ANNUAL REPORT
December 31, 1995
INVESCO
VARIABLE
INVESTMENT
FUNDS,
INC.
VIF - Industrial Income Portfolio
VIF - Total Return Portfolio
VIF - High Yield Portfolio
VIF - Utilities Portfolio
INVESCO FUNDS
<PAGE>
Economic Overview January 1996
1995 will long stand out as a banner year for U.S. investors. The S&P 500
achieved a total return of 37.46% for the 12 months ended 12/31/95, only the
fourth time in fifteen years the broad market returned over 25%. By other
measures, market results were even more exciting: The Dow Jones Industrial
Average broke 5000 for the first time in history, and fixed-income markets
followed suit, with the Lehman Government/Corporate Bond Index gaining 19.24%.1
This spectacular performance was influenced by a number of positive
economic factors. Inflation was low at a mere 2.8%, unemployment was down, and
growth in Gross Domestic Product slowed to apparently sustainable levels. In
addition, the Federal Reserve Board cut short-term interest rates by .25% in
July and again on December 19, and there may well be more cuts in 1996.
By year-end, however, the broad market expansion appeared to be slowing
down, with the S&P growing just 1.94% in December.1 And January brought choppy
financial waters as the broad market whipsawed in the wake of stalled federal
budget negotiations.
Until a budget settlement is reached in Washington, it seems likely that
the financial markets will remain volatile. However, we feel that budget
approval will ultimately restore the stock market to moderate growth levels,
heralding the beginning of a trend for both the U.S. stock and bond markets
throughout 1996.
This year, the markets should get some help from slow, steady economic
growth, but earnings improvements almost certainly won't see the dramatic gains
enjoyed in 1995. In addition, although business investment is expected to be
lower in '96, U.S. companies should continue to enjoy expanded sales overseas.
Therefore, although we may see corrections in some sectors, we expect advances
in securities prices to be in the single-digit range for 1996.
/s/ R. Dalton Sim
- -----------------
R. Dalton Sim
Chairman and President
INVESCO Trust Company
INVESCO Variable Investment Funds, Inc.
The line graphs in each of the following sections illustrate the value of
a $10,000 investment in the individual INVESCO Variable Investment Funds, plus
reinvested dividends and capital gain distributions, for the period from
inception through 12/31/95.2 (Of course, past performance is not a guarantee of
future results.)
The charts and other total return figures cited reflect each portfolio's
operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance.
VIF-Industrial Income Portfolio
Industrial Income Portfolio
Average Annual Total Return
as of 12/31/952
1 year 29.25%
-----------------------------------
Since inception (8/94) 20.89%
-----------------------------------
<PAGE>
For the one year period ended 12/31/95, VIF-Industrial Income Portfolio
returned 29.25%.2 (Of course past performance is not a guarantee of future
results.) As the Fund is a blended portfolio containing approximately 60% stocks
and 40% bonds at year-end, this return is significantly higher than the Lehman
Government/Corporate Bond Index return of 19.24%, and is below the S&P 500
return of 37.46% for the same period.1
The portfolio's combination of stock and bond investments allows the Fund
to pursue its primary mission of providing high current income with the
potential for capital appreciation, yet remain defensive against potential
equity market downturns.
Equities are selected from major companies with average market
capitalizations of $10 to $20 billion dollars. As of 12/31/95 portfolio
allocations were diversified across nine investment sectors, with specific
companies such as General Electric and AT&T Corp chosen for their ability to
benefit from global economic growth, superior competitive positions, and
financially strong balance sheets and management.
The fixed-income segment is managed to pursue a high total return through
a unique "barbell" portfolio structure. Almost half of the bonds are in
AAA-rated government securities, seeking to provide the portfolio with
stability. The remainder is invested primarily in below-investment grade
corporate bonds, generating higher current income with significant opportunities
for capital appreciation. For example, following its acquisition by Time Warner,
Cablevision Industries' rating was increased, enhancing the portfolio's
performance.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO VIF-Industrial Income Portfolio to the value of a
$10,000 investment in the S&P 500 Index and Lehman Government/Corporate
Bond Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (8/94) through
12/31/95.
Fund Managers
VIF-Industrial Income Portfolio is co-managed by two INVESCO Trust Company
senior vice presidents. Industry veteran Charles P. Mayer oversees the equity
portion of the holdings. He began his investment career in 1969, and previously
managed a sizable equity portfolio for Westinghouse Pension Investment
Corporation. Mr. Mayer earned his MBA from St. John's University and BA from St.
Peter's College.
Donovan J. (Jerry) Paul manages the portfolio's fixed-income investments.
He earned his MBA from the University of Northern Iowa, as well as a BBA from
the University of Iowa. A Chartered Financial Analyst, Mr. Paul has more than 20
years of experience in the securities industry. He joined INVESCO in 1994;
previously, he was director of fixed-income research for Stein, Roe & Farnham.
Mr. Paul also manages VIF-High Yield Portfolio.
<PAGE>
VIF-Total Return Portfolio
Total Return Portfolio
Average Annual Total Return
as of 12/31/952
1 year 22.79%
-----------------------------------
Since inception (6/94) 15.10%
-----------------------------------
For the one year period ended 12/31/95, VIF-Total Return Portfolio
returned 22.79%.2 (Of course past performance is not a guarantee of future
results.) As the Fund is a "balanced" portfolio containing both stocks and
bonds, this return is higher than the Lehman Government/Corporate Bond Index
return of 19.24%, and is below the S&P 500 return of 37.46% for the same
period.1
Total Return Portfolio generally holds 30% in stocks and 30% in bonds,
with the remaining 40% allocated according to market conditions. Our strategy
involves gradually adjusting the Fund's holdings according to shifts in the
stock and bond markets. This flexibility allows us to pursue consistent returns
in all market cycles.
VIF-Total Return's asset allocation has favored equities all year long.
This has proven beneficial to our performance, since stocks have clearly
outperformed bonds. The best performing sectors during the fourth quarter were
consumer staples, capital goods, and energy, with top returns realized over the
last quarter from Kimberly-Clark Corp and Eli Lilly Co. Stock selection is based
upon a "bottom-up, value" process that evaluates a company's historical
profitability relative to its current price. General characteristics of the
resulting portfolio of stocks usually include a low price/earnings ratio and a
higher-than-average yield.
The Fund's fixed-income segment invests only in Treasury and investment
grade corporate bonds. Our long maturity bond profile has benefited performance
throughout the year. With low inflation and moderate economic activity, interest
rates have not seen upward pressure. As a result, we continue to emphasize
longer duration investments.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO VIF-Total Return Portfolio to the value of a $10,000
investment in the S&P 500 Index and Lehman Government/Corporate Bond
Index, assuming in each case reinvestment of all dividends and capital
gain distributions, for the period from inception (6/94) through 12/31/95.
Fund Manager
VIF-Total Return Portfolio is managed by Edward C. Mitchell, president of
INVESCO Capital Management, Inc. He earned his MBA at the University of Colorado
and a BA from the University of Virginia. A Chartered Financial Analyst, Mr.
Mitchell began his investment career in 1969.
He is assisted by David S. Griffin, who began his investment career in
1982. Mr. Griffin holds an MBA from the College of William and Mary, as well as
a BA from Ohio Wesleyan University. He is a Chartered Financial Analyst.
<PAGE>
VIF-High Yield Portfolio
VIF-High Yield Portfolio had a total return of 19.76% for the one-year
period ended 12/31/95, tracking with a total return of 19.90% for the Merrill
Lynch High Yield Master Index1 for the same period.2 (Of course, past
performance is not a guarantee of future results.)
The Fund's strong total return during 1995 can be attributed to investing
primarily in below-investment-grade corporate bonds, which have presented
significant potential for both growth and income in recent months.
