41 25,964 1.30 2.01 (0.56) 156
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 10.51 (31.40) 5,557 1.34(d) 1.34(d) (0.09)(d) 55
Year ended 12/31/07 15.39 4.84 32 1.37 1.40 (0.32) 45
Year ended 12/31/06 15.10 17.20 854 1.40 1.58 (0.31) 52
Year ended 12/31/05 13.41 7.88 679 1.42 1.82 (0.64) 70
Year ended 12/31/04 12.43 9.23 622 1.45 2.26 (0.71) 156
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</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) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable. 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.
(d) Ratios are based on average daily net assets (000's omitted) of $176,954
and $1,813 for Series I and Series II shares, respectively.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, 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, 2008 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 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $720.30 $4.71 $1,019.66 $5.53 1.09%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 720.20 5.79 1,018.40 6.80 1.34
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $115,436
Corporate Dividends Received Deduction* 62.56%
</Table>
* The above percentage is 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. SMALL CAP EQUITY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. SMALL CAP EQUITY FUND
[INVESCO AIM LOGO] AIM V.I. TECHNOLOGY FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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
Invesco Aim Web site, invescoaim.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, 2008, is available at our Web
site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. TECHNOLOGY FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY this goal by thoroughly understanding the
key business drivers of companies in which
The U.S. economy was negatively affected by a credit contraction and reduced business we invest. The portfolio is constructed
and consumer spending in 2008. Information technology (IT) companies were not immune with the goal of holding approximately
since the outlook for major financial companies, which are major purchasers of 40-60 individual stocks best suited to
technology equipment, deteriorated in 2008. As a result, the IT sector and Series I capitalize on secular trends prevalent in
shares of AIM V.I. Technology Fund, excluding variable product issuer charges, the IT sector.
underperformed the broad market, as measured by the S&P 500 Index, for the year ended
December 31, 2008.(triangle) We may reduce or eliminate a stock
when:
The Fund's Series I shares, excluding variable product issuer charges, also
under-performed the Fund's style-specific index, the S&P North American Technology o A stock's price reaches its valuation
Sector Index.(triangle) This was mainly due to stock selection within the Internet target.
software and services industry, as well as stock selection and an underweight position
in the data processing and outsourced services industry. For the year, the Fund's o A company's fundamentals change or
Series I shares, excluding variable product issuer charges, held up better than the deteriorate.
Fund's peer group, the Lipper VUF Science & Technology Funds Category
Average.(triangle) o It no longer meets our investment
criteria.
Your Fund's long-term performance appears later in this report.
MARKET CONDITIONS AND YOUR FUND
FUND VS. INDEXES
Several factors contributed to the
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. negative performance of most major market
If variable product issuer charges were included, returns would be lower. indexes for the year ended December 31,
Series I Shares -44.50% 2008.(1) The chief catalyst was the
Series II Shares -44.75 ongoing subprime loan crisis and its far
S&P 500 Index(triangle) (Broad Market Index) -36.99 reaching effects on overall credit
S&P North American Technology Sector Index(triangle)* (Style-Specific Index) -43.33 availability. Although inflation weighed
Lipper VUF Science & Technology Funds Category Average(triangle) (Peer Group) -45.44 heavily on the minds of consumers and
investors in the first half of 2008,
(triangle) Lipper Inc. falling home values and commodity prices
alleviated short-term inflationary
* The style-specific index changed its name on 3/31/08, from the S&P GSTI Index to the pressures beginning mid-year as
S&P North American Technology Sector Index. unemployment and global economic
======================================================================================= instability took center stage.
HOW WE INVEST We place great emphasis on companies The U.S. Federal Reserve Board (the
exhibiting high returns on invested Fed) continued the monetary easing policy
We seek to grow capital by investing in capital and generating free cash flow, it began in 2007. Since December 2007, the
companies we believe are generating metrics the team believes are good Fed cut the federal funds target rate from
sustainable, superior earnings and cash indicators of financial health and the 4.25% to a range of zero to 0.25%(2) in an
flow growth that is not fully reflected in potential for growth. Also, we seek effort to inject liquidity into weakening
investor expectations or equity management teams that are good stewards of credit markets. Real gross domestic
valuations. The Fund emphasizes companies capital, which is evident in high quality product contracted in the third and fourth
believed to have a strategic advantage balance sheets and manageable debt levels. quarters of 2008. This contraction was
over their competition in industries such Only stocks that represent a proper risk largely due to a decrease in personal
as hardware, software, medical technology, and reward profile are chosen for consumption and residential investment.
biotechnology, telecommunications inclusion in the portfolio. Valuation also Inflation, as measured by the
equipment and services, semiconductors and plays a critical role in stock selection. seasonally-adjusted Consumer Price Index,
service-related companies in the IT virtually ground to a halt following sharp
sector. We use a research oriented Risk management plays an important role declines in energy prices in the second
bottom-up investment approach focusing on in portfolio construction, as our target half of the year. However, unemployment
company fundamentals and growth prospects. portfolio attempts to limit volatility and trended higher
downside risk. We seek to accomplish
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* Total Net Assets $71.7 million
By sector
Total Number of Holdings* 61
Information Technology 89.7% 1. Cisco Systems, Inc. 4.3% ==========================================
Telecommunication Services 4.0 2. Hewlett-Packard Co. 4.2
Financials 1.3 3. Microsoft Corp. 4.0 The Fund's holdings are subject to change,
Consumer Discretionary 1.3 4. McAfee Inc. 3.8 and there is no assurance that the Fund
U.S. Treasury Bills, Money Market 5. Intel Corp. 3.5 will continue to hold any particular
Funds Plus Other Assets Less 6. Adobe Systems Inc. 3.3 security.
Liabilities 3.7 7. QUALCOMM Inc. 3.2
8. Google Inc.-Class A 2.9 * Excluding money market fund holdings.
9. NICE Systems Ltd.-ADR 2.7
10. Cognizant Technology Solutions
Corp.-Class A 2.7
========================================== ==========================================
AIM V.I. TECHNOLOGY FUND
during the year and ultimately reached a AT&T benefited from increases in their WARREN TENNANT
seasonally adjusted rate of 7.2% in wireless customer base from its exclusive Chartered Financial Analyst,
December.(3) rights to offer the Apple iPhone. [TENNANT portfolio manager, is lead
Additionally, AT&T continued to expand its PHOTO] manager of AIM V.I. Technology
Against this backdrop, consumer fiber optic cable and high speed internet Fund. Mr. Tennant joined
staples, health care and utilities were network during the year, as well as Invesco Aim in 2000 and was
among the best performing sectors of the participated in share buyback and cost named a portfolio manager in 2007 before
S&P 500 Index. Conversely, financial cutting initiatives. Adobe Systems, on the becoming lead manager of the Fund in 2008.
services, materials and IT were the worst other hand, suffered as a result of the He earned both his B.B.A. in finance and
performing sectors. cyclical downturn in advertising during his M.B.A. from The University of Texas at
the year. A significant portion of their Austin.
On an absolute basis, holdings in business comes from the advertising
integrated telecommunication services industry, which has seen slowing demand in BRIAN NELSON
contributed the most to Fund performance the face of continued global economic Chartered Financial Analyst,
during the year, while holdings in weakness. We continued to hold these [NELSON portfolio manager, is
communications equipment, semiconductors stocks at the end of the year. PHOTO] co-manager of AIM V.I.
and Internet software and services were Technology Fund. He began his
the primary detractors from performance. Changes in the Fund's holdings during investment career in 1995 and
Other contributors to performance included the year were partially the result of joined Invesco Aim in 2004. Mr. Nelson
cash, Nasdaq 100 futures and a litigation management changes with more emphasis earned a B.A. from the University of
settlement. At times, the Fund held cash being placed on risk and return analysis California-Santa Barbara and is a member
in a defensive effort to avoid market in an effort to limit volatility and of the Security Analyst Society of San
volatility. Occasionally, this cash was mitigate downside risk. Although we sought Francisco. He joined the team on Jan. 23,
deployed quickly through the use of Nasdaq to take advantage of extreme dislocations 2009, after the close of the reporting
futures, which are a derivative instrument in valuation, the macroeconomic period.
that allows an efficient way to gain broad environment caused us to be cautious
exposure to the companies within the during the year. Assisted by the Technology Team
Nasdaq 100 Index, providing predominately
technology sector exposure. As always, we thank you for your
continued investment in AIM V.I.
Relative to the S&P North American Technology Fund.
Technology Sector Index, our security
selection in the systems software and home (1) Lipper Inc.
entertainment software industries (2) U.S. Federal Reserve
benefited Fund performance. Additionally, (3) Bureau of Labor Statistics
our exposure to a private venture capital (4) Bloomberg L.P.
firm not owned by the index contributed
positively to Fund performance. On the The views and opinions expressed in
other hand, our security selection in the management's discussion of Fund
Internet software and services industry, performance are those of Invesco Aim
as well as our security selection and Advisors, Inc. These views and opinions
underweight exposure to the data are subject to change at any time based on
processing and outsourced services factors such as market and economic
industry, detracted from relative conditions. These views and opinions may
performance. not be relied upon as investment advice or
recommendations, or as an offer for a
It is important to note that our particular security. The information is
style-specific index, the S&P North not a complete analysis of every aspect of
American Technology Sector Index, is a any market, country, industry, security or
modified capitalization-weighted index. the Fund. Statements of fact are from
This means it has extremely high weights sources considered reliable, but Invesco
in large market capitalization holdings Aim Advisors, Inc. makes no representation
such as MICROSOFT, International Business or warranty as to their completeness or
Machines (not a Fund holding), accuracy. Although historical performance
HEWLETT-PACKARD and INTEL.(4) In fact, the is no guarantee of future results, these
top seven holdings have a weighting of insights may help you understand our
roughly 7% each within the index.(4) By investment management philosophy.
comparison, the Fund is allowed to own no
more than 5% in any single holding by See important Fund and index disclosures
prospectus, meaning we will always be later in this report.
underweight these large names.
Top contributors to Fund performance
during the year included AT&T, MCAFEE and
SOLERA HOLDINGS, while top detractors
included ADOBE SYSTEMS, GOOGLE and APPLE.
