KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
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YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
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INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-BLUE CHIP GROWTH FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
<PAGE>
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the periods from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the index does not have
expenses, which would, of course, have lowered its performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-BLUE CHIP GROWTH FUND
VIF-BLUE CHIP GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 29.17%
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Since inception (8/97) 31.92%
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For the one-year period ended 12/31/99, VIF-Blue Chip Growth Fund had a
total return of 29.17%. This return exceeded its benchmark, the S&P 500 Index,
which over the same period had a total return of 21.03%. (Of course, past
performance is not a guarantee of future results.)(1),(2)
The fund ended the year well ahead of the S&P 500 because of its consistent
focus on rapidly growing large companies. The biggest outperformers for the year
were the fund's technology stocks--indeed, many of the fund's holdings in other
areas, especially financial and health care stocks, performed poorly. Technology
stocks that did particularly well included Yahoo Inc and PMC-Sierra Inc. Our two
retail companies, Home Depot and Wal-Mart Stores, also had excellent final
quarters.
Graph: INVESCO VIF - Blue Chip Growth Fund
Total Return from Inception (8/97) through 12/31/99 vs. S&P Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Blue Chip Growth Fund to the value of a $10,000 investment in the S&P
500 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (8/97) through
12/31/99.
We believe the fund is best served by staying with those growth companies
that can consistently, and noncyclically, post better-than-average earnings
gains because they are in value-added manufacturing or service businesses in
which unit demand is growing steadily. The fund will likely remain heavily
weighted in technology, health care, communications and financial services.
Selected steady-growth consumer staples companies, such as Procter & Gamble and
Coca-Cola Co, will remain core holdings. Slower-growth industries, such as
utilities and energy, will continue to be under-weighted.
<PAGE>
FUND MANAGEMENT
VIF-Blue Chip Growth Fund is managed by Vice President Trent E. May. He
received a BS from the Florida Institute of Technology and a MBA from Rollins
College. Before joining INVESCO in 1996, Trent was a senior equity
manager/equity analyst with Munder Capital Management. He is a Chartered
Financial Analyst.
Vice President Douglas J. McEldowney is co-manager of the fund. He received a BA
in Finance from the University of Kentucky and a Masters in Business
Administration from Rollins College. Before joining INVESCO in 1999, Doug was
Senior Vice President and Portfolio Manager at Bank of America Investment
Management in Sarasota, Florida. He is a Chartered Financial Analyst and a
Certified Public Accountant.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE NASDAQ IS AN UNMANAGED INDEX OF
STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
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SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND
84.26 COMMON STOCKS
2.29 BEVERAGES
Coca-Cola Co 410 $ 23,882
================================================================================
1.59 BIOTECHNOLOGY
MedImmune Inc(a) 100 16,588
================================================================================
0.94 BROADCASTING
Clear Channel Communications(a) 110 9,818
================================================================================
2.37 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Lucent Technologies 330 24,688
================================================================================
18.25 COMPUTER RELATED
Cisco Systems(a) 450 48,206
Dell Computer(a) 1,000 51,000
EMC Corp(a) 100 10,925
Intuit Inc(a) 200 11,988
Microsoft Corp(a) 430 50,202
Redback Networks(a) 100 17,750
================================================================================
190,071
2.15 ELECTRICAL EQUIPMENT
General Electric 145 22,439
================================================================================
7.20 ELECTRONICS -- SEMICONDUCTOR
Intel Corp 150 12,347
Maxim Integrated Products(a) 590 27,841
PMC-Sierra Inc(a) 100 16,031
Texas Instruments 100 9,688
Xilinx Inc(a) 200 9,094
================================================================================
75,001
4.21 FINANCIAL
Citigroup Inc 790 43,894
================================================================================
15.60 HEALTH CARE DRUGS -- PHARMACEUTICALS
Bristol-Myers Squibb 430 27,601
Forest Laboratories(a) 200 12,287
Lilly (Eli) & Co 560 37,240
Merck & Co 300 20,119
Pfizer Inc 245 7,947
Warner-Lambert Co 700 57,356
================================================================================
162,550
1.08 HEALTH CARE RELATED
Healtheon/WebMD Corp(a) 300 11,250
================================================================================
<PAGE>
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SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
1.84 HOUSEHOLD PRODUCTS
Procter & Gamble 175 $ 19,173
================================================================================
2.92 INSURANCE
American International Group 281 30,383
================================================================================
3.32 INVESTMENT BANK/BROKER FIRM
Schwab (Charles) Corp 900 34,537
================================================================================
8.44 RETAIL
Amazon.com Inc(a) 200 15,225
Home Depot 698 47,822
Wal-Mart Stores 360 24,885
================================================================================
87,932
3.19 SERVICES
America Online(a) 440 33,192
================================================================================
0.99 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 100 10,313
================================================================================
4.26 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 585 29,689
MCI WorldCom(a) 278 14,725
================================================================================
44,414
3.62 TELEPHONE
BellSouth Corp 300 14,044
Covad Communications Group(a) 200 11,188
SBC Communications 255 12,431
================================================================================
37,663
TOTAL COMMON STOCKS (Cost $640,226) 877,788
================================================================================
15.74 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $164,038
(Collateralized by US Treasury
Inflationary Index Notes,
due 1/15/2007 at 3.375%, value
$167,635) (Cost $164,000) $ 164,000 164,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $804,226)
(Cost for Income Tax Purposes $810,573) $1,041,788
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
BLUE CHIP
GROWTH
FUND
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ASSETS
Investment Securities:
At Cost(a) $ 804,226
================================================================================
At Value(a) $ 1,041,788
Cash 958
Receivables:
Investment Securities Sold 3,261
Dividends and Interest 277
Prepaid Expenses and Other Assets 57
================================================================================
TOTAL ASSETS 1,046,341
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 12,040
Accrued Expenses and Other Payables 2,292
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TOTAL LIABILITIES 14,332
================================================================================
NET ASSETS AT VALUE $ 1,032,009
================================================================================
NET ASSETS
Paid-in Capital(b) $ 721,055
Accumulated Undistributed
(Distributions in Excess of) Net Investment Loss (9)
Accumulated Undistributed Net Realized Gain
on Investment Securities 73,401
Net Appreciation of Investment Securities 237,562
================================================================================
NET ASSETS AT VALUE $ 1,032,009
================================================================================
Shares Outstanding 55,928
NET ASSET VALUE, Offering and Redemption Price per Share $ 18.45
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $164,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Blue Chip Growth Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
BLUE CHIP
GROWTH
FUND
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INVESTMENT INCOME
INCOME
Dividends $ 3,282
Interest 3,428
================================================================================
TOTAL INCOME 6,710
================================================================================
EXPENSES
Investment Advisory Fees 5,079
Transfer Agent Fees 5,000
Administrative Fees 10,581
Custodian Fees and Expenses 3,320
Directors' Fees and Expenses 8,023
Professional Fees and Expenses 15,649
Registration Fees and Expenses 38
Reports to Shareholders 6,006
Other Expenses 439
================================================================================
TOTAL EXPENSES 54,135
Fees and Expenses Absorbed by Investment Adviser (42,862)
Fees and Expenses Paid Indirectly (2,294)
================================================================================
NET EXPENSES 8,979
================================================================================
NET INVESTMENT LOSS (2,269)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 76,229
Change in Net Appreciation of Investment Securities 138,346
================================================================================
NET GAIN ON INVESTMENT SECURITIES 214,575
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 212,306
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
BLUE CHIP GROWTH FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Loss $ (2,269) $ (224)
Net Realized Gain on Investment Securities 76,229 22,394
Change in Net Appreciation of Investment Securities 138,346 81,686
NET INCREASE IN NET ASSETS FROM OPERATIONS 212,306 103,856
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (1,109)
In Excess of Net Investment Income 0 (227)
Net Realized Gain on Investment Securities (13,856) (7,300)
================================================================================
TOTAL DISTRIBUTIONS (13,856) (8,636)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 464,451 801
Reinvestment of Distributions 13,856 8,636
================================================================================
478,307 9,437
Amounts Paid for Repurchases of Shares (15,632) 0
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 462,675 9,437
================================================================================
TOTAL INCREASE IN NET ASSETS 661,125 104,657
NET ASSETS
Beginning of Period 370,884 266,227
================================================================================
End of Period (Including Accumulated Undistributed
(Distributions in Excess of) Net Investment Loss
of ($9) and ($0), respectively) $ 1,032,009 $ 370,884
================================================================================
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FUND SHARE TRANSACTIONS
Shares Sold 30,520 61
Shares Issued from Reinvestment of Distributions 798 634
================================================================================
31,318 695
Shares Repurchased (990) 0
================================================================================
NET INCREASE IN FUND SHARES 30,328 695
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT FUNDS, INC.