We focus on a variety of opportunities for appreciation. One has been
cyclical companies with "near-death experiences." Having survived bankruptcy and
appearing to successfully restructure balance sheets and reduce debt, companies
such as USG Corp have seen ratings improvement and subsequent price
appreciation.
Special situations provide another growth prospect. For example, CONVEX
Computer held a CCC rating at year-end, despite its recent acquisition by
AA-rated Hewlett-Packard Co. We anticipate that when the ratings catch up with
the acquisition, appreciation in the price of this security may follow.
High Yield Portfolio
Average Annual Total Return
as of 12/31/952
1 year 19.76%
-----------------------------------
Since inception (5/94) 11.83%
-----------------------------------
In addition to growth potential in the broad fixed-income market, we have
found that conditions within certain sectors present opportunities as well.
Cable television, telecommunications and broadcasting are currently attractive,
due to improving creditworthiness and heightened takeover activity.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO VIF-High Yield Portfolio to the value of a $10,000
investment in the Merrill Lynch High Yield Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the
period from inception (5/94) through 12/31/95.
Fund Manager
Donovan J. (Jerry) Paul manages the VIF-High Yield Portfolio. He earned his
MBA from the University of Northern Iowa, as well as a BBA from the University
of Iowa. A Chartered Financial Analyst, Mr. Paul has more than 20 years of
experience in the securities industry. He joined INVESCO in 1994; previously he
was director of fixed-income research for Stein, Roe & Farnham. Mr. Paul is also
co-manager of VIF-Industrial Income Portfolio.
<PAGE>
VIF-Utilities Portfolio
Utilities Portfolio
Average Annual Total Return
as of 12/31/952
1 year 9.08%
-----------------------------------
Since inception (1/95) 9.08%
-----------------------------------
VIF-Utilities Portfolio had a total return of 9.08% for the one year
period ended 12/31/95, compared to a return of 24.17% by the Dow Jones Utilities
Index for the same period.2 (Of course, past performance is not a guarantee of
future results.)
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO VIF-Utilities Portfolio to the value of a $10,000
investment in the Dow Jones Utilities Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the
period from inception (1/95) through 12/31/95.
Since becoming fully invested during the fourth quarter, however, Utilities
Portfolio has outperformed the Index. For the three month period ended 12/31/95,
we achieved a total return of 7.15%, significantly exceeding the Dow Jones
Utilities Index return of 5.19% for the same period.2 Our heaviest weighting is
in electric utilities to capitalize on the rally in long-term bonds. However,
should interest rates rise, utilities in general and electric utilities in
particular would come under some pressure.
With this in mind, the portfolio includes a broad cross-section of the
various utility sectors. In particular, we are placing an emphasis on growth-
oriented companies such as Southern New England Telecommunications. Over the
long-term, we expect utilities to continue in their traditional role of
providing a hedge against market downturns while distributing above-average
dividends.
Fund Manager
VIF-Utilities Portfolio is managed by INVESCO Vice President Brian F.
Kelly. A Certified Public Accountant, he holds an MBA and JD from the University
of Iowa, as well as a BA from the University of Notre Dame. Before joining
INVESCO in 1993, Mr. Kelly was senior equity investment analyst with Sears
Investment Management Company.
1 THE S&P 500 AND DOW JONES INDUSTRIAL AVERAGE ARE UNMANAGED INDEXES CONSIDERED
REPRESENTATIVE OF THE PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE LEHMAN
GOVERNMENT/CORPORATE BOND INDEX IS AN UNMANAGED INDEX ILLUSTRATING THE BROAD
FIXED-INCOME MARKET. THE MERRILL LYNCH HIGH YIELD MASTER INDEX IS AN UNMANAGED
INDEX ILLUSTRATING THE BELOW-INVESTMENT-GRADE FIXED-INCOME MARKET. THE DOW JONES
UTILITY INDEX IS AN UNMANAGED INDEX REPRESENTING THE BROAD UTILITY STOCK MARKET.
2 TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
FOR THE PERIODS INDICATED. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE
SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN WHEN
PURCHASED.
<PAGE>
INVESCO Variable Investment Funds, Inc.
Statement of Investment Securities
December 31, 1995
<TABLE>
<CAPTION>
Country Shares, Units
Code if or Principal
Description Non US Amount Value
<S> <C> <C>
HIGH YIELD Portfolio
FIXED INCOME SECURITIES 83.91%
Corporate Bonds 83.91%
ADVERTISING 1.91%
Outdoor Systems, Sr Notes,
10.750%, 8/15/2003 $ 100,000 $ 97,000
----------
AEROSPACE & DEFENSE 2.07%
Howmet Corp, Sr Sub Notes^,
10.000%, 12/1/2003 100,000 105,000
----------
AUTOMOBILE RELATED 0.82%
Venture Holdings Trust, Sr Sub
Notes, 9.750%, 4/1/2004 50,000 41,500
----------
BROADCASTING 13.23%
Act III Broadcasting, Sr Sub
Notes, 10.250%, 12/15/2005 100,000 102,125
Allbritton Communications,
Sr Sub Deb, 11.500%, 8/15/2004 100,000 105,125
Argyle Television, Sr Sub Notes,
9.750%, 11/1/2005 100,000 99,000
Benedek Broadcasting, Sr Secured
Notes, 11.875%, 3/1/2005 100,000 106,000
EZ Communications, Sr Sub Notes,
9.750%, 12/1/2005 100,000 100,500
Granite Broadcasting, Sr Sub
Notes, Series A, 10.375%,
5/15/2005 100,000 102,500
Outlet Broadcasting, Sr Sub Notes,
10.875%, 7/15/2003 50,000 55,500
----------
670,750
----------
CABLE TELEVISION 13.51%
Cablevision Industries, Sr Deb,
Series B, 9.250%, 4/1/2008 152,000 164,160
Continental Cablevision, Sr
Notes^, 8.300%, 5/15/2006 100,000 100,000
Diamond Cable Communications PLC,
Sr Discount Step-Up Notes
Zero Coupon^^, 12/15/2005 UK 200,000 118,000