AIM V.I. TECHNOLOGY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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
effective than other types of charts in
illustrating
==========================================
AVERAGE ANNUAL TOTAL RETURNS THE PERFORMANCE DATA QUOTED REPRESENT AIM V.I. TECHNOLOGY FUND, A SERIES
As of 12/31/08 PAST PERFORMANCE AND CANNOT GUARANTEE PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
COMPARABLE FUTURE RESULTS; CURRENT IS CURRENTLY OFFERED THROUGH INSURANCE
SERIES I SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE COMPANIES ISSUING VARIABLE PRODUCTS. YOU
Inception (5/20/97) -1.44% CONTACT YOUR VARIABLE PRODUCT ISSUER OR CANNOT PURCHASE SHARES OF THE FUND
10 Years -5.21 FINANCIAL ADVISOR FOR THE MOST RECENT DIRECTLY. PERFORMANCE FIGURES GIVEN
5 Years -6.73 MONTH-END VARIABLE PRODUCT PERFORMANCE. REPRESENT THE FUND AND ARE NOT INTENDED TO
1 Year -44.50 PERFORMANCE FIGURES REFLECT FUND EXPENSES, REFLECT ACTUAL VARIABLE PRODUCT VALUES.
REINVESTED DISTRIBUTIONS AND CHANGES IN THEY DO NOT REFLECT SALES CHARGES,
SERIES II SHARES NET ASSET VALUE. INVESTMENT RETURN AND EXPENSES AND FEES ASSESSED IN CONNECTION
10 Years -5.47 PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU WITH A VARIABLE PRODUCT. SALES CHARGES,
5 Years -7.01 MAY HAVE A GAIN OR LOSS WHEN YOU SELL EXPENSES AND FEES, WHICH ARE DETERMINED BY
1 Year -44.75 SHARES. THE VARIABLE PRODUCT ISSUERS, WILL VARY
========================================== AND WILL LOWER THE TOTAL RETURN.
THE TOTAL ANNUAL FUND OPERATING EXPENSE
SERIES II SHARES' INCEPTION DATE IS APRIL RATIO SET FORTH IN THE MOST RECENT FUND THE MOST RECENT MONTH-END PERFORMANCE
30, 2004. 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 THE
BLENDED RETURNS OF THE HISTORICAL 1.11% AND 1.36%, RESPECTIVELY. THE EXPENSE INVESCO AIM AUTOMATED INFORMATION LINE,
PERFORMANCE OF SERIES II SHARES SINCE RATIOS PRESENTED ABOVE MAY VARY FROM THE 866 702 4402. AS MENTIONED ABOVE, FOR THE
THEIR INCEPTION AND THE RESTATED EXPENSE RATIOS PRESENTED IN OTHER SECTIONS MOST RECENT MONTH-END PERFORMANCE
HISTORICAL PERFORMANCE OF SERIES I SHARES OF THIS REPORT THAT ARE BASED ON EXPENSES INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
(FOR PERIODS PRIOR TO INCEPTION OF SERIES INCURRED DURING THE PERIOD COVERED BY THIS CONTACT YOUR VARIABLE PRODUCT ISSUER OR
II SHARES) ADJUSTED TO REFLECT THE RULE REPORT. FINANCIAL ADVISOR.
12B-1 FEES APPLICABLE TO SERIES II SHARES.
THE INCEPTION DATE OF SERIES I SHARES IS
MAY 20, 1997.
THE PERFORMANCE OF THE FUND'S SERIES I
AND SERIES II SHARE CLASSES WILL DIFFER
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Fund data from 5/20/97, index data from 5/31/97
Lipper VUF
S&P North Science &
AIM V.I. American Technology Funds
Technology Fund- S&P 500 Technology Sector Category
Date Series I Shares Index(1) Index(1) Average(1)
- ------- ---------------- -------- ----------------- ----------------
5/20/97 $10000
5/97 10000 $10000 $10000 $10000
6/97 10000 10445 10129 10114
7/97 11870 11275 11942 11395
8/97 11970 10644 11666 11484
9/97 12510 11227 12017 12019
10/97 11799 10852 10983 11098
11/97 11699 11354 11162 11072
12/97 11479 11549 10630 10740
1/98 11529 11677 11182 10883
2/98 12569 12518 12396 12243
3/98 13059 13159 12598 12455
4/98 13300 13294 13312 12988
5/98 12590 13066 12403 12213
6/98 13680 13596 13481 12964
7/98 12650 13452 13778 12533
8/98 10299 11509 11283 9909
9/98 11100 12247 12889 10954
10/98 11569 13241 13837 11913
11/98 12450 14043 15449 13135
12/98 14429 14852 17981 15256
1/99 16865 15473 20870 16837
2/99 15165 14992 18365 15377
3/99 17600 15592 19935 17009
4/99 18104 16196 20563 17354
5/99 17953 15813 20339 17527
6/99 20499 16689 22732 19427
7/99 20198 16170 22513 19371
8/99 21747 16090 23685 20066
9/99 22421 15649 23922 20560
10/99 25733 16639 24769 22530
11/99 30120 16977 28231 25594
12/99 37367 17976 33962 30812
1/00 37337 17073 31864 29888
2/00 49796 16750 37645 36535
3/00 47087 18388 39336 35822
4/00 41804 17835 35906 32799
5/00 37043 17469 31950 29575
6/00 43214 17899 35881 32574
7/00 41382 17620 34207 31157
8/00 48317 18713 38656 35385
9/00 44998 17726 32395 31641
10/00 40669 17650 29948 29088
11/00 28387 16260 23089 22569
12/00 28620 16340 21110 22705
1/01 30990 16919 24573 24948
2/01 21256 15377 17761 18831
3/01 16807 14404 15294 16268
4/01 21225 15522 18213 19401
5/01 19793 15626 17487 18582
6/01 19419 15246 17534 18168
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
7/01 17906 15096 16285 16758
8/01 15182 14152 14165 14628
9/01 11227 13009 11299 11697
10/01 13235 13257 13113 13460
11/01 15555 14274 15348 15422
12/01 15505 14399 15077 15496
1/02 15454 14189 15061 15232
2/02 13083 13916 13049 13273
3/02 14536 14439 13978 14455
4/02 12618 13564 12265 12628
5/02 11922 13464 11765 11982
6/02 10207 12506 10102 10457
7/02 8997 11531 9079 9324
8/02 8614 11607 8962 9124
9/02 7161 10346 7363 7788
10/02 8261 11256 8971 9107
11/02 9552 11918 10541 10511
12/02 8240 11218 9005 9164
1/03 8221 10925 8925 9092
2/03 8322 10761 9062 9119
3/03 8150 10865 8960 9094
4/03 8917 11759 9894 9977
5/03 9926 12378 10999 11106
6/03 9824 12536 10971 11163
7/03 10258 12758 11601 11723
8/03 11074 13006 12403 12524
9/03 10661 12868 12221 12173
10/03 11862 13596 13415 13333
11/03 12074 13715 13674 13497
12/03 11972 14434 13884 13638
1/04 12447 14699 14537 14292
2/04 12235 14903 14125 14068
3/04 11912 14678 13735 13816
4/04 11185 14448 12935 12928
5/04 11720 14646 13652 13559
6/04 11922 14931 13988 13799
7/04 10721 14437 12662 12365
8/04 10328 14495 12031 11823
9/04 10812 14652 12448 12352
10/04 11518 14875 13108 13076
11/04 12173 15477 13848 13822
12/04 12526 16004 14289 14274
1/05 11820 15614 13344 13369
2/05 11891 15942 13370 13349
3/05 11517 15660 13045 12997
4/05 11023 15363 12378 12507
5/05 11961 15851 13503 13636
6/05 11739 15874 13241 13471
7/05 12314 16464 14134 14254
8/05 12194 16314 14025 14157
9/05 12335 16446 14169 14501
10/05 12113 16172 13918 14273
11/05 12869 16783 14848 15064
12/05 12798 16789 14578 15079
1/06 13575 17233 15119 15984
2/06 13443 17280 14886 15744
3/06 13918 17495 15221 16172
4/06 14110 17730 15122 16161
5/06 12920 17220 14011 14913
6/06 12759 17243 13818 14670
7/06 12164 17349 13227 13994
8/06 12860 17762 14262 14869
9/06 13545 18219 14834 15358
10/06 13777 18812 15428 15785
11/06 14281 19170 15986 16492
12/06 14140 19438 15887 16372
1/07 14221 19732 16146 16689
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
2/07 14100 19347 15816 16547
3/07 14029 19563 15888 16642
4/07 14443 20430 16684 17164
5/07 14907 21142 17402 17995
6/07 15099 20791 17540 18232
7/07 15039 20147 17417 18139
8/07 15523 20448 17921 18484
9/07 16259 21212 18664 19469
10/07 17005 21550 19912 20752
11/07 15340 20649 18351 19235
12/07 15230 20506 18578 19306
1/08 13334 19276 16226 16719
2/08 12839 18650 15671 16199
3/08 12677 18569 15814 16083
4/08 13715 19474 16964 17382
5/08 14684 19726 18038 18387
6/08 13372 18064 16320 16550
7/08 12999 17913 16210 16226
8/08 13383 18172 16561 16547
9/08 11375 16554 14275 14022
10/08 9308 13774 11656 11363
11/08 8230 12786 10346 10221
12/08 8452 12921 10528 10534
====================================================================================================================================
AIM V.I. TECHNOLOGY FUND
AIM V.I. TECHNOLOGY FUND'S INVESTMENT OBJECTIVE IS CAPITAL GROWTH.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Since a large percentage of the Fund's The S&P 500--REGISTERED TRADEMARK-- INDEX The Chartered Financial
assets may be invested in securities of a is a market capitalization-weighted index Analyst--REGISTERED TRADEMARK--
limited number of companies, each covering all major areas of the U.S. (CFA--REGISTERED TRADEMARK--) designation
investment has a greater effect on the economy. It is not the 500 largest is a globally recognized standard for
Fund's overall performance, and any change companies, but rather the most widely held measuring the competence and integrity of
in the value of those securities could 500 companies chosen with respect to investment professionals.
significantly affect the value of your market size, liquidity, and their
investment in the Fund. industry. The returns shown in management's
discussion of Fund performance are based
Prices of equity securities change in The S&P NORTH AMERICAN TECHNOLOGY on net asset values calculated for
response to many factors, including the SECTOR INDEX is a modified shareholder transactions. Generally
historical and prospective earnings of the capitalization-weighted index composed of accepted accounting principles require
issuer, the value of its assets, general companies involved in the technology adjustments to be made to the net assets
economic conditions, interest rates, industry. of the Fund at period end for financial
investor perceptions and market liquidity. reporting purposes, and as such, the net
The LIPPER VUF SCIENCE & TECHNOLOGY asset values for shareholder transactions
Foreign securities have additional FUNDS CATEGORY AVERAGE represents an and the returns based on those net asset
risks, including exchange rate changes, average of all of the variable insurance values may differ from the net asset
political and economic upheaval, relative underlying funds in the Lipper Science & values and returns reported in the
lack of information, relatively low market Technology Funds category. These funds Financial Highlights. Additionally, the
liquidity, and the potential lack of invest at least 65% of their portfolios in returns and net asset values shown
strict financial and accounting controls science and technology stocks. throughout this report are at the Fund
and standards. level only and do not include variable
The NASDAQ 100 INDEX includes 100 of product issuer charges. If such charges
There is no guarantee that the the largest domestic and international were included, the total returns would be
investment techniques and risk analysis non-financial securities listed on the lower.
used by the Fund's portfolio managers will Nasdaq Stock Market based on market
produce the desired results. capitalization. Industry classifications used in this
report are generally according to the
The prices of securities held by the The Fund is not managed to track the Global Industry Classification Standard,
Fund may decline in response to market performance of any particular index, which was developed by and is the
risks. including the indexes defined here, and exclusive property and a service mark of
consequently, the performance of the Fund MSCI Inc. and Standard & Poor's.