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund) (the
"Fund", presented herein), Dynamics Fund, Equity Income Fund (formerly
Industrial Income Fund), Financial Services Fund, Health Sciences Fund, High
Yield Fund, Market Neutral Fund, Realty Fund, Small Company Growth Fund,
Technology Fund, Telecommunications Fund, Total Return Fund and Utilities Fund.
On April 30, 1999, the board of directors of the Fund approved a name change for
Growth Fund to Blue Chip Growth Fund. The investment objective of the Fund is to
seek long-term capital growth. The Fund is registered under the Investment
Company Act of 1940 (the "Act") as a diversified, open-end management investment
company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the
<PAGE>
ex-dividend date. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Cost is determined on the specific identification basis.
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.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the year ended December 31, 1999, the Fund reclassified
$2,260 from accumulated undistributed net realized gain on investment securities
to accumulated undistributed net investment income. Net investment income, net
realized gains, paid-in capital and net assets were not affected.
F. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.85% on the first $500 million of average net assets;
reduced to 0.75% on the next $500 million of average net assets; reduced to
0.65% of average net assets in excess of $1 billion; reduced to 0.45% of average
net assets in excess of $2 billion; reduced to 0.40% of average net assets in
excess of $4 billion; reduced to 0.375% of average net assets in excess of $6
billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
<PAGE>
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.015% of average net assets plus, effective July 8, 1998, an
additional amount computed at an annual rate of 0.25% of new assets (the
"Incremental Fees") to provide administrative, accounting and clerical services.
The fee is accrued daily and paid monthly. IFG may pay all or a portion of the
Base Fee and the Incremental Fees to other companies that assist in providing
the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $886,651 and $578,582, respectively. There were no purchases or
sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $236,616 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $5,401 resulting in net
appreciation of $231,215.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year end December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
-------------------------------------------------------
<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 INVESCO Variable
Blue Chip Growth Fund, formerly INVESCO Variable Growth Fund, (one of the
portfolios constituting INVESCO Variable Investment Funds, Inc., hereafter
referred to as the "Fund") at December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the two years
in the period then ended and for the period August 25, 1997 (commencement of
investment operations) through December 31, 1997, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
BLUE CHIP GROWTH FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997(a)
PER SHARE DATA
Net Asset Value--Beginning
of Period $ 14.49 $ 10.69 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.00) 0.00 0.05
Net Gains on Securities
(Both Realized and Unrealized) 4.21 4.14 0.64
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 4.21 4.14 0.69
================================================================================
LESS DISTRIBUTIONS
Dividends from
Net Investment Income 0.00 0.04 0.00
Distributions from Capital Gains 0.25 0.01 0.00
In Excess of Capital Gains 0.00 0.29 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.25 0.34 0.00
================================================================================
Net Asset Value--End of Period $ 18.45 $ 14.49 $ 10.69
================================================================================
TOTAL RETURN(c) 29.17% 38.99% 6.90%(d)
RATIOS
Net Assets--End of Period
($000 Omitted) $ 1,032 $ 371 $ 266
Ratio of Expenses to
Average Net Assets(e)(f) 1.87% 1.57% 0.29%(g)
Ratio of Net Investment Income
(Loss) to Average Net Assets(e) (0.38%) (0.07%) 1.45%(g)
Portfolio Turnover Rate 114% 78% 12%(d)
(a) From August 25, 1997, commencement of investment operations, to December 31,
1997.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis
for the years ended December 31, 1999 and 1998.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily abosorbed, ratio of expenses to average
net assets would have been 8.99%, 12.04% and 28.76% (annualized),
respectively, and ratio to net investment loss to average net assets would
have been (7.50%), (10.54%) and (27.02%) (annualized), respectively.
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A16 9036 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- --------------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-DYNAMICS FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
<PAGE>
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the periods from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the index does not have
expenses, which would, of course, have lowered its performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-DYNAMICS FUND
VIF-DYNAMICS FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 55.60%
--------------------------------------------------------------
Since inception (8/97) 31.95%
--------------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Dynamics Fund gained 55.60%,
greatly outperforming its benchmark, the S&P Midcap 400, which over the same
period gained 14.72%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Throughout the period, financial markets faced the scenario of
continuously higher interest rates, yet the overall strength in the economy,
combined with a favorable outlook for corporate earnings, helped equities to
post strong returns. The communications and technology sectors experienced
strong appreciation, as individual stocks, such as VoiceStream Wireless and
VeriSign Inc, contributed materially to the fund's performance. The consumer
sector, although mixed on the whole, produced several strong contributors,
including TMP Worldwide and Westwood One. At the end of the year, the fund
increased its weighting in health care, where several biotech stocks, including
IDEC Pharmaceutical Inc and Immunex Corp benefited from a rally in that group.
The energy sector saw moderate gains, as the price of oil rose modestly, and
service stocks, such as BJ Services, were meaningful contributors. The fund
trimmed its exposure to financial services issues in the final quarter, where
the burden of higher interest rates continued to result in underperformance.
Graph: INVESCO VIF - Dynamics Fund
Total Return from Inception (8/97) through 12/31/99 vs.
S&P MidCap 400 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Dynamics Fund to the value of a $10,000 investment in the S&P MidCap
400 Index, assuming in each case reinvestment of all dividends and capital
gain distributions, for the period from inception (8/97) through 12/31/99.
The attractiveness of high-quality, mid-capitalization growth companies
should continue to gain recognition now that the global economy appears to be in
a recovery phase. Our strategy will focus on leading, high-return mid-caps in
the major growth sectors of technology, communications, consumer, financial
services, and health care. Attractive consumer groups include ad agencies, radio
and outdoor companies, and the gaming sector. The technology sector has already
experienced a strong year, but the software services, networking, and Internet
groups remain of interest. The services and equipment segments of the
communications sector continue to show excellent growth, and while the health
care sector is attractive, the leading mid-caps are being quickly consolidated,
not leaving much from which to choose. The current median market cap holding in
the fund is slightly above $5 billion.