Galaxy Telecom LP/Galaxy Telecom
Capital, Sr Sub Notes 12.375%,
10/1/2005 100,000 99,000
<PAGE>
Marcus Cable LP/Marcus Cable
Capital III, Sr Discount
Step-Up Notes Zero Coupon^^,
12/15/2005 150,000 102,000
Viacom Inc, Sub Deb, 8.000%,
7/7/2006 100,000 102,008
----------
685,168
----------
CHEMICALS 2.83%
NL Industries, Sr Secured Discount
Step-Up Notes Zero Coupon^^, 10/15/2005 50,000 38,375
Rexene Corp, Sr Notes, 11.750%, 12/1/2004 100,000 105,250
----------
143,625
----------
COMPUTER RELATED 2.66%
CONVEX Computer, Conv Sub Deb,
6.000%, 3/1/2012 150,000 134,625
----------
ELECTRONICS 1.74%
Zenith Electronics, Conv Sub Deb,
6.250%, 4/1/2011 125,000 88,125
----------
HEALTH CARE RELATED 2.19%
Tenet Healthcare, Sr Sub Notes,
10.125%, 3/1/2005 100,000 110,750
----------
MANUFACTURING 1.77%
Plastic Specialties & Technologies,
Sr Secured Notes 11.250%, 12/1/2003 100,000 90,000
----------
OFFICE EQUIPMENT 1.92%
Dictaphone Corp, Sr Sub Notes,
11.750%, 8/1/2005 100,000 97,500
----------
OIL & GAS RELATED 4.08%
Gulf Canada Resources Ltd, Sr Sub Deb,
9.250%, 1/15/2004 CA 100,000 103,566
TransTexas Gas, Sr Secured Notes,
11.500%, 6/15/2002 100,000 103,250
----------
206,816
----------
PAPER & PAPER PRODUCTS 8.61%
Crown Paper, Sr Sub Notes, 11.000%,
9/1/2005 100,000 87,500
Gaylord Container, Sr Sub Discount
Step-Up Deb Zero Coupon^^, 5/15/2005 100,000 98,000
Repap New Brunswick, 2nd Priority Sr
Secured Notes 10.625%, 4/15/2005 CA 50,000 48,750
Tembec Finance, Gtd Sr Notes, 9.875%,
9/30/2005 CA 100,000 98,500
<PAGE>
Williamhouse-Regency of Delaware,
Sr Sub Notes^ 13.000%, 11/15/2005 100,000 103,750
----------
436,500
----------
PRINTING & PUBLISHING 1.98%
American Media Operations, Sr Sub Notes,
11.625%, 11/15/2004 100,000 100,500
RECREATION PRODUCTS & SERVICES 7.27%
Aztar Corp, Sr Sub Notes, 13.750%, 10/1/2004 50,000 55,375
Empress River Casino Finance, Gtd Sr Notes,
10.750%, 4/1/2002 100,000 102,000
Grand Casinos, Gtd 1st Mortgage Notes,
10.125%, 12/1/2003 100,000 104,250
Trump Hotels & Casino Resorts Holdings
LP/Trump Hotels & Casino Resorts Funding,
Sr Secured Notes, 15.500%, 6/15/2005 100,000 107,000
----------
368,625
----------
RETAIL 6.51%
Penn Traffic, Sr Notes, 8.625%, 12/15/2003 100,000 88,625
Samsonite Corp, Sr Sub Notes, Series B,
11.125%, 7/15/2005 50,000 49,000
TLC Beatrice International Holdings,
Sr Secured Notes 11.500%, 10/1/2005 100,000 98,750
TPI Enterprises, Gtd Conv Sub Deb, 8.250%,
7/15/2002 100,000 93,500
----------
329,875
----------
TELECOMMUNICATIONS 8.80%
Centennial Cellular, Sr Notes, 8.875%,
11/1/2001 100,000 98,250
Comcast Cellular, Sr Participating
Redeemable Notes, Series B Zero Coupon^^,
3/5/2000 100,000 76,750
IntelCom Group, Sr Discount Step-Up Notes^
Zero Coupon^^, 9/15/2005 100,000 57,250
Mobile Telecommunication Technologies,
Sr Sub Discount Notes 13.500%, 12/15/2002 100,000 111,000
MobileMedia Corp, Sr Sub Notes, 9.375%,
11/1/2007 100,000 103,000
----------
446,250
----------
TRANSPORTATION 2.01%
Stena AB, Sr Notes, 10.500%, 12/15/2005 SW 100,000 102,000
----------
TOTAL FIXED INCOME SECURITIES
(Cost $4,209,981) 4,254,609
----------
<PAGE>
PREFERRED STOCKS 1.11%
ELECTRICAL EQUIPMENT 1.11%
BCP/Essex Holdings, Series B, Jr Sub Deb,
15.000% (Cost $52,580) 2,234 56,397
----------
OTHER SECURITIES 6.11%
CABLE TELEVISION 2.05%
Wireless One, Units (Each unit
consists of one $1,000 face amount Sr Note,
13.000%, 10/15/2003 and 3 wrnts to buy
equal number of shrs of cmn stock) 100 104,000
----------
RECREATION PRODUCTS & SERVICES 0.46%
Casino America, Units (Each unit consists
of one $1,000 face amount 1st Mortgage
Note, 11.500%, 11/15/2001 and 3.263 wrnts
to buy 1.5 shrs of cmn stock) 25 23,375
----------
TELECOMMUNICATIONS 3.60%
American Communications Services, Units^
(Each unit consists of one $1,000 face
amount Sr Discount Step-Up Note, Zero
Coupon^^ 11/1/2005 and 1 wrnt to
buy 12.8 shrs of cmn stock) 100 55,250
Comunicacion Cellular SA, Units^ (Each unit
consists of one $1,000 face amount
Sr Deferred Step-Up, Zero Coupon^^,
11/15/2003 and one wrnt to buy 12,860
shrs of cmn stock) CO 100 56,500
GSTTelecommunications, Units^ (Each unit
consists of eight $1,000 face amount
Sr Discount Step-Up Notes, Zero Coupon^^,
12/15/2005 and one $1,000 face
amount Conv Sr Sub Discount Step-Up Notes
Zero Coupon^^, 12/15/2005) 15 70,500
----------
182,250
----------
TOTAL OTHER SECURITIES
(Cost $302,398) 309,625
----------
SHORT-TERM INVESTMENTS
- US GOVERNMENT AGENCY OBLIGATIONS 8.87%
Federal Farm Credit Bank, 5.670%, 1/2/1996 350,000 349,945
Federal Home Loan Mortgage, 5.580%, 1/4/1996 100,000 99,953
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $449,898) 449,898
----------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $5,014,857#) $ 5,070,529
==========
<PAGE>
INDUSTRIAL INCOME Portfolio
COMMON STOCKS 61.30%
AEROSPACE & DEFENSE 1.80%
Boeing Co 1,000 78,375
Lockheed Martin 900 71,100
----------
149,475
----------
AUTOMOBILE RELATED 1.12%
Chrysler Corp 1,000 55,375
Eaton Corp 700 37,537
----------
92,912
----------
BANKING 3.91%
BankAmerica Corp 1,000 64,750
Chase Manhattan 1,400 84,875
Citicorp 500 33,625
First Chicago NBD 1,267 50,047
Mellon Bank 1,700 91,375
----------
324,672
----------
BUILDING & CONSTRUCTION PRODUCTS 0.76%
Masco Corp 2,000 62,750
----------
CABLE TELEVISION 0.44%
Comcast Corp Special Class A 2,000 36,375
----------
CHEMICALS 6.97%
Agrium Inc 5,000 225,000
ARCO Chemical 2,000 97,250
Lawter International 5,000 58,125
Olin Corp 1,000 74,250
Vigoro Corp 2,000 123,500
----------
578,125
----------
COMPUTER RELATED 1.71%
Hewlett-Packard Co 600 50,250
International Business Machines 1,000 91,750
----------
142,000
----------
DIVERSIFIED COMPANIES 3.11%
AlliedSignal Inc 1,000 47,500
General Electric 1,000 72,000
Kansas City Southern Industries 1,500 68,625