The Fund's investments are concentrated may deviate significantly from the
in a comparatively narrow segment of the performance of the indexes.
economy. Consequently, the Fund may tend
to be more volatile than other mutual A direct investment cannot be made in
funds, and the value of the Fund's an index. Unless otherwise indicated,
investments may tend to rise and fall more index results include reinvested
rapidly. dividends, and they do not reflect sales
charges. Performance of an index of funds
Many of the products and services reflects fund expenses; performance of a
offered in technology-related industries market index does not.
are subject to rapid obsolescence, which
may lower the value of securities of
companies in this sector.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.31%
ADVERTISING-0.64%
Focus Media Holding Ltd.-ADR (China)(b)(c) 50,134 $ 455,718
================================================================================
APPLICATION SOFTWARE-9.24%
Adobe Systems Inc.(c) 109,956 2,340,963
- --------------------------------------------------------------------------------
Amdocs Ltd.(c) 87,461 1,599,662
- --------------------------------------------------------------------------------
ANSYS, Inc.(b)(c) 27,009 753,281
- --------------------------------------------------------------------------------
Nuance Communications, Inc.(b)(c) 85,684 887,686
- --------------------------------------------------------------------------------
Salesforce.com, Inc.(b)(c) 7,200 230,472
- --------------------------------------------------------------------------------
Solera Holdings Inc.(b)(c) 33,700 812,170
================================================================================
6,624,234
================================================================================
COMMUNICATIONS EQUIPMENT-18.36%
Brocade Communications Systems, Inc.(b)(c) 93,241 261,075
- --------------------------------------------------------------------------------
Cisco Systems, Inc.(c) 190,361 3,102,884
- --------------------------------------------------------------------------------
CommScope, Inc.(b)(c) 53,550 832,167
- --------------------------------------------------------------------------------
Harris Corp. 36,201 1,377,448
- --------------------------------------------------------------------------------
Juniper Networks, Inc.(c) 51,100 894,761
- --------------------------------------------------------------------------------
NICE Systems Ltd.-ADR (Israel)(c) 86,862 1,951,789
- --------------------------------------------------------------------------------
Nokia Oyj-ADR (Finland)(b) 83,896 1,308,777
- --------------------------------------------------------------------------------
Nortel Networks Corp. (Canada)(b)(c) 2,727 709
- --------------------------------------------------------------------------------
Polycom, Inc.(b)(c) 42,966 580,471
- --------------------------------------------------------------------------------
QUALCOMM Inc.(b) 64,596 2,314,475
- --------------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(b)(c) 13,184 535,007
================================================================================
13,159,563
================================================================================
COMPUTER HARDWARE-8.72%
Apple Inc.(b)(c) 22,568 1,926,179
- --------------------------------------------------------------------------------
Dell Inc.(b)(c) 68,746 703,959
- --------------------------------------------------------------------------------
Hewlett-Packard Co.(b) 83,180 3,018,602
- --------------------------------------------------------------------------------
Teradata Corp.(c) 40,605 602,172
================================================================================
6,250,912
================================================================================
COMPUTER STORAGE & PERIPHERALS-3.49%
EMC Corp.(b)(c) 171,911 1,799,908
- --------------------------------------------------------------------------------
NetApp, Inc.(a)(b)(c) 38,875 543,084
- --------------------------------------------------------------------------------
Seagate Technology 34,867 154,461
================================================================================
2,497,453
================================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.26%
Alliance Data Systems Corp.(b)(c) 15,117 703,394
- --------------------------------------------------------------------------------
VeriFone Holdings, Inc.(b)(c) 40,000 196,000
================================================================================
899,394
================================================================================
ELECTRONIC COMPONENTS-2.79%
Amphenol Corp.-Class A(b) 41,833 1,003,155
- --------------------------------------------------------------------------------
Dolby Laboratories Inc.-Class A(b)(c) 30,375 995,085
================================================================================
1,998,240
================================================================================
HOME ENTERTAINMENT SOFTWARE-2.71%
Activision Blizzard, Inc.(c) 122,619 1,059,428
- --------------------------------------------------------------------------------
Nintendo Co., Ltd. (Japan) 2,300 882,918
================================================================================
1,942,346
================================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.59%
AT&T Inc.(b) 40,000 1,140,000
================================================================================
INTERNET RETAIL-0.64%
Amazon.com, Inc.(b)(c) 8,887 455,726
================================================================================
INTERNET SOFTWARE & SERVICES-9.38%
Ariba Inc.(b)(c) 117,200 845,012
- --------------------------------------------------------------------------------
DivX, Inc.(b)(c) 105,479 551,655
- --------------------------------------------------------------------------------
eBay Inc.(c) 75,273 1,050,811
- --------------------------------------------------------------------------------
Equinix, Inc.(b)(c) 22,989 1,222,785
- --------------------------------------------------------------------------------
Google Inc.-Class A(b)(c) 6,700 2,061,255
- --------------------------------------------------------------------------------
Omniture, Inc.(b)(c) 38,049 404,841
- --------------------------------------------------------------------------------
Yahoo! Inc.(c) 48,213 588,199
================================================================================
6,724,558
================================================================================
IT CONSULTING & OTHER SERVICES-2.71%
Cognizant Technology Solutions Corp.-Class A(c) 107,729 1,945,586
================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.35%
BlueStream Ventures L.P. (Acquired 08/03/00-
06/13/08; Cost $3,149,655)(d)(e) -- 966,804
================================================================================
SEMICONDUCTOR EQUIPMENT-4.11%
Applied Materials, Inc.(b) 84,720 858,214
- --------------------------------------------------------------------------------
ASML Holding N.V.-New York Shares (Netherlands)(b) 55,400 1,001,078
- --------------------------------------------------------------------------------
MEMC Electronic Materials, Inc.(b)(c) 34,569 493,645
- --------------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(b)(c) 32,700 592,524
================================================================================
2,945,461
================================================================================
SEMICONDUCTORS-11.55%
Broadcom Corp.-Class A(c) 50,183 851,606
- --------------------------------------------------------------------------------
Intel Corp.(b) 169,926 2,491,115
- --------------------------------------------------------------------------------
Intersil Corp.-Class A 77,890 715,809
- --------------------------------------------------------------------------------
Marvell Technology Group Ltd.(c) 166,696 1,111,862
- --------------------------------------------------------------------------------
Microsemi Corp.(c) 25,263 319,324
- --------------------------------------------------------------------------------
Netlogic Microsystems Inc.(b)(c) 21,004 462,298
- --------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
AIM V.I. TECHNOLOGY FUND
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS-(CONTINUED)
Texas Instruments Inc. 39,027 $ 605,699
- --------------------------------------------------------------------------------
Xilinx, Inc. 96,590 1,721,234
================================================================================
8,278,947
================================================================================
SYSTEMS SOFTWARE-15.37%
Check Point Software Technologies Ltd. (Israel)(c) 97,372 1,849,094
- --------------------------------------------------------------------------------
McAfee Inc.(c) 78,731 2,721,731
- --------------------------------------------------------------------------------
Microsoft Corp. 148,828 2,893,216
- --------------------------------------------------------------------------------
Novell, Inc.(c) 191,373 744,441
- --------------------------------------------------------------------------------
Oracle Corp.(c) 87,887 1,558,237
- --------------------------------------------------------------------------------
Red Hat, Inc.(c) 94,111 1,244,147
================================================================================
11,010,866
================================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.40%
American Tower Corp.-Class A(c) 58,710 1,721,377
================================================================================
Total Common Stocks & Other Equity Interests
(Cost $101,561,534) 69,017,185
================================================================================
<Caption>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS-0.25%
1.81%, 01/15/09 (Cost $174,877),(f) $ 175,000 $ 174,877
================================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-0.34%
Liquid Assets Portfolio-Institutional Class(g) 122,768 122,768
- --------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 122,768 122,768
================================================================================
Total Money Market Funds (Cost $245,536) 245,536
================================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-96.90% (Cost $101,981,947) 69,437,598
================================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-17.70%
Liquid Assets Portfolio-Institutional Class (Cost
$12,686,974)(g)(h) 12,686,974 12,686,974
================================================================================
TOTAL INVESTMENTS-114.60% (Cost $114,668,921) 82,124,572
================================================================================
OTHER ASSETS LESS LIABILITIES-(14.60)% (10,463,306)
================================================================================
NET ASSETS-100.00% $ 71,661,266
________________________________________________________________________________
================================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The value of this security at December
31, 2008 represented 1.35% of the Fund's Net Assets.
(e) The Fund has a remaining commitment of $101,250 to purchase additional
interests in BlueStream Ventures L.P., which is subject to the terms of
the limited partnership agreement.