<PAGE>
FUND MANAGEMENT
VIF-Dynamics Fund is managed by INVESCO Senior Vice President Timothy J. Miller
and Thomas R. Wald. Tim received his MBA from the University of Missouri, and a
BSBA from St. Louis University. A 19-year veteran of the investment business, he
is a Chartered Financial Analyst. Before joining INVESCO in 1992, Tim was an
analyst and portfolio manager with Mississippi Valley Advisors.
Tom assumed responsibilities of co-manager in October 1997. He received his MBA
from The Wharton School, University of Pennsylvania, and a BA from Tulane
University. Before joining INVESCO, Tom was the senior health care analyst at
Munder Capital Management.
(1) 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.
(2) THE S&P MIDCAP 400 IS AN UNMANAGED INDEX INDICATIVE OF DOMESTIC
MID-CAPITALIZATION STOCKS. THE NASDAQ IS AN UNMANAGED INDEX OF STOCKS TRADED
OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
DYNAMICS FUND
86.01 COMMON STOCKS
0.29 AEROSPACE & DEFENSE
General Dynamics 1,640 $ 86,510
================================================================================
1.61 BANKS
First Security 1,700 43,403
Marshall & Ilsley 1,300 81,656
Northern Trust 2,780 147,340
UnionBanCal Corp 1,360 53,635
Zions Bancorp 2,570 152,112
================================================================================
478,146
2.42 BIOTECHNOLOGY
Affymetrix Inc(a) 400 67,875
Biogen Inc(a) 1,800 152,100
Chiron Corp(a) 3,400 144,075
IDEC Pharmaceuticals(a) 1,000 98,250
Immunex Corp(a) 1,780 194,576
Millennium Pharmaceuticals(a) 500 61,000
================================================================================
717,876
4.73 BROADCASTING
AMFM Inc(a) 4,550 356,037
Citadel Communications(a) 2,400 155,700
EchoStar Communications Class A Shrs(a) 5,690 554,775
Hispanic Broadcasting(a) 2,020 186,282
Westwood One(a) 1,950 148,200
================================================================================
1,400,994
2.45 CABLE
Cablevision Systems Class A Shrs(a) 1,920 144,960
Jones Intercable Class A Shrs(a) 2,530 175,361
NTL Inc(a) 1,590 198,353
USA Networks(a) 3,760 207,740
================================================================================
726,414
3.21 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 1,965 112,987
Comverse Technology(a) 1,950 282,262
JDS Uniphase(a) 3,440 554,915
================================================================================
950,164
16.52 COMPUTER RELATED
Apple Computer(a) 1,010 103,841
Art Technology Group(a) 1,600 208,000
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
BroadVision Inc(a) 2,440 $ 414,952
Brocade Communications Systems(a) 540 95,580
Citrix Systems(a) 1,740 214,020
Electronic Arts(a) 2,125 178,500
Exodus Communications(a) 4,700 417,419
Extreme Networks(a) 1,030 86,005
Inktomi Corp(a) 1,080 95,850
Internap Network Services(a) 970 167,810
Intuit Inc(a) 3,570 213,977
Legato Systems(a) 3,770 259,423
Mercury Interactive(a) 2,560 276,320
Metromedia Fiber Network Class A Shrs(a) 2,530 121,282
Network Appliance(a) 4,520 375,443
Peregrine Systems(a) 700 58,931
PSINet Inc(a) 2,300 142,025
Red Hat(a) 480 101,400
Redback Networks(a) 1,080 191,700
Siebel Systems(a) 4,470 375,480
Symantec Corp(a) 1,250 73,281
Synopsys Inc(a) 2,960 197,580
Verio Inc(a) 1,620 74,824
Vignette Corp(a) 600 97,800
Visual Networks(a) 1,600 126,800
Whittman-Hart Inc(a) 4,280 229,515
================================================================================
4,897,758
0.26 CONSUMER FINANCE
SLM Holding 1,800 76,050
================================================================================
2.37 ELECTRICAL EQUIPMENT
Flextronics International Ltd(a) 4,440 204,240
Jabil Circuit(a) 620 45,260
Molex Inc 4,230 239,788
Sanmina Corp(a) 2,130 212,734
================================================================================
702,022
8.49 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 3,290 163,061
Applied Micro Circuits(a) 1,200 152,700
Conexant Systems(a) 3,060 203,107
Linear Technology 2,040 145,988
LSI Logic(a) 1,750 118,125
Maxim Integrated Products(a) 5,360 252,925
Microchip Technology(a) 1,280 87,600
MIPS Technologies Class A Shrs(a) 2,150 111,800
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
PMC-Sierra Inc(a) 1,970 $ 315,816
RF Micro Devices(a) 3,290 225,159
SDL Inc(a) 1,430 311,740
Vitesse Semiconductor(a) 3,720 195,068
Xilinx Inc(a) 5,140 233,709
================================================================================
2,516,798
1.87 ENTERTAINMENT
Gemstar International Group Ltd(a) 5,540 394,725
International Speedway Class A Shrs(a) 3,200 161,200
================================================================================
555,925
0.95 EQUIPMENT -- SEMICONDUCTOR
KLA-Tencor Corp(a) 1,190 132,536
Teradyne Inc(a) 2,270 149,820
================================================================================
282,356
2.58 GAMING
Harrah's Entertainment(a) 15,040 397,620
Mandalay Resort Group(a) 7,980 160,598
MGM Grand(a) 4,110 206,784
================================================================================
765,002
1.83 HEALTH CARE DRUGS -- PHARMACEUTICALS
Allergan Inc 2,900 144,275
Forest Laboratories(a) 4,500 276,469
Teva Pharmaceutical Industries Sponsored ADR
Representing Ord Shrs 1,700 121,869
================================================================================
542,613
1.87 HEALTH CARE RELATED
Bausch & Lomb 4,300 294,281
Genzyme Corp-General Division(a) 2,600 117,000
Stryker Corp 2,050 142,731
================================================================================
554,012
0.61 INSURANCE
AFLAC Inc 3,850 181,672
================================================================================
0.77 INVESTMENT BANK/BROKER FIRM
E*TRADE Group(a) 2,955 77,199
Waddell & Reed Financial
Class A Shrs 1,710 46,384
Class B Shrs 4,220 106,028
================================================================================
229,611
0.24 LEISURE TIME
Royal Caribbean Cruises Ltd 1,470 72,489
================================================================================
0.53 LODGING -- HOTELS
Marriott International Class A Shrs 4,950 156,234
================================================================================
0.51 MANUFACTURING
Parker-Hannifin Corp 2,960 151,885
================================================================================
7.18 OIL & GAS RELATED
Anadarko Petroleum 2,520 85,995
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Apache Corp 4,965 $ 183,395
BJ Services(a) 5,650 236,241
Burlington Resources 1,720 56,867
Coflexip SA Sponsored ADR Representing 1/2 Ord Shr 2,000 76,000
Cooper Cameron(a) 4,825 236,123
EOG Resources 2,210 38,813
Global Industries Ltd(a) 4,260 36,743
Nabors Industries(a) 5,975 184,852
Noble Drilling(a) 6,540 214,185
Santa Fe International 5,780 149,558
Smith International(a) 3,950 196,266
Talisman Energy(a) 4,870 125,403
Transocean Sedco Forex 1,900 64,006
Weatherford International(a) 6,140 245,216
================================================================================
2,129,663
0.31 PERSONAL CARE
Estee Lauder Class A Shrs 1,820 91,796
================================================================================
1.90 PUBLISHING
Meredith Corp 2,680 111,723
New York Times Class A Shrs 4,530 222,536
Valassis Communications(a) 5,440 229,840
================================================================================
564,099
2.05 RETAIL
AnnTaylor Stores(a) 3,040 104,690
Circuit City Stores-Circuit City Group 4,070 183,404
eToys Inc(a) 1,490 39,112
Stamps.com Inc(a) 1,000 41,625
Tandy Corp 4,840 238,068
================================================================================
606,899
10.47 SERVICES
BISYS Group(a) 1,900 123,975
Concord EFS(a) 3,930 101,197
DoubleClick Inc(a) 250 63,266
Fiserv Inc(a) 3,800 145,587
Getty Images(a) 450 21,994
Go2Net Inc(a) 1,780 154,860
Harte-Hanks Inc 2,240 48,720
HotJobs.com Ltd(a) 480 20,970
Lamar Advertising Class A Shrs(a) 2,550 154,434