Whitman Corp 3,000 69,750
----------
257,875
----------
<PAGE>
ELECTRICAL EQUIPMENT 0.88%
Honeywell Inc 1,500 72,937
----------
ELECTRONICS 1.35%
Intel Corp 600 34,050
Nokia Corp Sponsored ADR Representing
Ord A Shrs 2,000 77,750
----------
111,800
----------
ENGINEERING 1.02%
Foster Wheeler 2,000 85,000
----------
FINANCE RELATED 4.32%
Allmerica Financial* 8,000 216,000
American Express 1,000 41,375
Block (H & R) Inc 2,500 101,250
----------
358,625
----------
FOOD PRODUCTS & BEVERAGES 3.01%
CPC International 700 48,037
General Mills 1,000 57,750
Heinz (H J) Co 1,725 57,141
Quaker Oats 1,000 34,500
Seagram Co Ltd 1,500 51,937
----------
249,365
----------
HOTELS 0.74%
Hilton Hotels 1,000 61,500
----------
INSURANCE 2.24%
Allmerica Property & Casualty 4,000 108,000
Ohio Casualty 2,000 77,500
----------
185,500
----------
MEDICAL EQUIPMENT & SUPPLIES 0.90%
Becton Dickinson 1,000 75,000
----------
MEDICAL RELATED - DRUGS 1.75%
American Home Products 800 77,600
Pharmacia & Upjohn* 1,740 67,425
----------
145,025
----------
MINING 0.93%
ASARCO Inc 1,000 32,000
Newmont Mining 1,000 45,250
----------
77,250
----------
<PAGE>
OIL & GAS RELATED 7.20%
Amoco Corp 500 35,938
Atlantic Richfield 500 55,375
Dresser Industries 4,000 97,500
Exxon Corp 600 48,075
Halliburton Co 1,000 50,625
Mobil Corp 600 67,200
Schlumberger Ltd 500 34,625
Sonat Inc 3,000 106,875
Union Pacific Resources Group 4,000 101,500
----------
597,713
----------
PAPER & PAPER PRODUCTS 0.51%
Champion International 1,000 42,000
----------
PHOTO EQUIPMENT 0.57%
Eastman Kodak 700 46,900
----------
PRINTING & PUBLISHING 0.91%
Donnelley (R R) & Sons 1,000 39,375
Time Warner 950 35,981
----------
75,356
----------
REAL ESTATE RELATED 1.55%
Patriot American Hospitality* 5,000 128,750
----------
RECREATION PRODUCTS & SERVICES 0.71%
Disney (Walt) Co 1,000 59,000
----------
RETAIL 1.85%
Jostens Inc 2,000 48,500
Limited Inc 3,000 52,125
Melville Corp 1,200 36,900
Sears Roebuck & Co 400 15,600
----------
153,125
----------
TELECOMMUNICATIONS 1.56%
AT&T Corp 2,000 129,500
----------
TOBACCO 0.65%
Philip Morris 600 54,300
----------
TRANSPORTATION 4.84%
Canadian National Railway Represented by
Installment Receipts* 19,300 289,500
Illinois Central Series A 2,000 76,750
KLM Royal Dutch Airlines New York
Registered Shrs 1,000 35,250
----------
401,500
----------
<PAGE>
UTILITIES 3.99%
Bell Atlantic 1,000 66,875
GTE Corp 1,000 44,000
Rochester Gas & Electric 1,500 33,938
U S WEST Communications Group 3,400 121,550
U S WEST Media Group* 3,400 64,600
----------
330,963
----------
TOTAL COMMON STOCKS
(Cost $4,467,785) 5,085,293
----------
PREFERRED STOCKS 0.66%
MINING 0.66%
Amax Gold, $3.75, Conv Pfd, Series B
(Cost $48,795) 1,000 54,500
----------
FIXED INCOME SECURITIES 26.24%
US Government Obligations 10.10%
US Treasury Bonds, 7.625%, 2/15/2025 250,000 305,469
US Treasury Notes, 6.500%, 5/15/2005+ 500,000 532,813
----------
TOTAL US GOVERNMENT OBLIGATIONS
(Cost $819,015) 838,282
----------
US Government Agency Obligations 2.96%
Federal Home Loan Mortgage Gold
Participation Certificates 6.500%,
11/1/2010 (Cost $241,782) 244,224 245,594
----------
Corporate Bonds 13.18%
BROADCASTING 0.67%
Outlet Broadcasting, Sr Sub Notes,
10.875%, 7/15/2003 50,000 55,500
----------
CABLE TELEVISION 3.24%
Cablevision Industries, Sr Deb, Series B,
9.250%, 4/1/2008 100,000 108,000
Diamond Cable Communications PLC,
Sr Discount Step-Up Notes Zero Coupon^^,
12/15/2005 100,000 59,000
Viacom Inc, Sub Deb, 8.000%, 7/7/2006 100,000 102,008
----------
269,008
----------
CHEMICALS 0.63%
Rexene Corp, Sr Notes, 11.750%, 12/1/2004 50,000 52,625
----------
FOOD PRODUCTS & BEVERAGES 1.13%
Dr Pepper/Seven-Up Cos, Sr Sub Discount
Step-Up Notes Zero Coupon^^, 11/1/2002 100,000 93,750
----------
<PAGE>
HEALTH CARE RELATED 0.64%
Tenet Healthcare, Sr Notes, 8.625%,
12/1/2003 50,000 52,750
----------
PRINTING & PUBLISHING 1.71%
News America Holdings
Deb, 8.500%, 2/23/2025 25,000 28,935
Sr Notes, 8.500%, 2/15/2005 100,000 112,693
----------
141,628
----------
RECREATION PRODUCTS & SERVICES 0.64%
United Artists Theatre Circuit, Sr
Secured Notes, Series B^ 11.500%,
5/1/2002 50,000 53,250
----------
RETAIL 1.30%
Revco (D S) Inc, Sr Notes, 9.125%, 1/15/2000 100,000 108,000
----------
TELECOMMUNICATIONS 1.21%
Lenfest Communications, Sr Secured Notes,
8.375%, 11/1/2005 100,000 100,000
----------
TRANSPORTATION 0.62%
Overseas Shipholding Group, Notes,
8.000%, 12/1/2003 50,000 51,586
----------
UTILITIES 1.39%
Commonwealth Edison 1st Mortgage,
8.375%, 10/15/2006 100,000 114,859
----------
TOTAL CORPORATE BONDS
(Cost $1,075,013) 1,092,956
----------
TOTAL FIXED INCOME SECURITIES
(Cost $2,135,810) 2,176,832
----------
SHORT-TERM INVESTMENTS -
US GOVERNMENT AGENCY OBLIGATIONS 11.80%
Federal Farm Credit Bank, 5.650%, 1/8/1996 130,000 129,898
Federal Home Loan Bank, 5.550%, 1/2/1996 300,000 299,723
Federal Home Loan Mortgage
5.600%, 1/8/1996 100,000 99,922
5.580%, 1/4/1996 450,000 449,930
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $979,473) 979,473
----------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $7,631,863#) $ 8,296,098
==========
<PAGE>
TOTAL RETURN Portfolio
COMMON STOCKS 65.00%
AEROSPACE & DEFENSE 3.24%
Boeing Co 900 70,537
Lockheed Martin 900 71,100
Raytheon Co 1,600 75,600
----------
217,237
----------
AGRICULTURAL 1.10%
Archer-Daniels-Midland Co 4,100 73,800
----------
AUTOMOBILE RELATED 1.08%
Ford Motor 2,500 72,500
----------
BANKING 6.16%
Comerica Inc 1,900 76,237
First Chicago NBD 1,700 67,150
First of America Bank 1,600 71,000
First Union 1,200 66,750
State Street Boston 1,500 67,500
Wachovia Corp 1,400 64,050
----------
412,687
----------
BUILDING & CONSTRUCTION PRODUCTS 1.09%
Sherwin-Williams Co 1,800 73,350
----------
CHEMICALS 1.82%
AKZO NV ADR 1,300 75,400