(f) Security traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 1J.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost
$101,736,411)* $ 69,192,062
- -------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 12,932,510
=======================================================
Total investments (Cost
$114,668,921) 82,124,572
=======================================================
Foreign currencies, at value (Cost
$1,993,360) 1,902,254
- -------------------------------------------------------
Receivables for:
Investments sold 624,556
- -------------------------------------------------------
Fund shares sold 58,808
- -------------------------------------------------------
Dividends 70,650
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 27,162
=======================================================
Total assets 84,808,002
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Investments purchased 34,299
- -------------------------------------------------------
Fund shares reacquired 301,939
- -------------------------------------------------------
Collateral upon return of securities
loaned 12,686,974
- -------------------------------------------------------
Accrued fees to affiliates 46,701
- -------------------------------------------------------
Accrued other operating expenses 36,038
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 40,785
=======================================================
Total liabilities 13,146,736
=======================================================
Net assets applicable to shares
outstanding $ 71,661,266
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 296,651,706
- -------------------------------------------------------
Undistributed net investment income 16,648
- -------------------------------------------------------
Undistributed net realized gain (loss) (192,371,633)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (32,635,455)
=======================================================
$ 71,661,266
_______________________________________________________
=======================================================
NET ASSETS:
Series I $ 71,546,394
_______________________________________________________
=======================================================
Series II $ 114,872
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 8,539,438
_______________________________________________________
=======================================================
Series II 13,902
_______________________________________________________
=======================================================
Series I:
Net asset value per share $ 8.38
_______________________________________________________
=======================================================
Series II:
Net asset value per share $ 8.26
_______________________________________________________
=======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $14,102,208 were
on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $19,890) $ 953,200
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $123,326) 419,948
- ------------------------------------------------------
Interest 5,222
======================================================
Total investment income 1,378,370
======================================================
EXPENSES:
Advisory fees 861,527
- ------------------------------------------------------
Administrative services fees 332,668
- ------------------------------------------------------
Custodian fees 14,658
- ------------------------------------------------------
Distribution fees -- Series II 235
- ------------------------------------------------------
Transfer agent fees 24,975
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 19,246
- ------------------------------------------------------
Other 77,699
======================================================
Total expenses 1,331,008
======================================================
Less: Fees waived and expense offset
arrangement(s) (13,403)
======================================================
Net expenses 1,317,605
======================================================
Net investment income 60,765
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net
gains (losses) from securities
sold to affiliates of $(62,661)) (6,114,607)
- ------------------------------------------------------
Foreign currencies (6,478)
- ------------------------------------------------------
Futures contracts 237,807
======================================================
(5,883,278)
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (57,640,046)
- ------------------------------------------------------
Foreign currencies (91,366)
======================================================
(57,731,412)
======================================================
Net realized and unrealized gain (loss) (63,614,690)
======================================================
Net increase (decrease) in net assets
resulting from operations $(63,553,925)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 60,765 $ (638,699)
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (5,883,278) 13,189,887
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (57,731,412) (112,456)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (63,553,925) 12,438,732
========================================================================================================
Share transactions-net:
Series I (23,694,566) (27,010,839)
- --------------------------------------------------------------------------------------------------------
Series II 41,258 (14,017)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (23,653,308) (27,024,856)
========================================================================================================
Net increase (decrease) in net assets (87,207,233) (14,586,124)
________________________________________________________________________________________________________
========================================================================================================
NET ASSETS:
Beginning of year 158,868,499 173,454,623
========================================================================================================
End of year (includes undistributed net investment income (loss) of
$16,648 and $(44,279), respectively) $ 71,661,266 $158,868,499
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objective is capital growth.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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. TECHNOLOGY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. OTHER RISKS -- 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.
Many of the products and services offered in technology-related
industries are subject to rapid obsolescence, which may lower the value of
the securities of the companies in this sector.
J. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. TECHNOLOGY FUND
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.
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
recalculating the value of the contracts on a daily basis. 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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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 approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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. The Advisor did not waive fees and/or reimburse expenses during the period
under this expense limitation.
Also, the Advisor has contractually agreed, through at least April 30, 2010,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
AIM V.I. TECHNOLOGY FUND
For the year ended December 31, 2008, the Advisor waived advisory fees of
$13,212.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $282,668 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $80,099,973
- --------------------------------------
Level 2 1,057,795
- --------------------------------------
Level 3 966,804
======================================
$82,124,572
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $716,439 and securities sales of $497,969,
which resulted in net realized gains (losses) of $(62,661).
AIM V.I. TECHNOLOGY 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, 2008, the Fund received credits from this arrangement, which
resulted in the reduction of the Fund's total expenses of $191.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,430
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
There were no ordinary income or long-term capital gain distributions paid
during the years ended December 31, 2008 and 2007.
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 63,127
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (31,097,830)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- (depreciation) -- other investments (91,106)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (46,479)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (189,666,156)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (4,151,996)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 296,651,706
================================================================================================
Total net assets $ 71,661,266
________________________________________________________________________________________________
================================================================================================
</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 wash sales
and partnership interest.
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 to utilizing
$189,666,156 of capital loss carryforward in the fiscal year ending December 31,
2009.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $153,547,080
- -----------------------------------------------------------------------------------------------
December 31, 2010 33,793,499
- -----------------------------------------------------------------------------------------------
December 31, 2016 2,325,577
===============================================================================================
Total capital loss carryforward $189,666,156
_______________________________________________________________________________________________
===============================================================================================
</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. TECHNOLOGY 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, 2008 was $85,609,496 and
$95,305,047, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 1,463,686
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (32,561,516)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(31,097,830)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $113,222,402.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, expired capital loss carryforward and proxy costs on December 31,
2008, undistributed net investment income was increased by $162, undistributed
net realized gain (loss) was increased by $256,500,120 and shares of beneficial
interest decreased by $256,500,282. This reclassification had no effect on the
net assets of the Fund.
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,720,789 $ 21,453,022 2,069,689 $ 31,052,670
- ------------------------------------------------------------------------------------------------------------------------
Series II 8,278 74,875 1,031 14,874
========================================================================================================================
Reacquired:
Series I (3,692,517) (45,147,588) (3,920,382) (58,063,509)
- ------------------------------------------------------------------------------------------------------------------------
Series II (3,056) (33,617) (1,948) (28,891)
========================================================================================================================
Net increase (decrease) in share activity (1,966,506) $(23,653,308) (1,851,610) $(27,024,856)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 66% 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, Invesco Aim and/or Invesco Aim affiliates may make payments to these
entities, which are considered to be related to the Fund, for providing
services to the Fund, Invesco Aim and or Invesco Aim affiliates including
but not limited to services such as, securities brokerage, third party
record keeping and account servicing and administrative services. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
AIM V.I. TECHNOLOGY FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET NET (LOSSES)
VALUE, INVESTMENT ON SECURITIES TOTAL FROM NET ASSET NET ASSETS,
BEGINNING INCOME (BOTH INVESTMENT VALUE, END TOTAL END OF PERIOD
OF PERIOD (LOSS) REALIZED AND UNREALIZED) OPERATIONS OF PERIOD RETURNS(A) (000S OMITTED)
- --------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $15.10 $ 0.01(c) $(6.73) $(6.72) $ 8.38 (44.50)% $ 71,546
Year ended 12/31/07 14.02 (0.06) 1.14 1.08 15.10 7.70 158,739
Year ended 12/31/06 12.69 (0.08) 1.41 1.33 14.02 10.48 173,321
Year ended 12/31/05 12.42 (0.07) 0.34 0.27 12.69 2.17 190,700
Year ended 12/31/04 11.87 (0.04)(e) 0.59 0.55 12.42 4.63 200,556
- --------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 14.95 (0.02)(c) (6.67) (6.69) 8.26 (44.75) 115
Year ended 12/31/07 13.91 (0.10) 1.14 1.04 14.95 7.48 130
Year ended 12/31/06 12.62 (0.12) 1.41 1.29 13.91 10.22 134
Year ended 12/31/05 12.39 (0.11) 0.34 0.23 12.62 1.86 142
Year ended
12/31/04(f) 11.09 (0.05)(e) 1.35 1.30 12.39 11.72 166
__________________________________________________________________________________________________________________________
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
AND/OR EXPENSES AND/OR TO AVERAGE PORTFOLIO
ABSORBED EXPENSES ABSORBED NET ASSETS TURNOVER(B)
- --------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 1.15%(d) 1.16%(d) 0.05%(d) 81%
Year ended 12/31/07 1.10 1.10 (0.38) 59
Year ended 12/31/06 1.12 1.12 (0.54) 116
Year ended 12/31/05 1.12 1.12 (0.60) 114
Year ended 12/31/04 1.15 1.15 (0.39)(e) 137
- --------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 1.40(d) 1.41(d) (0.20)(d) 81
Year ended 12/31/07 1.35 1.35 (0.63) 59
Year ended 12/31/06 1.37 1.37 (0.79) 116
Year ended 12/31/05 1.37 1.37 (0.85) 114
Year ended
12/31/04(f) 1.40(g) 1.40(g) (0.64)(e) (g) 137
______________________________________________________________________________________
======================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns are not annualized for periods less than one
year and do not reflect charges assessed in connection with a variable
product, which if included would reduce total returns.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $114,776
and $94 for Series I and Series II shares, respectively.
(e) 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)% and $ (0.10) and (1.07)% for Series I and Series II
shares, respectively.
(f) Series II commenced on April 30, 2004.
(g) Annualized.
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
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $632.00 $4.68 $1,019.41 $5.79 1.14%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 630.10 5.70 1,018.15 7.05 1.39
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 to reflect the most recent fiscal half year.
AIM V.I. TECHNOLOGY 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
U.S. Treasury Obligations* 0.20%
</Table>
* The above percentage is based on ordinary income dividends paid to
shareholders during the Fund's fiscal 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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. TECHNOLOGY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. TECHNOLOGY FUND
[INVESCO AIM LOGO] AIM V.I. UTILITIES FUND
- -- SERVICE MARK -- Annual Report to Shareholders o December 31, 2008
[MOUNTAIN GRAPHIC]
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 Invesco Aim Web site,
invescoaim.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, 2008, is
available at our Web site. Go to invescoaim.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.
It is anticipated that the businesses of the affiliated investment adviser firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc., Invesco Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc. -- will be combined into
Invesco Institutional (N.A.), Inc., and the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about Aug. 1,
2009. Additional information will be posted at invescoaim.com on or about Aug. 1, 2009.
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.
Invesco Aim Distributors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM V.I. UTILITIES FUND
=======================================================================================
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY MARKET CONDITIONS AND YOUR FUND
Although there were no safe havens from widespread stock market losses, utilities Several factors contributed to the
stocks generally held up somewhat better than the broad market in 2008, due to their negative performance of most major market
defensive nature. Consequently, Series I shares of AIM V.I. Utilities Fund, excluding indexes for the fiscal year ended December
variable product issuer charges, fared better than the broad market, as measured by the 31, 2008.(1) The chief catalyst was the
S&P 500 Index, for the year ended December 31, 2008.(triangle) The Fund benefited from a ongoing subprime loan crisis and its far
litigation settlement, and its cash exposure. Conversely, the Fund's electric utilities reaching effects on overall credit
and multi-utilities holdings detracted from performance. availability. Although inflation weighed
heavily on the minds of consumers and
Your Fund's long-term performance appears later in this report. investors in the first half of 2008,
falling home values and commodity prices
FUND VS. INDEXES alleviated short-term inflationary
pressures beginning mid-year as
Total returns, 12/31/07 to 12/31/08, excluding variable product issuer charges. If unemployment and global economic
variable product issuer charges were included, returns would be lower. instability took center stage.