Omnicom Group 1,930 193,000
Paychex Inc 5,250 210,000
Sapient Corp(a) 680 95,838
SEI Investments(a) 2,400 285,637
TMP Worldwide(a) 1,100 156,200
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
VeriSign Inc(a) 2,360 $ 450,170
VERITAS Software(a) 3,105 444,403
Viant Corp(a) 400 39,600
WPP Group PLC(a) 11,340 179,572
Young & Rubicam 3,020 213,665
================================================================================
3,103,088
3.52 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Crown Castle International(a) 5,920 190,180
Telecorp PCS Class A Shrs(a) 1,000 38,000
VoiceStream Wireless(a) 2,410 342,973
Western Wireless Class A Shrs(a) 3,280 218,940
WinStar Communications(a) 3,400 254,575
================================================================================
1,044,668
1.27 TELECOMMUNICATIONS -- LONG DISTANCE
Allegiance Telecom(a) 2,300 212,175
ITC DeltaCom(a) 2,650 73,206
Viatel Inc(a) 1,700 91,163
================================================================================
376,544
4.83 TELEPHONE
Amdocs Ltd(a) 6,100 210,450
AT&T Canada Class B Depository Receipts(a) 3,730 150,133
CenturyTel Inc 2,105 99,724
COLT Telecom Group PLC Sponsored ADR Representing
4 Ord Shrs(a) 1,720 350,880
Covad Communications Group(a) 2,440 136,487
McLeodUSA Inc(a) 4,160 244,920
RCN Corp(a) 2,700 130,950
Rhythms NetConnections(a) 3,500 108,500
================================================================================
1,432,044
0.37 TEXTILE -- APPAREL MANUFACTURING
Jones Apparel Group(a) 4,060 110,128
================================================================================
TOTAL COMMON STOCKS (Cost $20,611,951) 25,503,460
================================================================================
13.99 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
12/31/1999 due 1/3/2000 at 2.800%, repurchased
at $4,147,968 (Collaterized by US Treasury
Inflationary Index Notes, due 1/15/2007 at
3.375%, value $4,213,443) (Cost $4,147,000) $4,147,000 4,147,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $24,758,951)
(Cost for Income Tax Purposes $24,760,800) $29,650,460
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
DYNAMICS
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 24,758,951
================================================================================
At Value(a) $ 29,650,460
Cash 2,984
Receivables:
Investment Securities Sold 12,572
Fund Shares Sold 197,037
Dividends and Interest 3,655
Prepaid Expenses and Other Assets 55
================================================================================
TOTAL ASSETS 29,866,763
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 198,115
Accrued Expenses and Other Payables 1,641
================================================================================
TOTAL LIABILITIES 199,756
================================================================================
NET ASSETS AT VALUE $ 29,667,007
================================================================================
NET ASSETS
Paid-in Capital(b) $ 24,850,051
Accumulated Undistributed (Distributions in
Excess of) Net Investment Income (16)
Accumulated Undistributed Net Realized Loss
on Investment Securities and Foreign
Currency Transactions (74,537)
Net Appreciation of Investment Securities
and Foreign Currency Transactions 4,891,509
================================================================================
NET ASSETS AT VALUE $ 29,667,007
================================================================================
Shares Outstanding 1,570,044
NET ASSET VALUE, Offering and Redemption Price per Share $ 18.90
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $4,147,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Dynamics Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
DYNAMICS
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 8,102
Interest 39,213
================================================================================
TOTAL INCOME 47,315
================================================================================
EXPENSES
Investment Advisory Fees 29,422
Transfer Agent Fees 5,000
Administrative Fees 19,574
Custodian Fees and Expenses 8,826
Directors' Fees and Expenses 8,023
Professional Fees and Expenses 15,674
Registration Fees and Expenses 38
Reports to Shareholders 6,091
Other Expenses 449
================================================================================
TOTAL EXPENSES 93,097
Fees and Expenses Absorbed by Investment Adviser (41,017)
Fees and Expenses Paid Indirectly (6,497)
================================================================================
NET EXPENSES 45,583
================================================================================
NET INVESTMENT INCOME 1,732
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities and Foreign
Currency Transactions (66,357)
Change in Net Appreciation Depreciation) of:
Investment Securities 4,832,731
Foreign Currency Transactions (1,214)
================================================================================
Total Net Appreciation 4,831,517
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND FOREIGN CURRENCY
TRANSACTIONS 4,765,160
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,766,892
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
DYNAMICS FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Income (Loss) $ 1,732 $ (1,758)
Net Realized Loss on Investment Securities
and Foreign Currency Transactions (66,357) (4,118)
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 4,831,517 55,876
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 4,766,892 50,000
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (1,730) (587)
In Excess of Net Investment Income (4,078) 0
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (3,715)
================================================================================
TOTAL DISTRIBUTIONS (5,808) (4,302)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 34,477,477 799
Reinvestment of Distributions 5,808 4,302
================================================================================
34,483,285 5,101
Amounts Paid for Repurchases of Shares (9,885,578) 0
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS 24,597,707 5,101
================================================================================
TOTAL INCREASE IN NET ASSETS 29,358,791 50,799
NET ASSETS
Beginning of Period 308,216 257,417
================================================================================
End of Period (Including Accumulated Undistributed
(Distributions in Excess of) Net Investment Loss
of ($16) and ($2), respectively) $29,667,007 $ 308,216
================================================================================
--------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 2,115,404 74
Shares Issued from Reinvestment of Distributions 350 393
================================================================================
2,115,754 467
Shares Repurchased (571,073) 0
================================================================================
NET INCREASE IN FUND SHARES 1,544,681 467
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund (the "Fund", presented herein), Equity Income Fund (formerly Industrial
Income Fund), Financial Services Fund, Health Sciences Fund, High Yield Fund,
Market Neutral Fund, Realty Fund, Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. The investment
objective of the Fund is to seek appreciation of capital. The Fund is registered
under the Investment Company Act of 1940 (the "Act") as a diversified, open-end
management investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
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
<PAGE>
its market value exceeds the current market value of the repurchase agreements
including accrued interest. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
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.