Imperial Chemical Industries PLC ADR 1,000 46,750
----------
122,150
----------
COMPUTER RELATED 2.33%
Compaq Computer* 1,500 72,000
Hewlett-Packard Co 1,000 83,750
----------
155,750
----------
DIVERSIFIED COMPANIES 5.26%
du Pont (E I) de Nemours 1,000 69,875
General Electric 1,000 72,000
Hanson PLC Sponsored ADR 4,600 70,150
Minnesota Mining & Manufacturing 1,100 72,875
Textron Inc 1,000 67,500
----------
352,400
----------
FINANCE RELATED 0.97%
Dun & Bradstreet 1,000 64,750
----------
<PAGE>
FOOD PRODUCTS & BEVERAGES 7.43%
Anheuser-Busch Cos 1,300 86,937
General Mills 1,400 80,850
Heinz (H J) Co 2,350 77,844
Kellogg Co 900 69,525
PepsiCo Inc 1,500 83,812
Unilever NV New York Shrs 700 98,525
----------
497,493
----------
HOUSEHOLD APPLIANCES 1.19%
Whirlpool Corp 1,500 79,875
----------
INSURANCE 1.96%
Marsh & McLennan 700 62,125
SAFECO Corp 2,000 69,000
----------
131,125
----------
INVESTMENT BROKERS 1.08%
Morgan Stanley Group 900 72,563
----------
MEDICAL RELATED - DRUGS 3.45%
American Home Products 800 77,600
Bristol-Myers Squibb 1,000 85,875
Lilly (Eli) & Co 1,200 67,500
----------
230,975
----------
OFFICE SUPPLIES 1.00%
Deluxe Corp 2,300 66,700
----------
OIL & GAS RELATED 4.56%
Amoco Corp 1,300 93,437
Exxon Corp 900 72,112
Repsol SA Sponsored ADR 2,100 69,038
Royal Dutch Petroleum 5 Gldr Shrs 500 70,563
----------
305,150
----------
PAPER & PAPER PRODUCTS 0.99%
Kimberly-Clark Corp 800 66,200
----------
POLLUTION CONTROL SERVICES 0.98%
WMX Technologies 2,200 65,725
----------
PRINTING & PUBLISHING 0.92%
Gannett Co 1,000 61,375
----------
RETAIL 5.71%
Circuit City Stores 2,500 69,062
Genuine Parts 1,600 65,600
Giant Food Class A 2,200 69,300
K mart Corp 6,500 47,125
<PAGE>
Melville Corp 2,100 64,575
Penney (J C) Co 1,400 66,675
----------
382,337
----------
TEXTILES & APPAREL MANUFACTURERS 1.73%
Liz Claiborne 2,000 55,500
Shaw Industries 4,100 60,475
----------
115,975
----------
TOBACCO 2.45%
American Brands 1,600 71,400
Philip Morris 1,000 90,500
Schweitzer-Mauduit International* 80 1,850
----------
163,750
----------
TRANSPORTATION 1.98%
Illinois Central Series A 1,800 69,075
Roadway Services 1,300 63,538
----------
132,613
----------
UTILITIES 6.52%
CINergy Corp 2,300 70,437
NYNEX Corp 1,300 70,200
SCEcorp 4,000 71,000
Telefonica de Espana SA Sponsored ADR 1,700 71,188
Telefonos de Mexico SA de CV Sponsored
ADR Representing Ord Series L Shrs 2,500 79,688
Texas Utilities 1,800 74,025
----------
436,538
----------
TOTAL COMMON STOCKS
(Cost $3,956,474) 4,353,018
----------
FIXED INCOME SECURITIES 25.88%
US Government Obligations 25.88%
US Treasury Bonds
9.375%, 2/15/2006 250,000 321,640
9.250%, 2/15/2016 150,000 206,297
8.125%, 8/15/2019 100,000 125,750
7.250%, 8/15/2022 225,000 260,508
US Treasury Notes
8.000%, 1/15/1997 150,000 154,078
7.250%, 8/15/2004 200,000 222,437
6.375%, 7/15/1999 225,000 232,523
6.375%, 8/15/2002 200,000 210,125
----------
TOTAL FIXED INCOME SECURITIES
(Cost $1,601,362) 1,733,358
----------
<PAGE>
SHORT-TERM INVESTMENTS 9.12%
Commercial Paper 6.88%
FINANCE RELATED 6.88%
Progress Capital Holdings, 5.620%,
1/30/1996 (Cost $460,904) 463,000 460,904
----------
Repurchase Agreements 2.24%
Repurchase Agreement with State Street
Bank & Trust Co dated 12/29/1995
due 1/2/1996 at 5.000%, repurchased at
$150,083 (Collateralized by US Treasury
Bonds due 5/15/2016 at 7.250%,
value $154,646) (Cost $150,000) 150,000 150,000
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $610,904) 610,904
----------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $6,168,740#) $ 6,697,280
==========
UTILITIES Portfolio
COMMON STOCKS 91.87%
ELECTRICAL EQUIPMENT 2.53%
TII Industries* 700 6,213
----------
ELECTRONICS 1.58%
Nokia Corp Sponsored ADR Representing
Ord A Shrs 100 3,887
----------
OIL & GAS RELATED 23.60%
Essex County Gas 450 11,587
Key Production* 800 4,400
Louis Dreyfus Natural Gas* 550 8,319
Panaco Inc* 1,400 6,213
Petro-Canada Represented by Installment
Receipts* 1,900 10,925
Sonat Inc 250 8,906
Union Pacific Resources Group 300 7,612
----------
57,962
----------
TELECOMMUNICATIONS 6.86%
Frontier Corp 350 10,500
Lincoln Telecommunications 300 6,338
----------
16,838
----------
Utilities 57.30%
ELECTRIC 25.72%
Central Louisiana Electric 100 2,687
CILCORP Inc 100 4,238
Commonwealth Energy Systems SBI 150 6,713
Empire District Electric 300 5,362
<PAGE>
Florida Public Utilities 200 3,775
IES Industries 300 7,950
Interstate Power 100 3,325
MidAmerican Energy 200 3,350
Montana Power 100 2,263
Nevada Power 200 4,450
Northwestern Public Service 300 8,400
Orange & Rockland Utilities 100 3,575
Public Service of Colorado 100 3,538
Public Service of New Mexico* 200 3,525
----------
63,151
----------
GAS 10.13%
Chesapeake Utilities 550 8,044
Columbia Gas System* 100 4,387
Connecticut Energy 200 4,450
ONEOK Inc 350 8,006
----------
24,887
----------
TELEPHONE 21.45%
ALLTEL Corp 200 5,900
Ameritech Corp 100 5,900
BellSouth Corp 100 4,350
Century Telephone Enterprises 200 6,350
Cincinnati Bell 100 3,475
GTE Corp 100 4,400
NYNEX Corp 100 5,400
Southern New England Telecommunications 200 7,950
U S WEST Communications Group 250 8,937
----------
52,662
----------
TOTAL UTILITIES 140,700
----------
TOTAL COMMON STOCKS
(Cost $211,125) 225,600
----------
SHORT-TERM INVESTMENTS -
US GOVERNMENT AGENCY OBLIGATIONS 8.13%
Federal National Mortgage Association,
5.600%, 1/10/1996+ (Cost $19,972) 20,000 19,972
----------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $231,097#) $ 245,572
==========
<FN>
^^ Step up bonds are obligations which increase the interest payment rate
at a specific point in time. Rate shown reflects current rate which may step
up at a future date.
# Also represents cost for income tax purposes.
* Security is non-income producing.
+ Security has been designated as collateral for installment receipts.