Series I Shares -32.35% The U.S. Federal Reserve Board (the
Series II Shares -32.51 Fed) continued the monetary easing policy
S&P 500 Index(triangle) (Broad Market Index) -36.99 it began in 2007. Since December 2007, the
Lipper VUF Utility Funds Category Average(triangle) (Peer Group) -35.17 Fed cut the federal funds target rate from
4.25% to a range of zero to 0.25%(2) in an
(triangle)Lipper Inc. effort to inject liquidity into weakening
======================================================================================= credit markets. Real GDP contracted in the
third and fourth quarters of 2008. This
HOW WE INVEST We seek to manage risk by: contraction was largely due to a decrease
in personal consumption and residential
We invest primarily in natural gas, o Diversifying across most industries and investment. Inflation, as measured by the
electricity and telecommunication services sub-industries within the utilities seasonally-adjusted Consumer Price Index,
companies, selecting stocks based on our sector. virtually ground to a halt following sharp
empirical research of individual declines in energy prices in the second
companies. Our fundamental analysis o Owning both regulated and unregulated half of the year. However, unemployment
focuses on positive cash flows and utilities. Unregulated companies trended higher during the year and
predictable earnings. Our fundamental generally provide greater growth ultimately reached a seasonally adjusted
analysis seeks strong balance sheets, potential, while regulated firms rate of 7.2% in December.(3)
competent management and sustainable generally provide more stable dividends
dividends and distributions. and greater principal protection. Against this backdrop, consumer
staples, health care and utilities were
We look for companies that may benefit o Maintaining a reasonable cash position among the best performing sectors of the
from industry trends, such as increased to avoid having to sell stocks during S&P 500 Index. Conversely, financials,
demand for certain products and market downturns. materials and information technology were
deregulation of state markets. We look for the worst performing sectors.
companies that are attractively valued We may sell a stock for any of the
relative to the rest of the market. We following reasons:
also monitor and may adjust industry and
position weights according to prevailing o Earnings growth is threatened because
economic trends such as gross domestic of a deterioration in a firm's
product (GDP) growth and interest rate fundamentals or due to a change in the
changes. operating environment.
o Valuation becomes too high.
o Corporate strategychanges.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 EQUITY HOLDINGS* Total Net Assets $82.4 million
By sector
Total Number of Holdings* 30
Utilities 77.3% 1.AT&T Inc. 6.3% ==========================================
Telecommunication Services 15.2 2.Exelon Corp. 4.9
Energy 5.7 3.Verizon Communications Inc. 4.8 The Fund's holdings are subject to change,
Money Market Funds 4.FPL Group, Inc. 4.8 and there is no assurance that the Fund
Plus Other Assets Less Liabilities 1.8 5.Entergy Corp. 4.2 will continue to hold any particular
6.Alaska Communications security.
Systems Group Inc. 4.1
7.Sempra Energy 4.1 * Excluding money market fund holdings.
8.PG&E Corp. 3.8
9.Edison International 3.5
10.Equitable Resources, Inc. 3.4
========================================== ==========================================
AIM V.I. UTILITIES FUND
Utilities stocks tend to be sensitive Because carbon dioxide emissions remain MEGGAN WALSH
to interest rate movements because they a popular topic with legislators, we Chartered Financial
generally pay dividends and can be positioned the Fund with more exposure to [WALSH Analyst, senior
particularly attractive when interest natural gas and nuclear power companies. PHOTO] portfolio manager, is
rates are low. Indeed, yields of many Natural gas has one-third the carbon lead manager of AIM V.I.
utility stocks generally supported dioxide emissions of coal. Nuclear power Utilities Fund. She has
utilities stocks somewhat as interest generation produces no greenhouse gas worked in the investment industry since
rates declined in 2008, causing the emissions. During the year, we purchased 1987 and joined Invesco Aim in 1991. Ms.
utilities sector to outperform the broad ONEOK, which processes and distributes Walsh earned a B.S. in finance from the
market as measured by the S&P 500 Index. natural gas to Oklahoma, Kansas and Texas, University of Maryland and an M.B.A. from
and PUBLIC SERVICE ENTERPRISE GROUP, which Loyola. She joined the team on Jan. 23,
During the year, the wireless supplies nuclear power to the Northeast 2009, after the close of the reporting
telecommunication services industry held and Mid-Atlantic markets. Additionally, we period.
up better than other industries in which continued to maintain our focus on holding
the Fund was invested. The Fund also what we believed were attractively priced DAVIS PADDOCK
benefited from a litigation settlement stocks of strong companies with reasonable Chartered Financial
during the year. Additionally, our cash growth prospects and attractive dividend [PADDOCK Analyst, portfolio
position, which averaged 2.55% for the yields. PHOTO] manager, is co-manager
year and fell within our typical of AIM V.I. Utilities
allocation, was a positive contributor As always, we thank you for your Fund. He joined Invesco
against severe market volatility. On the continued investment in AIM V.I. Utilities Aim in 2001. Mr. Paddock earned his B.A.
other hand, Fund holdings in the electric Fund. and M.B.A. from The University of Texas at
utilities and multi-utilities industries Austin. He joined the team on Jan. 23,
generally detracted from performance. (1) Lipper Inc. 2009, after the close of the reporting
(2) U.S. Federal Reserve period.
Electric utility SOUTHERN COMPANY was (3) Bureau of Labor Statistics
the largest equity contributor to Fund JOHN SEGNER left the team on Jan. 23,
performance during the year. Although The views and opinions expressed in 2009, after the close of the reporting
Southern operates as a regulated utility, management's discussion of Fund period.
it benefited from its positioning in performance are those of Invesco Aim
states that offer fairly stable regulatory Advisors, Inc. These views and opinions Assisted by the Utilities Team
environments and growing customer bases. are subject to change at any time based on
Telecom provider FAIRPOINT COMMUNICATIONS, factors such as market and economic
another holding which was a top conditions. These views and opinions may
contributor to performance in 2008, not be relied upon as investment advice or
benefited from the completion of its recommendations, or as an offer for a
merger with VERIZON COMMUNICATIONS' (also particular security. The information is
a Fund holding) landline operations in not a complete analysis of every aspect of
northern New England. any market, country, industry, security or
the Fund. Statements of fact are from
On the other hand, WILLIAMS COMPANIES, sources considered reliable, but Invesco
EL PASO and QUESTAR -- holdings leveraged Aim Advisors, Inc. makes no representation
to natural gas -- were the largest or warranty as to their completeness or
detractors from Fund performance for the accuracy. Although historical performance
year. These gas companies are largely is no guarantee of future results, these
exploration and production driven. insights may help you understand our
Therefore, their growth depends on investment management philosophy.
successful production of new and existing
wells, as well as the price of natural See important Fund and index disclosures
gas, both of which fell during the year. later in this report.
Following recent events, we were less
concerned about the possible repeal of the
dividend tax cut as significant tax hikes
seemed unlikely in the near term given
economic uncertainty. Interest rate and
inflationary trends, however, presented a
cause for concern going forward.
AIM V.I. UTILITIES FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee changes in value during the early years doubling, or 100% change, in the value of
comparable future results. shown in the chart. The vertical axis, the the investment. In other words, the space
one that indicates the dollar value of an between $5,000 and $10,000 is the same
This chart, which is a logarithmic investment, is constructed with each size as the space between $10,000 and
chart, presents the fluctuations in the segment representing a percent change in $20,000, and so on.
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 AIM V.I. UTILITIES FUND, A SERIES
effective than other types of charts in PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS,
illustrating THE PERFORMANCE DATA QUOTED REPRESENT IS CURRENTLY OFFERED THROUGH INSURANCE
========================================== PAST PERFORMANCE AND CANNOT GUARANTEE COMPANIES ISSUING VARIABLE PRODUCTS. YOU
AVERAGE ANNUAL TOTAL RETURNS COMPARABLE FUTURE RESULTS; CURRENT CANNOT PURCHASE SHARES OF THE FUND
As of 12/31/08 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE DIRECTLY. PERFORMANCE FIGURES GIVEN
CONTACT YOUR VARIABLE PRODUCT ISSUER OR REPRESENT THE FUND AND ARE NOT INTENDED TO
SERIES I SHARES FINANCIAL ADVISOR FOR THE MOST RECENT REFLECT ACTUAL VARIABLE PRODUCT VALUES.
Inception (12/30/94) 5.91% MONTH-END VARIABLE PRODUCT PERFORMANCE. THEY DO NOT REFLECT SALES CHARGES,
10 Years 1.61 PERFORMANCE FIGURES REFLECT FUND EXPENSES, EXPENSES AND FEES ASSESSED IN CONNECTION
5 Years 8.13 REINVESTED DISTRIBUTIONS AND CHANGES IN WITH A VARIABLE PRODUCT. SALES CHARGES,
1 Year -32.35 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
SERIES II SHARES MAY HAVE A GAIN OR LOSS WHEN YOU SELL AND WILL LOWER THE TOTAL RETURN.
10 Years 1.36% SHARES.
5 Years 7.88 THE MOST RECENT MONTH-END PERFORMANCE
1 Year -32.51 THE NET ANNUAL FUND OPERATING EXPENSE DATA AT THE FUND LEVEL, EXCLUDING VARIABLE
========================================== RATIO SET FORTH IN THE MOST RECENT FUND PRODUCT CHARGES, IS AVAILABLE ON THE
PROSPECTUS AS OF THE DATE OF THIS REPORT INVESCO AIM AUTOMATED INFORMATION LINE,
SERIES II SHARES' INCEPTION DATE IS APRIL FOR SERIES I AND SERIES II SHARES WAS 866 702-4402. AS MENTIONED ABOVE, FOR THE
30, 2004. RETURNS SINCE THAT DATE ARE 0.93% AND 1.18%, RESPECTIVELY.(1) THE TOTAL MOST RECENT MONTH-END PERFORMANCE
HISTORICAL. ALL OTHER RETURNS ARE THE ANNUAL FUND OPERATING EXPENSE RATIO SET INCLUDING VARIABLE PRODUCT CHARGES, PLEASE
BLENDED RETURNS OF THE HISTORICAL FORTH IN THE MOST RECENT FUND PROSPECTUS CONTACT YOUR VARIABLE PRODUCT ISSUER OR
PERFORMANCE OF SERIES II SHARES SINCE AS OF THE DATE OF THIS REPORT FOR SERIES I FINANCIAL ADVISOR.