Net capital loss carryovers utilized in 1999 by the Fund amounted to $1,818.
The Fund incurred and elected to defer post-October 31 net capital losses of
$250,619 to the year ended December 31, 2000. To the extent future capital gains
are offset by capital loss carryovers, such gains will not be distributed to
shareholders.
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, 1999, 100.00% qualified for the
dividends received deduction available to the Fund's corporate shareholders.
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
<PAGE>
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the year ended December 31, 1999, the Fund reclassified
$4,062 from accumulated undistributed net realized gain on investment securities
to accumulated undistributed net investment income. Net investment income, net
realized gains, paid-in capital and net assets were not affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% on the first $1 billion of average net assets; reduced
to 0.60% on the next $1 billion of average net assets; reduced to 0.45% of
average net assets in excess of $2 billion; reduced to 0.40% of average net
assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average nets assets in excess of $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% (the "Incremental Fee") to provide administrative,
accounting and clerical services. The fee is accrued daily and paid monthly. IFG
may pay all or a portion of the Base Fee and the Incremental Fee to other
companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $23,175,622 and $2,714,854, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $5,304,886 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $415,226, resulting in net
appreciation of $4,889,660.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
--------------------------------------------------------
<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 INVESCO Variable Dynamics Fund (one
of the portfolios constituting INVESCO Variable Investment Funds, Inc.,
hereafter referred to as the "Fund") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the two years in the period then ended and for the period August 25, 1997
(commencement of investment operations) through December 31, 1997, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
DYNAMICS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 12.15 $ 10.34 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) 0.00 (0.00) 0.02
Net Gains on Securities (Both Realized
and unrealized) 6.75 1.98 0.32
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 6.75 1.98 0.34
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income(c) 0.00 0.02 0.00
In Excess of Net Investment Income(c) 0.00 0.00 0.00
Distributions from Capital Gains 0.00 0.15 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.00 0.17 0.00
================================================================================
Net Asset Value-- End of Period $ 18.90 $ 12.15 $ 10.34
================================================================================
TOTAL RETURN(d) 55.60% 19.35% 3.40%(e)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 29,667 $ 308 $ 257
Ratio of Expenses to Average Net
Assets(f)(g) 1.26% 1.45% 0.52%(h)
Ratio of Net Investment Income (Loss) to
Average Net Assets(f) 0.04% (0.64%) 0.63%(h)
Portfolio Turnover Rate 70% 55% 28%(e)
(a) From August 25, 1997, commencement of investment operations, to December 31,
1997.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis
for the years ended December 31, 1999 and 1998.
(c) Distributions from net investment income and in excess of net investment
income for the year ended December 31, 1999, aggregated less than $0.01 on a
per share basis.
(d) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(e) Based on operations for the period shown and, accordingly, are not
representative of a full year.
<PAGE>
(f) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of the expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 2.25%, 14.76% and 34.18% (annualized), respectively,
and ratio of net investment loss to average net assets would have been
(0.95%), (13.95%) and(33.03%) (annualized), respectively.
(g) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
Annualized
OTHER INFORMATION
UNAUDITED
DYNAMICS FUND
On August 30, 1999, a special meeting of the shareholders of the Fund was held
at which the approval to increase of the investment advisory fee schedule was
ratified. There was a total of 25,287 votes cast of which, 25,287 voted for, 0
voted against, and 0 withheld/abstained from voting.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.INVESCO.COM
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A11 9037 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- --------------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-EQUITY INCOME FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
<PAGE>
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The graph below illustrates, for the periods from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the indexes do not have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-EQUITY INCOME FUND
VIF-EQUITY INCOME FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 14.84%
---------------------------------------------
5 years 21.81%
---------------------------------------------
Since inception (8/94) 20.34%
---------------------------------------------
For the one-year period ended 12/31/99, VIF-Equity Income Fund had a total
return of 14.84%. This lagged the S&P 500 Index, which over the same period had
a total return of 21.03%, but exceeded the Lehman Government/Corporate Bond
Index, which was negative 2.15%. (Of course, past performance is not a guarantee
of future results.)(1),(2)
The equity markets enjoyed another year of strong performance in 1999,
particularly in the fourth quarter. Technology was the strongest-performing
sector, evidenced by the tech-laden Nasdaq Composite finishing the quarter at
record highs. Other strong sectors during the period included consumer cyclicals
and basic material stocks. Retail stocks led the strong surge in the consumer
cyclical sectors during the quarter, while basic material stocks continued to
benefit from limited capacity growth and an accelerating global economy. Given
the surge in technology issues, large company growth stocks outperformed value
stocks. Despite the reported strength in both the fourth quarter and the
calendar year, breadth remained narrow throughout, with few stocks or sectors
outperforming the overall market.
Graph: VIF - INVESCO Equity Income
Total Return Since Inception 8/94 vs S&P 500 Index and Lehman
Government/Corportate Bond Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Equity Income Fund 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 12/31/99.
Throughout the year, the fund managed to benefit from its technology,
communications, and consumer holdings, while its performance was held back by
moribund sectors such as health care and financial services. Our sector
allocations remained relatively constant in the fourth quarter, though we did
modestly increase our basic material, financial service, and utility weightings.
We took advantage of the incredible surge in technology stocks and modestly
reduced positions in the sector, taking profits. Individual stocks performing
well during the fourth quarter included Champion International, Weyerhaeuser Co,
General Electric, Cable and Wireless PLC, Nextel Communications, US West, Dayton
Hudson, Wal-Mart Stores, AT&T Corp-Liberty Media Group, Colgate-Palmolive Co,
Morgan Stanley Dean Witter & Co, Citigroup Inc, Warner-Lambert Inc, Maxim
Integrated Products, and Kansas City Southern Industries.
<PAGE>
The performance of the fixed-income portion of the fund can be attributed
to our use of high-yield securities and the "stranded cost" theme. The
deleveraging and associated credit improvement achieved by many of our electric
utility holdings continue to validate our large allocation to the sector.
Outperformance has resulted from avoidance of credit risk experiences (i.e.,
defaults and credit quality decline), continued "big bang" positive events
leading to significant credit improvement, and situations in which the issuer's
credit quality has recovered from declines experienced in 1998. Issue-specific
security selection and "big bang" events will continue to drive performance
through 2000.
FUND MANAGEMENT
Senior Vice President and Director of Investments Charles P. Mayer is
responsible for the equity side of the portfolio. An industry veteran with 29
years of professional experience, he earned an MBA from St. John's University
and a BA from St. Peter's College.
Senior Vice President and Director of Fixed-Income Investments Jerry Paul serves
as co-portfolio manager of the fund, concentrating on fixed-income securities.