^ The following are restricted securities at December 31, 1995:
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Value as
Acquisition Acquisition % of
Description Date(s) Cost Net Assets
- ---------------------------------------------------------------------------------------------
High Yield Portfolio
<S> <C> <C>
American Communications Services,
Units 11/9/95 $ 53,515 1.06%
Comunicacion Cellular SA, Units 11/17/95 53,204 1.08
Continental Cablevision, Sr Notes
8.300%, 5/15/2006 12/8/95 99,679 1.91
GST Telecommunications, Units 12/14/95 62,554 1.35
Howmet Corp, Sr Sub Notes
10.000%, 12/1/2003 11/22/95 100,000 2.01
IntelCom Group, Sr Discount Step-Up
Notes Zero Coupon, 9/15/2005 8/3/95 51,344 1.09
Williamhouse-Regency of Delaware,
Sr Sub Notes, 13.000%, 11/15/2005 11/17/95 100,000 1.98
----------
10.48%
==========
Industrial Income Portfolio
United Artists Theatre Circuit,
Sr Secured Notes 10/19/94-
Series B, 11.500%, 5/1/2002 5/11/95 54,213 0.64%
==========
</TABLE>
Summary of Investments by Country
<TABLE>
<CAPTION>
% of
Country Investment
Country Code Securities Value
- ---------------------------------------------------------------------------------------------
High Yield Portfolio
<S> <C> <C>
Canada CA 4.95% $250,816
Columbia CO 1.11 56,500
Switzerland SW 2.01 102,000
United Kingdom UK 2.33 118,000
United States US 89.60 4,543,213
---------------------------
100.00% $5,070,529
===========================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Variable Investment Funds, Inc.
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
High Industrial Total
Yield Income Return Utilities
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Investment Securities:
At Cost $5,014,857 $7,631,863 $6,168,740 $231,097
==================================================================
At Value $5,070,529 $8,296,098 $6,697,280 $245,572
Cash 40,188 149,293 4,462 86,807
Receivables:
Investment Securities Sold 1,567 0 0 0
Fund Shares Sold 41,193 22,500 240,431 0
Dividends and Interest 85,235 45,532 54,649 695
Organization Costs 11,046 11,046 11,046 11,046
Prepaid Expenses and Other Assets 503 472 414 72
------------------------------------------------------------------
TOTAL ASSETS 5,250,261 8,524,941 7,008,282 344,192
------------------------------------------------------------------
LIABILITIES
Payables:
Investment Securities Purchased 0 93,500 438,089 37,571
Fund Shares Repurchased 20 51,954 0 0
Accrued Expenses and Other Payables 17,194 17,189 17,196 16,829
------------------------------------------------------------------
TOTAL LIABILITIES 17,214 162,643 455,285 54,400
------------------------------------------------------------------
Net Assets at Value $5,233,047 $8,362,298 $6,552,997 $289,792
==================================================================
NET ASSETS
Paid-in Capital* $5,177,436 $7,698,263 $ 6,020,008 $275,375
Accumulated Undistributed (Overdistributed)
Net Investment Income (143) (200) 4,449 117
Accumulated Undistributed Net Realized
Gain (Loss) on Investment Securities and
Foreign Currency Transactions 82 0 0 (175)
Net Appreciation of Investment Securities
and Foreign Currency Transactions 55,672 664,235 528,540 14,475
------------------------------------------------------------------
Net Assets at Value $5,233,047 $8,362,298 $ 6,552,997 $289,792
==================================================================
Shares Outstanding 473,935 664,722 539,662 26,744
Net Asset Value, Offering and Redemption
Price per Share $ 11.04 $ 12.58 $ 12.14 $ 10.84
==================================================================
<FN>
* The Fund has 500 million authorized shares of common stock, par value of $0.01
per share. Of such shares, 100 million have been allocated to each individual
Portfolio.
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Variable Investment Funds, Inc.
Statement of Operations
Year Ended December 31, 1995
<TABLE>
<CAPTION>
High Industrial Total
Yield Income Return Utilities
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $469 $61,377 $52,476 $1,547
Interest 259,999 97,682 106,486 1,046
Foreign Taxes Withheld 0 (225) (1,031) 0
------------------------------------------------------------------
TOTAL INCOME 260,468 158,834 157,931 2,593
------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 16,298 27,073 24,649 467
Transfer Agent Fees 5,000 5,000 5,000 5,000
Administrative Fees 10,407 10,541 10,493 10,011
Custodian Fees and Expenses 4,670 5,615 6,076 734
Directors' Fees and Expenses 7,597 7,610 7,608 7,502
Organization Expenses 3,682 3,682 3,682 3,682
Professional Fees and Expenses 17,451 18,537 17,952 14,890
Registration Fees and Expenses 268 240 385 106
Reports to Shareholders 3,565 2,395 4,704 1,194
Other Expenses 4,740 2,559 2,033 951
------------------------------------------------------------------
TOTAL EXPENSES 73,678 83,252 82,582 44,537
Fees and Expenses Absorbed
by Investment Adviser (47,278) (46,031) (49,223) (43,134)
Fees and Expenses Paid Indirectly (4,670) (4,733) (3,780) (734)
------------------------------------------------------------------
NET EXPENSES 21,730 32,488 29,579 669
------------------------------------------------------------------
NET INVESTMENT INCOME 238,738 126,346 128,352 1,924
------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency Transactions 171,439 170,187 2,985 (175)
Change in Net Appreciation on Investment
Securities and Foreign Currency Transactions 55,093 660,022 529,556 14,475
------------------------------------------------------------------
NET GAIN ON INVESTMENT SECURITIES 226,532 830,209 532,541 14,300
------------------------------------------------------------------
Net Increase in Net Assets from Operations $465,270 $956,555 $660,893 $16,224
==================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Variable Investment Funds, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
High Yield Industrial Income
Portfolio Portfolio
Year Ended Period Ended Year Ended Period Ended
December 31 December 31 December 31 December 31
------------------------------ ------------------------------
1995 1994 1995 1994
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $238,738 $3,332 $126,346 $1,915
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 171,439 82 170,187 0
Change in Net Appreciation on Investment
Securities and Foreign Currency Transactions 55,093 579 660,022 4,213
------------------------------ ------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS 465,270 3,993 956,555 6,128
------------------------------ ------------------------------
DISTRIBUTIONS
TO SHAREHOLDERS
Net Investment Income (239,112) (3,101) (126,762) (1,707)
Net Realized Gain on Investment Securities (171,439) 0 (170,179) 0
------------------------------ ------------------------------
TOTAL DISTRIBUTIONS (410,551) (3,101) (296,941) (1,707)
------------------------------ ------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 7,336,473 653,782 8,978,068 554,351
Reinvestment of Distributions 410,551 3,101 296,941 1,707
------------------------------ ------------------------------
7,747,024 656,883 9,275,009 556,058
Amounts Paid for Repurchases of Shares (3,192,335) (59,136) (2,096,909) (60,895)
------------------------------ ------------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 4,554,689 597,747 7,178,100 495,163
------------------------------ ------------------------------
Total Increase in Net Assets 4,609,408 598,639 7,837,714 499,584
NET ASSETS
Initial Subscription (Note 1) 0 25,000 0 25,000
Beginning of Period 623,639 0 524,584 0
------------------------------ ------------------------------
End of Period $5,233,047 $623,639 $8,362,298 $524,584
============================== ==============================
Accumulated Undistributed (Overdistributed)
Net Investment Income Included
in Net Assets at End of Period $(143) $231 $(200) $208
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 0 2,500 0 2,500
Shares Sold 657,306 65,433 764,485 55,410
Shares Issued from Reinvestment
of Distributions 37,188 310 23,604 169
------------------------------ ------------------------------
694,494 68,243 788,089 58,079
Shares Repurchased (282,878) (5,924) (175,375) (6,071)
------------------------------ ------------------------------
Net Increase in Fund Shares 411,616 62,319 612,714 52,008
------------------------------ ------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Variable Investment Funds, Inc.