THEIR INCEPTION AND THE RESTATED AND SERIES II SHARES WAS 0.94% AND 1.19%,
HISTORICAL PERFORMANCE OF SERIES I SHARES RESPECTIVELY. THE EXPENSE RATIOS PRESENTED (1) Total annual operating expenses less
(FOR PERIODS PRIOR TO INCEPTION OF SERIES ABOVE MAY VARY FROM THE EXPENSE RATIOS any contractual fee waivers and/or
II SHARES) ADJUSTED TO REFLECT THE RULE PRESENTED IN OTHER SECTIONS OF THIS REPORT expense reimbursements by the advisor
12B-1 FEES APPLICABLE TO SERIES II SHARES. THAT ARE BASED ON EXPENSES INCURRED DURING in effect through at least April 30,
THE INCEPTION DATE OF SERIES I SHARES IS THE PERIOD COVERED BY THIS REPORT. 2010. See current prospectus for more
DECEMBER 30, 1994. information.
THE PERFORMANCE OF THE FUND'S SERIES I
AND SERIES II SHARE CLASSES WILL DIFFER
PRIMARILY DUE TO DIFFERENT CLASS EXPENSES.
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Fund data from 12/30/94, index data from 12/31/94
AIM V.I. Lipper VUF Utility
Utilities Fund- Funds Category
Date Series I Shares S&P 500 Index(1) Average(1)
12/30/94 $10000
12/94 10000 $10000 $10000
1/95 10040 10259 10243
2/95 10090 10659 10344
3/95 10090 10973 10365
4/95 10100 11295 10601
5/95 10120 11746 10957
6/95 10110 12019 11032
7/95 10110 12417 11301
8/95 10131 12448 11463
9/95 10180 12973 11847
10/95 10240 12927 11847
11/95 10601 13493 12154
12/95 10909 13753 12585
1/96 10969 14221 12804
2/96 10889 14353 12701
3/96 11050 14491 12707
4/96 11453 14705 12849
5/96 11644 15083 12955
6/96 11815 15141 13265
7/96 11362 14472 12702
8/96 11514 14778 12954
9/96 11634 15609 13105
10/96 11977 16039 13507
11/96 12329 17251 14092
12/96 12302 16909 14223
1/97 12405 17965 14490
2/97 12343 18106 14466
3/97 11942 17363 14061
4/97 12024 18399 14207
5/97 12590 19524 14936
6/97 13095 20392 15414
7/97 13280 22014 15890
8/97 12961 20782 15431
9/97 13754 21919 16363
10/97 13754 21188 16184
11/97 14547 22168 17151
12/97 15182 22548 18113
1/98 15372 22798 18042
2/98 16015 24441 18639
3/98 17185 25691 20022
4/98 16795 25955 19666
5/98 16711 25509 19393
6/98 17059 26544 19831
7/98 17016 26264 19617
8/98 15214 22469 18140
9/98 16258 23910 19571
10/98 17102 25852 20146
11/98 17671 27418 20680
12/98 19051 28997 21824
1/99 19522 30209 21797
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
2/99 19276 29270 21187
3/99 19480 30441 21282
4/99 20445 31620 22619
5/99 20960 30874 23178
6/99 21270 32583 23467
7/99 21227 31570 23411
8/99 20264 31414 22669
9/99 20436 30554 22717
10/99 21153 32486 23834
11/99 21432 33147 24232
12/99 22699 35096 25405
1/00 23997 33333 26083
2/00 25092 32703 26279
3/00 25925 35900 27404
4/00 24333 34820 26110
5/00 23498 34106 25784
6/00 23672 34946 25877
7/00 23163 34400 25714
8/00 24593 36536 27269
9/00 25166 34608 27698
10/00 24257 34461 27058
11/00 22166 31746 25256
12/00 23895 31902 26662
1/01 23417 33033 26273
2/01 22759 30023 25485
3/01 21999 28122 24947
4/01 23541 30306 26277
5/01 22077 30509 25567
6/01 19955 29767 23903
7/01 18798 29473 23035
8/01 17640 27630 22121
9/01 15643 25399 20446
10/01 15892 25884 20158
11/01 16065 27869 20005
12/01 16147 28113 20333
1/02 14954 27703 19052
2/02 14438 27169 18511
3/02 15343 28191 19614
4/02 14930 26482 18828
5/02 14335 26288 18120
6/02 13681 24416 16920
7/02 12545 22513 15260
8/02 12729 22661 15681
9/02 11822 20200 14283
10/02 12373 21976 14894
11/02 12591 23268 15442
12/02 12864 21902 15584
1/03 12427 21330 15286
2/03 12081 21009 14828
3/03 12289 21212 15164
4/03 12866 22959 16334
5/03 13995 24167 17624
6/03 14076 24476 17855
7/03 13430 24908 17203
8/03 13569 25393 17370
9/03 13938 25124 17733
10/03 14099 26544 18116
11/03 14273 26778 18388
12/03 15113 28181 19495
1/04 15230 28698 19912
2/04 15568 29097 20276
3/04 15498 28658 20213
4/04 15120 28209 19793
5/04 15251 28595 19898
6/04 15515 29151 20330
7/04 15779 28186 20456
8/04 16162 28299 20992
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
9/04 16557 28606 21481
10/04 17214 29043 22381
11/04 18255 30217 23466
12/04 18673 31245 24297
1/05 18662 30484 24188
2/05 19237 31125 24775
3/05 19248 30574 24676
4/05 19393 29995 24773
5/05 19703 30948 25214
6/05 20611 30993 26318
7/05 21388 32145 27200
8/05 22058 31852 27602
9/05 23026 32109 28527
10/05 21543 31574 27058
11/05 21520 32767 27155
12/05 21817 32779 27470
1/06 22685 33647 28572
2/06 22832 33738 28754
3/06 22294 34157 28369
4/06 22697 34616 28982
5/06 22942 33621 28947
6/06 23493 33665 29486
7/06 24569 33873 30706
8/06 25242 34678 31511
9/06 24863 35571 31533
10/06 26014 36729 33251
11/06 26993 37426 34538
12/06 27371 37952 35115
1/07 27589 38525 35550
2/07 28453 37774 36404
3/07 29742 38195 37947
4/07 31068 39887 39476
5/07 32087 41277 41154
6/07 30862 40592 39940
7/07 29584 39335 38466
8/07 29957 39923 38986
9/07 31425 41415 40927
10/07 33332 42074 43493
11/07 32612 40314 42854
12/07 33013 40035 43111
1/08 30729 37634 40033
2/08 29890 36413 39276
3/08 29974 36255 38852
4/08 31490 38020 41311
5/08 32744 38512 42906
6/08 32027 35269 41550
7/08 29644 34972 38525
8/08 29051 35478 37832
9/08 25510 32321 32373
10/08 22479 26893 27999
11/08 22576 24963 27700
12/08 22337 25226 28004
====================================================================================================================================
AIM V.I. UTILITIES FUND
AIM V.I. UTILITIES FUND'S INVESTMENT OBJECTIVES ARE CAPITAL GROWTH AND INCOME.
o Unless otherwise stated, information presented in this report is as of December 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data providedby Invesco Aim.
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
Since a large percentage of the Fund's The S&P 500--REGISTERED TRADEMARK-- INDEX The Chartered Financial
assets may be invested in securities of a is a market capitalization-weighted index Analyst--REGISTERED TRADEMARK--
limited number of companies, each covering all major areas of the U.S. (CFA--REGISTERED TRADEMARK--) designation
investment has a greater effect on the economy. It is not the 500 largest is a globally recognized standard for
Fund's overall performance, and any change companies, but rather the most widely held measuring the competence and integrity of
in the value of those securities could 500 companies chosen with respect to investment professionals.
significantly affect the value of your market size, liquidity, and their
investment in the Fund. industry. The returns shown in management's
discussion of Fund performance are based
Prices of equity securities change in The LIPPER VUF UTILITY FUNDS CATEGORY on net asset values calculated for
response to many factors, including the AVERAGE represents an average of all of shareholder transactions. Generally
historical and prospective earnings of the the variable insurance underlying funds in accepted accounting principles require
issuer, the value of its assets, general the Lipper Utility Funds category. These adjustments to be made to the net assets
economic conditions, interest rates, funds invest primarily in the equity of the Fund at period end for financial
investor perceptions and market liquidity. securities of domestic and foreign reporting purposes, and as such, the net
companies providing utilities. asset values for shareholder transactions
Foreign securities have additional and the returns based on those net asset
risks, including exchange rate changes, The Fund is not managed to track the values may differ from the net asset
political and economic upheaval, relative performance of any particular index, values and returns reported in the
lack of information, relatively low market including the indexes defined here, and Financial Highlights. Additionally, the
liquidity, and the potential lack of consequently, the performance of the Fund returns and net asset values shown
strict financial and accounting controls may deviate significantly from the throughout this report are at the Fund
and standards. performance of the indexes. level only and do not include variable
product issuer charges. If such charges
There is no guarantee that the A direct investment cannot be made in were included, the total returns would be
investment techniques and risk analysis an index. Unless otherwise indicated, lower.
used by the Fund's portfolio managers will index results include reinvested
produce the desired results. dividends, and they do not reflect sales Industry classifications used in this
charges. Performance of an index of funds report are generally according to the
The prices of securities held by the reflects fund expenses; performance of a Global Industry Classification Standard,
Fund may decline in response to market market index does not. which was developed by and is the
risks. exclusive property and a service mark of
MSCI Inc. and Standard & Poor's.
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.
Government regulation, difficulty in
obtaining adequate financing and
investment return, environmental issues,
fuel prices for generation of electricity,
natural gas availability, power marketing
and trading risks, and risks associated
with nuclear power facilities may
adversely affect the market value of the
Fund's holdings.
Although the Fund's return during
certain periods was positively affected by
its investments in initial public
offerings (IPOs), there can be no
assurance that the Fund will have
favorable IPO investment opportunities in
the future.