Jerry began his investment career in 1976; before joining INVESCO, he worked for
Stein, Roe & Farnham Inc., as well as Quixote Investment Management. He earned
an MBA from the University of Northern Iowa, and a BBA from the University of
Iowa. He is a Chartered Financial Analyst and Certified Public Accountant. Jerry
recently was named Morningstar's 1999 Fixed-Income Manager of the Year.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE LEHMAN GOVERNMENT/CORPORATE BOND
INDEX IS AN UNMANAGED INDEX INDICATIVE OF THE BROAD FIXED-INCOME MARKET. THE
NASDAQ IS AN UNMANAGED INDEX OF STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
81.60 COMMON STOCK
1.97 AEROSPACE & DEFENSE
Honeywell International 21,000 $1,211,437
Northrop Grumman 7,000 378,437
================================================================================
1,589,874
0.66 AUTOMOBILES
Ford Motor 10,000 534,375
================================================================================
5.87 BANKS
Bank of New York 30,000 1,200,000
Chase Manhattan 11,700 908,944
Morgan (J P) & Co 9,000 1,139,625
Summit Bancorp 20,000 612,500
Wells Fargo 22,000 889,625
================================================================================
4,750,694
2.44 BEVERAGES
Anheuser-Busch Cos 15,000 1,063,125
Coca-Cola Co 15,700 914,525
================================================================================
1,977,650
1.82 BROADCASTING
AT&T Corp-Liberty Media Group Class A Shrs(a) 26,000 1,475,500
================================================================================
1.38 CHEMICALS
Lyondell Chemical 20,600 262,650
Praxair Inc 17,000 855,312
================================================================================
1,117,962
1.20 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
Lucent Technologies 13,000 972,562
================================================================================
2.76 COMPUTER RELATED
Computer Associates International 8,300 580,481
Galileo International 15,300 458,044
Microsoft Corp(a) 10,000 1,167,500
SAP AG Sponsored ADR Representing 1/12 Ord Shr 500 26,031
================================================================================
2,232,056
1.78 ELECTRIC UTILITIES
Alliant Energy 11,400 313,500
Duke Energy 7,600 380,950
PG&E Corp 17,000 348,500
ScottishPower PLC Sponsored ADR
Representing 4 Ord Shrs 14,130 395,640
================================================================================
1,438,590
2.39 ELECTRICAL EQUIPMENT
General Electric 12,500 1,934,375
================================================================================
1.61 ELECTRONICS
General Motors Class H Shrs(a) 13,600 1,305,600
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
3.11 ELECTRONICS-- SEMICONDUCTOR
Intel Corp 14,000 $1,152,375
Maxim Integrated Products(a) 12,400 585,125
Texas Instruments 8,000 775,000
================================================================================
2,512,500
1.37 FINANCIAL
Citigroup Inc 20,000 1,111,250
================================================================================
3.98 FOODS
General Mills 20,000 715,000
Heinz (H J) Co 17,225 685,770
Kellogg Co 20,000 616,250
Quaker Oats 10,000 656,250
Tasty Baking 64,250 542,109
================================================================================
3,215,379
1.24 GAMING
Park Place Entertainment(a) 80,000 1,000,000
================================================================================
0.21 GOLD & PRECIOUS METALS MINING
Newmont Mining 7,000 171,500
================================================================================
7.50 HEALTH CARE DRUGS-- PHARMACEUTICALS
American Home Products 19,000 749,312
Bristol-Myers Squibb 16,000 1,027,000
Merck & Co 15,000 1,005,937
Pfizer Inc 9,300 301,669
Pharmacia & Upjohn 10,400 468,000
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 15,500 998,781
Warner-Lambert Co 18,500 1,515,844
================================================================================
6,066,543
1.27 HEALTH CARE RELATED
Medtronic Inc 28,198 1,027,465
================================================================================
2.69 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 20,000 1,300,000
Procter & Gamble 8,000 876,500
================================================================================
2,176,500
3.27 INSURANCE
Allmerica Financial 25,000 1,390,625
Ohio Casualty 16,000 257,000
Travelers Property Casualty Class A Shrs 29,000 993,250
================================================================================
2,640,875
1.24 INVESTMENT BANK/BROKER FIRM
Morgan Stanley Dean Witter & Co 7,000 999,250
================================================================================
0.96 LODGING-- HOTELS
Hilton Hotels 18,000 173,250
Marriott International Class A Shrs 19,000 599,687
================================================================================
772,937
1.23 MANUFACTURING
Textron Inc 13,000 996,938
================================================================================
7.00 OIL & GAS RELATED
Apache Corp 27,000 997,312
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Atlantic Richfield 7,000 $ 605,500
Exxon Mobil 16,000 1,289,000
Royal Dutch Petroleum New York Registry
1.25 Gldr Shrs 13,300 803,819
Schlumberger Ltd 20,000 1,125,000
Transocean Sedco Forex 3,872 130,440
Unocal Corp 21,100 708,169
================================================================================
5,659,240
1.76 PAPER & FOREST PRODUCTS
Champion International 9,700 600,794
Weyerhaeuser Co 11,500 825,844
================================================================================
1,426,638
2.83 RAILROADS
Kansas City Southern Industries 26,500 1,977,562
Norfolk Southern 15,000 307,500
================================================================================
2,285,062
1.25 RESTAURANTS
McDonald's Corp 25,000 1,007,812
================================================================================
5.93 RETAIL
Circuit City Stores-Circuit City Group 25,000 1,126,562
Dayton Hudson 16,000 1,175,000
Penney (J C) Co 17,000 338,937
Tandy Corp 22,000 1,082,125
Wal-Mart Stores 15,500 1,071,438
================================================================================
4,794,062
1.43 SAVINGS & LOAN
Charter One Financial 60,348 1,154,156
================================================================================
0.56 SERVICES
America Online(a) 6,000 452,625
================================================================================
1.02 TELECOMMUNICATIONS-- CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 8,000 825,000
================================================================================
1.92 TELECOMMUNICATIONS-- LONG DISTANCE
AT&T Corp 15,000 761,250
Cable & Wireless PLC Sponsored ADR
Representing 3 Ord Shrs 15,000 794,063
================================================================================
1,555,313
5.46 TELEPHONE
Bell Atlantic 17,844 1,098,521
BellSouth Corp 16,000 749,000
SBC Communications 23,092 1,125,735
US WEST 20,000 1,440,000
================================================================================
4,413,256
0.49 TOBACCO
Philip Morris 17,000 394,187
================================================================================
TOTAL COMMON STOCK (Cost $53,898,924) 65,987,726
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
10.26 FIXED INCOME SECURITIES
0.88 US GOVERNMENT OBLIGATIONS
US Treasury Notes
6.000%, 8/15/2009 $ 250,000 $ 242,188
5.625%, 5/15/2008 $ 500,000 470,313
================================================================================
TOTAL US GOVERNMENT OBLIGATIONS (Amortized Cost $764,032) 712,501
================================================================================
9.38 CORPORATE BONDS
0.36 AIRLINES
Delta Air Lines, Deb, 10.375%, 12/15/2022 $ 250,000 293,092
================================================================================
0.63 BUILDING MATERIALS
USG Corp, Sr Notes, 8.500%, 8/1/2005 $ 500,000 510,509
================================================================================
0.44 CABLE
Comcast Cable Partners Ltd, Sr Discount
Step-Up Deb Zero Coupon(b), 11/15/2007 $ 300,000 285,750
Renaissance Media Group LLC/Renaissance
Media Capital, Gtd Sr Discount Step-Up
Notes, Zero Coupon(b), 4/15/2008 $ 100,000 70,000
================================================================================
355,750
0.28 COMPUTER RELATED
PSINet Inc, Sr Notes, Series B, 10.000%,
2/15/2005 $ 225,000 222,469
================================================================================
3.80 ELECTRIC UTILITIES
Cleveland Electric Illuminating, 1st