Statement of Changes in Net Assets (Continued)
<TABLE>
<CAPTION>
Total Return Utilities
Portfolio Portfolio
Year Ended Period Ended Year Ended Period Ended
December 31 December 31 December 31 December 31
------------------------------ ------------------------------
1995 1994 1995 1994
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $128,352 $9,035 $1,924 $0
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency Transactions 2,985 0 (175) 0
Change in Net Appreciation
(Depreciation) of Investment Securities
and Foreign Currency Transactions 529,556 (1,016) 14,475 0
------------------------------ ------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS 660,893 8,019 16,224 0
------------------------------ ------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (124,147) (8,791) (1,807) 0
Net Realized Gain on Investment Securities (2,985) 0 0 0
------------------------------ ------------------------------
TOTAL DISTRIBUTIONS (127,132) (8,791) (1,807) 0
------------------------------ ------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 7,764,103 1,138,563 282,916 0
Reinvestment of Distributions 127,132 8,791 1,807 0
------------------------------ ------------------------------
7,891,235 1,147,354 284,723 0
Amounts Paid for Repurchases of Shares (2,926,643) (116,938) (34,348) 0
------------------------------ ------------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 4,964,592 1,030,416 250,375 0
------------------------------ ------------------------------
Total Increase in Net Assets 5,498,353 1,029,644 264,792 0
NET ASSETS
Initial Subscription (Note 1) 0 25,000 0 25,000
Beginning of Period 1,054,644 0 25,000 0
------------------------------ ------------------------------
End of Period $6,552,997 $1,054,644 $289,792 $25,000
============================== ==============================
Accumulated Undistributed Net
Investment Income Included in
Net Assets at End of Period $4,449 $244 $117 $0
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 0 2,500 0 2,500
Shares Sold 684,722 112,706 27,466 0
Shares Issued from Reinvestment
of Distributions 10,470 871 167 0
------------------------------ ------------------------------
695,192 116,077 27,633 2,500
Shares Repurchased (260,017) (11,590) (3,389) 0
------------------------------ ------------------------------
Net Increase in Fund Shares 435,175 104,487 24,244 2,500
============================== ==============================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Variable Investment Funds, Inc.
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. (the "Fund"), a Maryland Corporation, was incorporated on
August 19, 1993, and consists of four separate portfolios: High Yield Portfolio,
Industrial Income Portfolio, Total Return Portfolio and Utilities Portfolio (the
"Portfolios"). The investment objectives of the respective Portfolios are: to
seek the best possible current income for the Industrial Income Portfolio; to
seek a high total return on investment through capital appreciation and current
income for the Total Return Portfolio; to seek a high level of current income by
investing principally in lower rated bonds and other debt securities and in
preferred stock for the High Yield Portfolio; and to seek capital appreciation
and income on securities of companies principally engaged in public utilities
for the Utilities Portfolio. The Fund is registered under the Investment Company
Act of 1940 (the "Act") as a diversified, open-end management investment
company. On December 16, 1993, the Fund issued and sold 2,500 shares of each
Portfolio at $10.00 per share to INVESCO Funds Group, Inc. ("IFG"). Investment
operations of the High Yield Portfolio commenced on May 27, 1994, the Industrial
Income Portfolio on August 10, 1994, the Total Return Portfolio on June 2, 1994
and the Utilities Portfolio on January 1, 1995. The Fund's shares are not
offered directly to the public but are sold exclusively to life insurance
companies ("Participating Insurance Companies") as a pooled funding vehicle for
variable annuity and variable life insurance contracts issued by separate
accounts of the Participating Insurance Companies.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION - Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales
price in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest
closing bid price obtained from one or more dealers making a market for
such securities or by a pricing service approved by the Fund's board of
directors.
Debt securities are valued at evaluated bid prices as determined by
a pricing service approved by the Fund's board of directors. If evaluated
bid prices are not available, debt securities are valued by averaging the
bid prices obtained from dealers making a market for such securities.
Foreign securities are valued at the closing price on the principal
stock exchange on which they are traded. In the event that closing prices
are not available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to
the close of the New York Stock Exchange.
<PAGE>
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
by the Fund's board of directors. Restricted securities are valued in
accordance with procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which
approximates market value) if maturity is 60 days or less at the time of
purchase, or market value if maturity is greater than 60 days.
B. REPURCHASE AGREEMENTS - Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to
ensure its market value exceeds the current market value of the repurchase
agreements including accrued interest.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are accounted for on the trade date and dividend income is
recorded on the ex dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the
dividend if such information is obtained subsequent to the ex dividend
date. Interest income, which may be comprised of stated coupon rate,
market discount and original issue discount, is recorded on the accrual
basis. Discounts on debt securities purchased are amortized over the life
of the respective security as adjustments to interest income. Cost is
determined on the specific identification basis.
The Fund may have elements of risk due to concentrated investments
in foreign issuers located in a specific country. Such concentrations may
subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and
unrealized gain or loss from investments includes fluctuations from
currency exchange rates and fluctuations in market value..
The High Yield Portfolio invests primarily in high yield bonds, some
of which may be rated below investment grade. These high yield bonds may
be more susceptible than higher grade bonds to real or perceived adverse
economic or industry conditions. The secondary market, on which high yield
bonds are traded, may also be less liquid than the market for higher grade
bonds.
Restricted securities held by the Fund may not be sold except in
exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of the Fund to sell a security at
a fair price and may substantially delay the sale of the security which
the Fund seeks to sell. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets exist.
Investments in securities of governmental agencies may only be
guaranteed by the respective agency's limited authority to borrow from the
U.S. Government and may not be guaranteed by the full faith and credit of
the United States.
D. FEDERAL AND STATE TAXES - The Fund has complied and continues to comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make
sufficient distributions of net investment income and net realized capital
gains, if any, to relieve it from all federal and state income taxes and
federal excise taxes. At December 31, 1995, the Utilities Portfolio had
$175 in net capital loss carryovers which expire in the year 2003.
Therefore, no federal income tax provision is required.
<PAGE>
Dividends paid by the Fund from net investment income and
distributions of net realized short-term capital gains are, for federal
income tax purposes, taxable as ordinary income to shareholders. Of the
ordinary income distributions declared for the year ended December 31,
1995, amounts qualifying for the dividends received deduction available to
the Fund's corporate shareholders were as follows:
Qualifying
Portfolio Percentages
-------------------------------------------------
High Yield Portfolio 0.11%
Industrial Income Portfolio 20.12%
Total Return Portfolio 33.22%
Utilities Portfolio 78.90%
Investment income received from foreign sources may be subject to
foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions
to shareholders are recorded by the Fund on the ex dividend/distribution
date. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for mortgage-backed securities, market discounts,
foreign currency transactions, nontaxable dividends, net operating losses
and expired capital loss carryforwards. As of December 31, 1995, there
were no such differences.
F. ORGANIZATION COSTS - Organization costs of $73,640 advanced by IFG are
amortized and are payable on a straight-line basis over a sixty-month
period from the date the Fund commenced operations. IFG has agreed that if
it redeems any of its initially acquired shares of the Fund during the
five years from the date the Fund commenced operations, the proceeds
payable to it in respect of such shares will be reduced by a pro rata
share of the Fund's unamortized organization costs.
G. EXPENSES - Each of the Portfolios bears expenses incurred specifically on
its behalf and, in addition, each Portfolio bears a portion of general
expenses, based on the relative net assets of each Portfolio.
Under an agreement between each Portfolio and the Fund's Custodian,
agreed upon Custodian Fees and Expenses are reduced by credits granted by
the Custodian from any temporarily uninvested cash. Such credits are
included in Fees and Expenses Paid Indirectly in the Statement of
Operations.