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS-98.20%
ELECTRIC UTILITIES-36.39%
Duke Energy Corp. 160,000 $ 2,401,600
- ---------------------------------------------------------------------------
E.ON AG (Germany) 64,000 2,600,547
- ---------------------------------------------------------------------------
Edison International 90,000 2,890,800
- ---------------------------------------------------------------------------
Entergy Corp. 42,000 3,491,460
- ---------------------------------------------------------------------------
Exelon Corp. 73,000 4,059,530
- ---------------------------------------------------------------------------
FirstEnergy Corp. 50,000 2,429,000
- ---------------------------------------------------------------------------
FPL Group, Inc. 78,000 3,925,740
- ---------------------------------------------------------------------------
Pepco Holdings, Inc. 121,000 2,148,960
- ---------------------------------------------------------------------------
Portland General Electric Co. 87,000 1,693,890
- ---------------------------------------------------------------------------
PPL Corp. 84,000 2,577,960
- ---------------------------------------------------------------------------
Southern Co. 48,000 1,776,000
===========================================================================
29,995,487
===========================================================================
GAS UTILITIES-10.44%
AGL Resources Inc. 87,000 2,727,450
- ---------------------------------------------------------------------------
Equitable Resources, Inc. 84,000 2,818,200
- ---------------------------------------------------------------------------
ONEOK, Inc. 67,000 1,951,040
- ---------------------------------------------------------------------------
Questar Corp. 34,000 1,111,460
===========================================================================
8,608,150
===========================================================================
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-3.09%
NRG Energy, Inc.(b) 109,000 2,542,970
===========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-15.16%
Alaska Communications Systems Group Inc. 360,000 3,376,800
- ---------------------------------------------------------------------------
AT&T Inc. 182,000 5,187,000
- ---------------------------------------------------------------------------
Verizon Communications Inc. 116,000 3,932,400
===========================================================================
12,496,200
===========================================================================
MULTI-UTILITIES-27.45%
Ameren Corp. 75,000 2,494,500
- ---------------------------------------------------------------------------
CMS Energy Corp. 238,000 2,406,180
- ---------------------------------------------------------------------------
Dominion Resources, Inc. 66,000 2,365,440
- ---------------------------------------------------------------------------
National Grid PLC (United Kingdom) 208,000 2,085,831
- ---------------------------------------------------------------------------
PG&E Corp. 81,000 3,135,510
- ---------------------------------------------------------------------------
Public Service Enterprise Group Inc. 64,000 1,866,880
- ---------------------------------------------------------------------------
Sempra Energy 79,000 3,367,770
- ---------------------------------------------------------------------------
Wisconsin Energy Corp. 50,000 2,099,000
- ---------------------------------------------------------------------------
Xcel Energy, Inc. 151,000 2,801,050
===========================================================================
22,622,161
===========================================================================
OIL & GAS STORAGE & TRANSPORTATION-5.67%
El Paso Corp. 275,000 2,153,250
- ---------------------------------------------------------------------------
Williams Cos., Inc. (The) 174,000 2,519,520
===========================================================================
4,672,770
===========================================================================
Total Common Stocks (Cost $80,950,721) 80,937,738
===========================================================================
MONEY MARKET FUNDS-1.80%
Liquid Assets Portfolio-Institutional Class(c) 743,422 743,422
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 743,422 743,422
===========================================================================
Total Money Market Funds (Cost $1,486,844) 1,486,844
===========================================================================
TOTAL INVESTMENTS-100.00% (Cost $82,437,565) 82,424,582
===========================================================================
OTHER ASSETS LESS LIABILITIES-0.00% (3,714)
===========================================================================
NET ASSETS-100.00% $82,420,868
___________________________________________________________________________
===========================================================================
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
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, 2008
<Table>
ASSETS:
Investments, at value (Cost $80,950,721) $80,937,738
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 1,486,844
======================================================
Total investments (Cost
$82,437,565) 82,424,582
======================================================
Receivables for:
Fund shares sold 1,116
- ------------------------------------------------------
Dividends 361,794
- ------------------------------------------------------
Fund expenses absorbed 6,322
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 29,104
======================================================
Total assets 82,822,918
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 274,202
- ------------------------------------------------------
Accrued fees to affiliates 51,156
- ------------------------------------------------------
Accrued other operating expenses 36,786
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 39,906
======================================================
Total liabilities 402,050
======================================================
Net assets applicable to shares
outstanding $82,420,868
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $79,762,001
- ------------------------------------------------------
Undistributed net investment income 3,155,248
- ------------------------------------------------------
Undistributed net realized gain (loss) (488,333)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (8,048)
======================================================
$82,420,868
______________________________________________________
======================================================
NET ASSETS:
Series I $80,704,195
______________________________________________________
======================================================
Series II $ 1,716,673
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Series I 6,031,270
______________________________________________________
======================================================
Series II 129,115
______________________________________________________
======================================================
Series I:
Net asset value per share $ 13.38
______________________________________________________
======================================================
Series II:
Net asset value per share $ 13.30
______________________________________________________
======================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $47,697) $ 4,243,801
- ------------------------------------------------------
Dividends from affiliated money market
funds (includes securities lending
income of $53,222) 153,371
======================================================
Total investment income 4,397,172
======================================================
EXPENSES:
Advisory fees 762,852
- ------------------------------------------------------
Administrative services fees 340,852
- ------------------------------------------------------
Custodian fees 12,427
- ------------------------------------------------------
Distribution fees -- Series II 5,943
- ------------------------------------------------------
Transfer agent fees 19,459
- ------------------------------------------------------
Trustees' and officers' fees and
benefits 19,596
- ------------------------------------------------------
Other 56,317
======================================================
Total expenses 1,217,446
======================================================
Less: Fees waived (32,119)
======================================================
Net expenses 1,185,327
======================================================
Net investment income 3,211,845
======================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 1,511,674
- ------------------------------------------------------
Foreign currencies (5,308)
======================================================
1,506,366
======================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (52,817,766)
- ------------------------------------------------------
Foreign currencies (1,236)
======================================================
(52,819,002)
======================================================
Net realized and unrealized gain (loss) (51,312,636)
======================================================
Net increase (decrease) in net assets
resulting from operations $(48,100,791)
______________________________________________________
======================================================
</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, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,211,845 $ 3,053,887
- --------------------------------------------------------------------------------------------------------
Net realized gain 1,506,366 12,120,624
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (52,819,002) 12,996,939
========================================================================================================
Net increase (decrease) in net assets resulting from operations (48,100,791) 28,171,450
========================================================================================================
Distributions to shareholders from net investment income:
Series I (2,992,914) (2,819,765)
- --------------------------------------------------------------------------------------------------------
Series II (56,469) (60,178)
========================================================================================================
Total distributions from net investment income (3,049,383) (2,879,943)
========================================================================================================
Distributions to shareholders from net realized gains:
Series I (10,996,910) (7,308,544)
- --------------------------------------------------------------------------------------------------------
Series II (235,824) (167,024)
========================================================================================================
Total distributions from net realized gains (11,232,734) (7,475,568)
========================================================================================================
Share transactions-net:
Series I (13,874,354) (820,698)
- --------------------------------------------------------------------------------------------------------
Series II (362,485) 504,038
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (14,236,839) (316,660)
========================================================================================================
Net increase (decrease) in net assets (76,619,747) 17,499,279
________________________________________________________________________________________________________
========================================================================================================
NET ASSETS:
Beginning of year 159,040,615 141,541,336
========================================================================================================
End of year (includes undistributed net investment income of $3,155,248
and $3,000,396, respectively) $ 82,420,868 $159,040,615
________________________________________________________________________________________________________
========================================================================================================
</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, 2008
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-
one separate portfolios, (each constituting a "Fund"). The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. 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 Fund's investment objectives are capital growth and income.
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").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
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, American
Depositary Receipts 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
AIM V.I. UTILITIES FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, the investment
advisor 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 up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. OTHER RISKS -- 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.
The Fund may invest a large percentage of assets in securities of a
limited number of companies, such that each investment may have a greater
effect on the Fund's overall performance, and any change in the value of
those securities could significantly affect the value of your investment
in the Fund.
Government regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for generation of
electricity, availability of natural gas, risks associated with power
marketing and trading, and risks associated with nuclear power facilities
may adversely affect the market value of the Fund's holdings.
J. SECURITIES LENDING -- 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 sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
Dividends received on cash collateral investments for securities lending
transactions, which are net of compensation to counterparties, is included
in Dividends from affiliates on the Statement of Operations. The aggregate
value of securities out on loan is shown as a footnote on the Statement of
Assets and Liabilities, if any.
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
AIM V.I. UTILITIES FUND
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.
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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of 0.60% of the Fund's average daily net assets.
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, effective May 1, 2008, between the Advisor and each of 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., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd.
(collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay
40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that
provide discretionary investment management services to the Fund based on the
percentage of assets allocated to such Sub-Advisor(s).
The Advisor 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, 2010.
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.
Also, the Advisor has contractually agreed, through at least April 30, 2010,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$32,119.
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, 2008, Invesco did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim a fee for
costs incurred in providing accounting services and fund administrative services
to the Fund and to reimburse Invesco 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, 2008, Invesco Aim was paid $50,000 for accounting and fund administrative
services and reimbursed $290,852 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. For the year ended December 31, 2008,
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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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, 2008, 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
Invesco Aim, IAIS and/or IADI.
AIM V.I. UTILITIES FUND
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157
establishes a hierarchy that prioritizes the inputs to valuation methods giving
the highest priority to readily available unadjusted quoted prices in an active
market for identical assets (Level 1) and the lowest priority to significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using quoted prices in an active market for
identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $77,738,204
- --------------------------------------
Level 2 4,686,378
- --------------------------------------
Level 3 --
======================================
$82,424,582
______________________________________
======================================
</Table>
NOTE 4--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
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, 2008, the Fund paid legal fees of $3,432
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company, 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
Invesco Aim, not to exceed the contractually agreed upon rate.
AIM V.I. UTILITIES FUND
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $ 3,099,788 $ 3,761,176
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 11,182,329 6,594,335
========================================================================================================
Total distributions $14,282,117 $10,355,511
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -----------------------------------------------------------------------------------------------
Undistributed ordinary income $ 3,213,145
- -----------------------------------------------------------------------------------------------
Undistributed long-term gain 810,064
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (225,009)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 4,935
- -----------------------------------------------------------------------------------------------
Temporary book/tax differences (51,285)
- -----------------------------------------------------------------------------------------------
Capital loss carryforward (919,643)
- -----------------------------------------------------------------------------------------------
Post-October deferrals (173,340)
- -----------------------------------------------------------------------------------------------
Shares of beneficial interest 79,762,001
===============================================================================================
Total net assets $82,420,868
_______________________________________________________________________________________________
===============================================================================================
</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 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.