Mortgage, Series E, 9.000%, 7/1/2023 $ 100,000 100,436
Consumers Energy, 1st Refunding Mortgage,
7.375%, 9/15/2023 $ 500,000 445,572
El Paso Electric, 1st Mortgage, Series D,
8.900%, 2/1/2006 $ 150,000 154,449
Gulf States Utilities, 1st Mortgage,
8.700%, 4/1/2024 $ 250,000 244,930
Jersey Central Power & Light, Sr Secured
Medium-Term Notes Series C, 7.980%,
2/16/2023 $ 250,000 237,957
New York State Electric & Gas,
1st Mortgage, 8.300%, 12/15/2022 $ 200,000 193,345
Niagara Mohawk Power
1st Mortgage, 8.500%, 7/1/2023 $ 250,000 242,192
Sr Discount Step-Up Notes, Series H,
Zero Coupon(b), 7/1/2010 $ 500,000 377,673
Potomac Edison, 1st Mortgage
8.000%, 6/1/2024 $ 250,000 244,128
7.750%, 5/1/2025 $ 100,000 95,240
Public Service of New Mexico, Sr Notes,
Series A, 7.100%, 8/1/2005 $ 250,000 240,751
Union Electric, 1st Mortgage
8.750%, 12/1/2021 $ 250,000 252,188
8.250%, 10/15/2022 $ 250,000 247,999
================================================================================
3,076,860
0.53 INSURANCE
Equitable Cos, Sr Notes, 9.000%, 12/15/2004 $ 400,000 425,360
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.27 LODGING-- HOTELS
Hilton Hotels, Sr Notes, 7.200%, 12/15/2009 $ 250,000 218,852
================================================================================
1.82 OIL & GAS RELATED
Atlantic Richfield, Deb, 10.875%, 7/15/2005 $ 600,000 695,186
Canadian Forest Oil Ltd, Gtd Sr Sub Notes,
8.750%, 9/15/2007 $ 100,000 95,625
Exxon Mobil, Deb, 8.625%, 8/15/2021 $ 300,000 333,410
Forest Oil, Gtd Sr Sub Notes, 10.500%,
1/15/2006 $ 100,000 101,000
Gulf Canada Resources Ltd, Sr Notes,
8.350%, 8/1/2006 $ 250,000 $ 245,625
================================================================================
1,470,846
0.13 PAPER & FOREST PRODUCTS
Bowater Inc, Deb, 9.000%, 8/1/2009 $ 100,000 105,624
================================================================================
0.12 SERVICES
NationsRent Inc, Sr Sub Notes, 10.375%,
12/15/2008 $ 100,000 98,500
================================================================================
0.19 TELECOMMUNICATIONS-- LONG DISTANCE
Level 3 Communications, Sr Discount Step-Up
Notes Zero Coupon(b), 12/1/2008 $ 250,000 151,250
================================================================================
0.81 TELEPHONE
Centel Capital, Deb, 9.000%, 10/15/2019 $ 250,000 272,155
MetroNet Communications, Sr Discount Step-Up
Notes Zero Coupon(b), 11/1/2007 $ 225,000 186,750
NEXTLINK Communications, Sr Notes, 9.625%,
10/1/2007 $ 200,000 195,000
================================================================================
653,905
TOTAL CORPORATE BONDS (Amortized Cost $8,073,205) 7,583,017
================================================================================
TOTAL FIXED INCOME SECURITIES (Amortized Cost $8,837,237) 8,295,518
================================================================================
8.14 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $6,587,537
(Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007
at 3.375%, value $6,710,498)
(Cost $6,586,000) $6,586,000 6,586,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $69,322,161)
(Cost for Income Tax Purposes $69,339,985) $80,869,244
================================================================================
(a) Security is non-income producing.
(b) Step-up bonds are obligations which increase the interest payment rate at a
specified point in time. Rate shown reflects current rate which may step up
at a future date.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
EQUITY
INCOME
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 69,322,161
================================================================================
At Value(a) $ 80,869,244
Cash 29,755
Receivables:
Fund Shares Sold 456,750
Dividends and Interest 235,690
Prepaid Expenses and Other Assets 1,712
================================================================================
TOTAL ASSETS 81,593,151
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 1,665,294
Fund Shares Repurchased 29,652
Accrued Expenses and Other Payables 5,593
================================================================================
TOTAL LIABILITIES 1,700,539
================================================================================
NET ASSETS AT VALUE $ 79,892,612
================================================================================
NET ASSETS
Paid-in Capital(b) $ 61,225,381
Accumulated Undistributed Net Investment Income 103,485
Accumulated Undistributed Net Realized Gain on
Investment Securities and Foreign Currency Transactions 7,016,662
Net Appreciation of Investment Securities and Foreign
Currency Transactions 11,547,084
================================================================================
NET ASSETS AT VALUE $ 79,892,612
================================================================================
Shares Outstanding 3,802,444
NET ASSET VALUE, Offering and Redemption Price per Share $ 21.01
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $6,586,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated
to Equity Income Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
EQUITY
INCOME
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 910,117
Interest 796,289
Foreign Taxes Withheld (1,106)
================================================================================
TOTAL INCOME 1,705,300
================================================================================
EXPENSES
Investment Advisory Fees 528,557
Transfer Agent Fees 5,000
Administrative Fees 103,227
Custodian Fees and Expenses 19,115
Directors' Fees and Expenses 11,076
Professional Fees and Expenses 23,433
Registration Fees and Expenses 56
Reports to Shareholders 46,625
Other Expenses 6,977
================================================================================
TOTAL EXPENSES 744,066
Fees and Expenses Paid Indirectly (13,527)
================================================================================
NET EXPENSES 730,539
================================================================================
NET INVESTMENT INCOME 974,761
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 7,017,224
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 1,500,412
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND FOREIGN
CURRENCY TRANSACTIONS 8,517,636
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,492,397
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
EQUITY INCOME FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Income $ 974,761 $ 998,166
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 7,017,224 1,862,509
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 1,500,412 4,286,624
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 9,492,397 7,147,299
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (921,268) (976,679)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions (412,361) (2,014,499)
================================================================================
TOTAL DISTRIBUTIONS (1,333,629) (2,991,178)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 32,790,025 24,505,640
Reinvestment of Distributions 1,333,629 2,989,373
================================================================================
34,123,654 27,495,013
Amounts Paid for Repurchases of Shares (22,735,328) (11,399,085)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 11,388,326 16,095,928
================================================================================
TOTAL INCREASE IN NET ASSETS 19,547,094 20,252,049
NET ASSETS
Beginning of Period 60,345,518 40,093,469
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $103,485 and $49,995,
respectively) $79,892,612 $60,345,518
================================================================================
---------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 1,631,786 1,350,082
Shares Issued from Reinvestment of Distributions 63,475 167,472
================================================================================
1,695,261 1,517,554
Shares Repurchased (1,135,876) (627,712)
================================================================================
NET INCREASE IN FUND SHARES 559,385 889,842
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements -- INVESCO VARIABLE INVESTMENT
FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund) (the "Fund",
presented herein), Financial Services Fund, Health Sciences Fund, High Yield
Fund, Market Neutral Fund, Realty Fund, Small Company Growth Fund, Technology
Fund, Telecommunications Fund, Total Return Fund and Utilities Fund. The
investment objective of the Fund is to seek the best possible current income.