NOTE 2 - INVESTMENT ADVISORY AND OTHER AGREEMENTS. IFG serves as the Fund's
investment adviser. As compensation for its services to the Fund, IFG receives
an investment advisory fee which is accrued daily at the applicable rate and
paid monthly. The fee is based on the annual rate of each Portfolio's average
net assets as follows:
<PAGE>
AVERAGE NET ASSETS
-----------------------------------
$0 to $500 Million Over
$500 to $1 $1
Portfolio Million Billion Billion
- --------------------------------------------------------------------------------
High Yield Portfolio 0.60% 0.55% 0.45%
Industrial Income Portfolio 0.75% 0.65% 0.55%
Total Return Portfolio 0.75% 0.65% 0.55%
Utilities Portfolio 0.60% 0.55% 0.45%
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of the
High Yield, Industrial Income and Utilities Portfolios are made by ITC. A
separate Sub-Advisory Agreement between IFG and INVESCO Capital Management, Inc.
("ICM"), an affiliate of IFG, provides that investment decisions of the Total
Return Portfolio are made by ICM. Fees for such sub-advisory services are paid
by IFG.
In accordance with an Administrative Agreement, each Portfolio pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee of $5,000 per Portfolio per year. The fee
is paid monthly at one-twelfth of the annual fee.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by each Portfolio.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1995, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were as follows:
Portfolio Purchases Sales
- ---------------------------------------------------------------------------
High Yield Portfolio $11,507,443 $7,511,919
Industrial Income Portfolio 7,707,366 2,679,944
Total Return Portfolio 3,625,772 715
Utilities Portfolio 220,739 9,439
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were as follows:
Portfolio Purchases Sales
- ---------------------------------------------------------------------------
Industrial Income Portfolio $1,364,472 $368,112
Total Return Portfolio 1,370,992 128,418
<PAGE>
NOTE 4 - APPRECIATION AND DEPRECIATION. At December 31, 1995, the gross
appreciation of securities in which there was an excess of value over tax cost,
the gross depreciation of securities in which there was an excess of tax cost
over value and the resulting net appreciation by Portfolio were as follows:
Gross Gross Net
Portfolio Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------
High Yield Portfolio $95,696 $40,024 $55,672
Industrial Income Portfolio 726,130 61,895 664,235
Total Return Portfolio 571,016 42,476 528,540
Utilities Portfolio 15,150 675 14,475
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG, ITC or ICM. At December 31,
1995, 9.41% of outstanding shares of Utilities Portfolio was held by IFG.
The Fund has adopted an unfunded noncontributory defined benefit pension plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 25% of the retainer fee at
the time of retirement.
Pension expenses for the year ended December 31, 1995, included in Directors'
Fees and Expenses in the Statement of Operations, and unfunded accrued pension
costs and pension liability included in Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were as follows:
Unfunded
Pension Accrued Pension
Portfolio Expenses Pension Costs Liability
- ------------------------------------------------------------------------------
High Yield Portfolio $7 $(31) $(24)
Industrial Income Portfolio 9 (38) (29)
Total Return Portfolio 9 (38) (29)
Utilities Portfolio 0 (1) (1)
NOTE 6 - LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to redeem investor shares. The LOC permits borrowings to a
maximum of 10% of the Net Assets at Value of each respective Portfolio. Each
Portfolio agrees to pay annual fees and interest on the unpaid principal balance
based on prevailing market rates as defined in the agreement. During the fiscal
year ended December 31, 1995, there were no such borrowings.
<PAGE>
INVESCO Variable Investment Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
<CAPTION>
Year Period Year Period
Ended Ended Ended Ended
December 31 December 31 December 31 December 31
-------------------------------- --------------------------------
1995 1994 1995 1994
(Note 1) (Note 1)
High Yield Portfolio Industrial Income Portfolio
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $10.01 $10.00 $10.09 $10.00
-------------------------------- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.55 0.05 0.19 0.03
Net Gains on Securities
(Both Realized and Unrealized) 1.43 0.01 2.76 0.09
-------------------------------- --------------------------------
Total from Investment Operations 1.98 0.06 2.95 0.12
-------------------------------- --------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.55 0.05 0.20 0.03
Distributions from Capital Gains 0.40 0.00 0.26 0.00
-------------------------------- --------------------------------
Total Distributions 0.95 0.05 0.46 0.03
-------------------------------- --------------------------------
Net Asset Value - End of Period $11.04 $10.01 $12.58 $10.09
================================ ================================
TOTAL RETURN> 19.76% 0.60%* 29.25% 1.23%*
RATIOS
Net Assets - End of Period ($000 Omitted) $5,233 $624 $8,362 $525
Ratio of Expenses to Average Net Assets# 0.97%@ 0.74%~ 1.03%@ 0.79%~
Ratio of Net Investment Income to
Average Net Assets# 8.79% 2.72%~ 3.50% 1.69%~
Portfolio Turnover Rate 310% 23%* 97% 0%*
<FN>
> Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return for the
period shown.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the High Yield and Industrial Income Portfolios were
voluntarily absorbed by IFG for the year ended December 31, 1995 and the period
ended December 31, 1994. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.71% and 30.38% for
High Yield and 2.31% and 32.55% for Industrial Income, respectively, and ratio
of net investment income to average net assets would have been 7.05% and
(26.92%) for High Yield and 2.22% and (30.07%) for Industrial Income,
respectively.
@ Ratio reflects Total Expenses, less absorbed expenses by the investment
adviser.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Variable Investment Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
<CAPTION>
Year Period Year Period
Ended Ended Ended Ended
December 31 December 31 December 31 December 31
-------------------------------- --------------------------------
1995 1994 1995 1994+
(Note 1) (Note 1)
Total Return Portfolio Utilities Portfolio
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $10.09 $10.00 $10.00 $10.00
-------------------------------- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.25 0.09 0.07 0.00
Net Gains on Securities
(Both Realized and Unrealized) 2.05 0.09 0.84 0.00
-------------------------------- --------------------------------
Total from Investment Operations 2.30 0.18 0.91 0.00
-------------------------------- --------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.24 0.09 0.07 0.00
Distributions from Capital Gains 0.01 0.00 0.00 0.00
-------------------------------- --------------------------------
Total Distributions 0.25 0.09 0.07 0.00
-------------------------------- --------------------------------
Net Asset Value - End of Period $12.14 $10.09 $10.84 $10.00
================================ ================================
TOTAL RETURN> 22.79% 1.75%* 9.08% 0.00%
RATIOS
Net Assets - End of Period ($000 Omitted) $6,553 $1,055 $290 $25
Ratio of Expenses to Average Net Assets# 1.01%@ 0.86%~ 1.80%@ 0.00%
Ratio of Net Investment Income to
Average Net Assets# 3.91% 3.86%~ 2.47% 0.00%
Portfolio Turnover Rate 5% 0%* 24% 0%
<FN>
+ All of the expenses for the Utilities Portfolio were voluntarily absorbed by
IFG for the period ended December 31, 1994, since investment operations did not
commence during 1994.
> Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return for the
period shown.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Total Return and Utilities Portfolios were voluntarily
absorbed by IFG for the year ended December 31, 1995 and the period ended
December 31, 1994. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 2.51% and 16.44% for Total Return
and 57.13% for Utilities, respectively, and ratio of net investment income to
average net assets would have been 2.41% and (11.72%) for Total Return and
(52.86%) for Utilities, respectively.
@ Ratio reflects Total Expenses, less absorbed expenses by the investment
adviser.
~ Annualized
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Variable Investment Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, 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 each of the portfolios constituting
the INVESCO Variable Investment Funds, Inc. (the "Fund") at December 31, 1995,
the results of each of their operations for the year then ended and the changes
in each of their net assets and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards which 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, 1995 by correspondence with the custodian and the application of
alternative auditing procedures for unsettled security transactions, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
January 31, 1996
<PAGE>
INVESCO FUNDS
INVESCO Funds Group, Inc., (SM) Distributor
7800 E. Union Avenue
Post Office Box 173706
Denver, CO 80217-3706
1-800-525-8085
PAL(r): 1-800-424-8085
This information must be preceded or accompanied
by a current prospectus.