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 $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, 2008 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $919,643
_______________________________________________________________________________________________
===============================================================================================
</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 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $18,942,992 and
$41,289,520, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 11,412,323
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,637,332)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $ (225,009)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $82,649,591.
</Table>
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, on December 31, 2008, undistributed net investment income was
decreased by $7,610 and undistributed net realized gain (loss) was increased by
$7,610. This reclassification had no effect on the net assets of the Fund.
AIM V.I. UTILITIES FUND
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Series I 1,346,697 $ 28,997,020 2,496,664 $ 59,127,619
- ------------------------------------------------------------------------------------------------------------------------
Series II 26,485 551,996 47,500 1,114,914
========================================================================================================================
Issued as reinvestment of dividends:
Series I 1,077,799 13,989,824 416,289 10,128,309
- ------------------------------------------------------------------------------------------------------------------------
Series II 22,659 292,293 9,404 227,202
========================================================================================================================
Reacquired:
Series I (2,890,405) (56,861,198) (2,965,731) (70,076,626)
- ------------------------------------------------------------------------------------------------------------------------
Series II (58,398) (1,206,774) (35,116) (838,078)
========================================================================================================================
Net decrease in share activity (475,163) $(14,236,839) (30,990) $ (316,660)
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 60% 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, Invesco
Aim and/or Invesco Aim affiliates may make payments to these entities,
which are considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and or Invesco Aim affiliates including but not
limited to services such as, securities brokerage, third party record
keeping and account servicing and administrative services. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
these entities are also owned beneficially.
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, NET (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME(a) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $23.97 $0.52 $(8.36) $(7.84) $(0.59) $(2.16) $(2.75)
Year ended 12/31/07 21.23 0.47 3.94 4.41 (0.47) (1.20) (1.67)
Year ended 12/31/06 17.83 0.47 4.06 4.53 (0.70) (0.43) (1.13)
Year ended 12/31/05 15.61 0.42 2.21 2.63 (0.41) -- (0.41)
Year ended 12/31/04 12.95 0.42 2.57 2.99 (0.33) -- (0.33)
- -------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 23.80 0.46 (8.28) (7.82) (0.52) (2.16) (2.68)
Year ended 12/31/07 21.12 0.41 3.91 4.32 (0.44) (1.20) (1.64)
Year ended 12/31/06 17.76 0.42 4.06 4.48 (0.69) (0.43) (1.12)
Year ended 12/31/05 15.57 0.38 2.20 2.58 (0.39) -- (0.39)
Year ended 12/31/04(e) 12.63 0.26 2.68 2.94 -- -- --
___________________________________________________________________________________________________________________
===================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE NET TO AVERAGE NET
ASSETS WITH ASSETS WITHOUT RATIO OF NET
FEE WAIVERS FEE WAIVERS INVESTMENT
NET ASSET NET ASSETS, AND/OR AND/OR INCOME
VALUE, END TOTAL END OF PERIOD EXPENSES EXPENSES TO AVERAGE PORTFOLIO
OF PERIOD RETURN(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- -------------------------------------------------------------------------------------------------------------------------
SERIES I
Year ended 12/31/08 $13.38 (32.35)% $ 80,704 0.93%(d) 0.96%(d) 2.53%(d) 15%
Year ended 12/31/07 23.97 20.64 155,748 0.93 0.94 1.97 30
Year ended 12/31/06 21.23 25.46 139,080 0.93 0.96 2.40 38
Year ended 12/31/05 17.83 16.83 114,104 0.93 0.96 2.49 49
Year ended 12/31/04 15.61 23.65 159,554 1.01 1.01 3.09 52
- -------------------------------------------------------------------------------------------------------------------------
SERIES II
Year ended 12/31/08 13.30 (32.51) 1,717 1.18(d) 1.21(d) 2.28(d) 15
Year ended 12/31/07 23.80 20.32 3,293 1.18 1.19 1.72 30
Year ended 12/31/06 21.12 25.25 2,462 1.18 1.21 2.15 38
Year ended 12/31/05 17.76 16.55 801 1.18 1.21 2.24 49
Year ended 12/31/04(e) 15.57 23.28 602 1.28(f) 1.28(f) 2.82(f) 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, if applicable and do not reflect charges assessed in connection with
a variable product, which if included would reduce total returns.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios are based on average daily net assets (000's omitted) of $124,765
and $2,377 for Series I and Series II, respectively.
(e) Commencement date of April 30, 2004.
(f) Annualized.
AIM V.I. UTILITIES FUND
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the Employee Retirement Income Security Act of 1974, as amended ("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 were 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 Invesco 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 ERISA purportedly
brought on behalf of participants in the 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to 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, 2008, 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, 2008 by
correspondence with the custodian provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 10, 2009
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, 2008,
through December 31, 2008.
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
Series I $1,000.00 $697.40 $3.97 $1,020.46 $4.72 0.93%
- ---------------------------------------------------------------------------------------------------
Series II 1,000.00 696.50 5.03 1,019.20 5.99 1.18
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008, 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
184/366 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,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $11,182,329
Corporate Dividends Received Deduction* 100.00%
</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>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); 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 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim 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, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco 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
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, 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); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
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); 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 (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2004 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2004 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (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 public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (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 Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) 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.
AIM V.I. UTILITIES FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
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, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim 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); 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 Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President 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, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1993 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim 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 Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco 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, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, 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, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</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 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
AIM V.I. UTILITIES FUND
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 PRINCIPAL ACCOUNTANT RELATED 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
Billed Applicable Percentage of Fees
to Non-Audit Billed Applicable to
Fees Billed by PWC Services Provided Non-Audit Services
for Services for fiscal year end Fees Billed by PWC Provided for fiscal
Rendered to the 2008 Pursuant to for Services year end 2007
Registrant for Waiver of Rendered to the Pursuant to Waiver
fiscal Pre-Approval Registrant for of Pre-Approval
year end 2008 Requirement(1) fiscal year end 2007 Requirement(1)
------------------ ------------------- -------------------- --------------------
Audit Fees $569,248 N/A $537,483 N/A
Audit-Related Fees(2) $ 5,500 0% $ 20,167 0%
Tax Fees(3) $ 85,297 0% $ 84,855 0%
All Other Fees $ 0 0% $ 0 0%
-------- --------
Total Fees $660,045 0% $642,505 0%
PWC billed the Registrant aggregate non-audit fees of $90,797 for the fiscal
year ended 2008, and $105,022 for the fiscal year ended 2007, 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, 2008 includes
fees billed for completing agreed-upon procedures related to reorganization
transactions. 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, 2008 includes fees billed for
reviewing tax returns and consultation services. Tax fees for fiscal year
end December 31, 2007 includes fees billed for reviewing tax returns and
consultation services.
FEES BILLED BY PRINCIPAL ACCOUNTANT RELATED TO INVESCO AIM AND INVESCO AIM
AFFILIATES
PWC billed Invesco Aim Advisors, Inc. ("Invesco Aim"), the Registrant's
adviser, and any entity controlling, controlled by or under common control with
Invesco Aim that provides ongoing services to the Registrant ("Invesco Aim
Affiliates") aggregate fees for pre-approved non-audit services rendered to
Invesco Aim and Invesco Aim Affiliates as follows:
Fees Billed for Fees Billed for
Non-Audit Services Non-Audit Services
Rendered to Invesco Percentage of Fees Rendered to Invesco Percentage of Fees
Aim and Invesco Aim Billed Applicable to Aim and Invesco Aim Billed Applicable to
Affiliates for Non-Audit Services Affiliates for Non-Audit Services
fiscal year end 2008 Provided for fiscal fiscal year end 2007 Provided for fiscal
That Were Required year end 2008 That Were Required year end 2007
to be Pre-Approved Pursuant to Waiver to be Pre-Approved Pursuant to Waiver of
by the Registrant's of 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, Invesco Aim and Invesco 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 Invesco Aim and Invesco Aim
Affiliates aggregate non-audit fees of $0 for the fiscal year ended 2008,
and $0 for the fiscal year ended 2007, for non-audit services rendered to
Invesco Aim and Invesco Aim Affiliates.
The Audit Committee also has considered whether the provision of non-audit
services that were rendered to Invesco Aim and Invesco 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.
PwC advised the Funds' Audit Committee that PwC had identified two matters that
required further consideration under the SEC's auditor independence rules.
First, PwC was engaged to perform services to an affiliate of INVESCO PLC,
including (a) consulting with respect to the acquisition by the affiliate of
certain assets from a third party; and (b) providing expert testimony in
connection with any arbitration proceeding or litigation arising from or
relating to the transaction. SEC rules provide that an accountant is not
independent if, at any point during the audit and professional engagement
period, the accountant provides expert services unrelated to the audit to an
audit client. Specifically, PwC would not be permitted to provide expert
testimony nor perform other services in support of the client or its counsel in
connection with a proceeding. Within days of being engaged to provide the
services it was determined that some of the services contemplated in the
engagement terms would be inconsistent with the SEC's auditor independence
rules. A review of the services performed pursuant to the original agreement was
conducted. It was concluded that the services performed were not inconsistent
with the SEC's independence rules. Following the review, the initial engagement
terms were modified to limit PwC's services to those permitted under the rules.
Second, an employee of PwC served as a nominee shareholder (effectively
equivalent to a Trustee) of various companies or trusts since 2001. Some of
these companies held shares of INVESCO Nippon Warrants Fund (the "Investment."),
an affiliate of INVESCO PLC formerly known as AMVESCAP PLC (the "Company"). The
investment, which consisted of 2,070 shares, was initially entered into during
July 1, 2001 - December 31, 2005.
PwC informed the Audit Committee that the second matter could have constituted
an investment in an affiliate of an audit client in violation of Rule 2-01(c)(1)
of Regulation S-X. PwC advised the Audit Committee that it believes its
independence had not been adversely affected as it related to the audits of the
Funds. In reaching this conclusion, PwC noted that during the time of its audit,
the engagement team was not aware of the investment, as it relates to the second
matter, and that PwC did not believe either of these situations affected PwC's
ability to act objectively and impartially and to issue a report on financial
statements as the Funds' independent auditor. Based upon PwC's review and
discussion, the audit committee concurred with PwC's conclusions in relation to
its independence.
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 16, 2008, 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 16, 2008, 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: February 26, 2009
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: February 26, 2009
By: /s/ Sheri Morris
------------------------------------
Sheri Morris
Principal Financial Officer
Date: February 26, 2009
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.