The Fund is registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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 one or more 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
<PAGE>
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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Discounts and premiums 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 cost of foreign securities
is translated into U.S. dollars at the rates of exchange prevailing when such
securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
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 U.S. Government.
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.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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, 1999, 66.67% qualified for the
dividends received deduction available to the Fund's corporate shareholders.
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.
<PAGE>
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for mortgage-backed securities, market discounts, amortized premiums, foreign
currency transactions, nontaxable dividends, net operating losses and expired
capital loss carryforwards. For the year ended December 31, 1999, the Fund
reclassified $3 from accumulated undistributed net investment income to
accumulated undistributed net realized gain on investment securities. Net
investment income, net realized gains, paid-in capital and net assets were not
affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% on the first $500 million of average net assets;
reduced to 0.65% on the next $500 million of average net assets; reduced to
0.55% of average net assets in excess of $1 billion; reduced to 0.45% of average
net assets in excess of $2 billion; reduced to 0.40% of average net assets in
excess of $4 billion; reduced to 0.375% of average net assets in excess of $6
billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.015% of average net assets plus, effective July 8, 1998, an
additional amount computed at an annual rate of 0.25% of new assets (the
"Incremental Fees") to provide administrative, accounting and clerical services.
The fee is accrued daily and paid monthly. IFG may pay all or a portion of the
Base Fee and the Incremental Fees to other companies that assist in providing
the services.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $63,820,315 and $54,867,499, respectively. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
U.S. Government securities were $765,078 and $1,402,494, respectively.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $15,494,191 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $3,964,932, resulting in net
appreciation of $11,529,259.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses for the year ended December 31, 1999, included in Directors'
Fees and Expenses in the Statement of Operations were $1,297. Unfunded accrued
pension costs of $0 and pension liability of $2,414 are included in Prepaid
Expenses and Accrued Expenses, respectively, in the Statement of Assets and
Liabilities.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
<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 INVESCO Variable
Equity Income Fund, formerly INVESCO Variable Industrial Income Fund, (one of
the portfolios constituting INVESCO Variable Investment Funds, Inc., hereafter
referred to as the "Fund") at December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
EQUITY INCOME FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 18.61 $ 17.04 $ 14.33 $ 12.58 $ 10.09
===================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.26 0.33 0.30 0.28 0.19
Net Gains on Securities
(Both Realized and Unrealized) 2.50 2.23 3.71 2.52 2.76
===================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 2.76 2.56 4.01 2.80 2.95
===================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.25 0.32 0.29 0.28 0.20
Distributions from Capital Gains 0.11 0.67 1.01 0.77 0.26
===================================================================================================
TOTAL DISTRIBUTIONS 0.36 0.99 1.30 1.05 0.46
===================================================================================================
Net Asset Value-- End of Period 21.01 18.61 17.04 14.33 12.58
TOTAL RETURN(a) 14.84% 15.30% 28.17% 22.28% 29.25%
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 79,893 $ 60,346 $ 40,093 $ 22,342 $ 8,362
Ratio of Expenses to Average Net Assets(b)(c) 1.05% 0.93% 0.91% 0.95% 1.03%
Ratio of Net Investment Income to
Average Net Assets(b) 1.38% 1.98% 2.18% 2.87% 3.50%
Portfolio Turnover Rate 86% 73% 87% 93% 97%
</TABLE>
(a) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the periods shown.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1998, 1997, 1996 and 1995. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have
been 0.93%, 0.97%, 1.19%, and 2.31%, respectively, and ratio of net
investment income to average net assets would have been 1.98%, 2.12%, 2.63%
and 2.22%, respectively.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
We're easy to stay in touch with:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A90 9033 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
- --------------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-FINANCIAL SERVICES FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
<PAGE>
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The chart and other total return
figures cited reflect the fund's operating expenses, but the index does have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-FINANCIAL SERVICES FUND
VIF-FINANCIAL SERVICES FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
Since inception (9/99) 11.00%
----------------------------------------------------------
For the three months ended 12/31/99, VIF-Financial Services Fund had a
total return of 11.56%. This lagged the S&P 500, which over the same period had
a total return of 14.87. (Of course, past performance is not a guarantee of
future results.)(1),(2)
At the end of a difficult year for financial stocks, the fund enjoyed a
strong fourth quarter, handily outperforming the sector. The strongest
performers for the fund included brokerage stocks Morgan Stanley Dean Witter &
Co and Goldman Sachs Corp, which benefited from robust investment banking and
capital markets. Janus-driven Kansas City Southern Industries had an impressive
quarter as well. Financial services powerhouse Citigroup Inc. also advanced, as
did American Express and Marsh & McLennan, helped along by strength in its money
manager and perceived firming of insurance pricing. Not surprisingly,the
best-performing subsector for the year was the investment banking and brokerage
group.
Graph: INVESCO VIF - Financial Services Fund
Total Return from Inception (9/99) through 12/31/99 vs.
S&P 500 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Financial Services Fund to the value of a $10,000 investment in the
S&P 500 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (9/99) through
12/31/99.
Associates First Capital, hurt by deteriorating credit quality and fear of
increased competition in its business lines, performed poorly for the fund this
year. Firstar Corp declined because of integration concerns surrounding its two
mergers. The worst-performing subsector in 1999 was the savings and loans group,
which was pulled down mostly by weak results from Washington Mutual.
In general, we will continue to look for companies with above-average and
sustainable earnings growth, strong fundamentals, and attractive valuations in
relation to other firms in their respective sectors. We will continue to
maintain more substantial weighting in the large- to middle-capitalization
names. However, we are not without exposure to middle- to small-cap companies
that we believe will benefit from a rally in this sector when it does come.
Banks and thrifts will likely remain the largest weighting of the fund over the
<PAGE>
near-term, as credit quality remains excellent and international exposure is
limited in these industries. In addition to the qualities mentioned above, we
look for banks with attractive business mixes and favor those banks that have
exhibited economically intelligent deployment of capital. Stocks of insurance
companies with growth-oriented products will also be an area of focus.
FUND MANAGEMENT
The fund is managed by Jeff Morris. Prior to joining INVESCO, Jeff worked
at Norwest Mortgage. He received his BS degree in Business Administration, with
concentrations in finance and real estate, from Colorado State University and
his MS in Finance from the University of Colorado-Denver. Jeff is a Chartered
Financial Analyst.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE NASDAQ IS AN UNMANAGED INDEX OF
STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
90.59 COMMON STOCKS
36.56 BANKS
Bank of New York 10,975 $ 439,000
Chase Manhattan 5,400 419,512
City National 2,800 92,225
Comerica Inc 2,350 109,716
Fifth Third Bancorp 5,250 385,219
First Security 12,170 310,716
Firstar Corp 21,240 448,695
Huntington Bancshares 5,700 136,088
North Fork Bancorp 9,920 173,600
Northern Trust 7,100 376,300
Toronto-Dominion Bank 4,700 126,900
UnionBanCal Corp 2,700 106,481
Wells Fargo 10,850 438,747
================================================================================
3,563,199
4.52 CONSUMER FINANCE
American Express 2,650 440,562
================================================================================
18.52 FINANCIAL
Associates First Capital Class A Shrs 11,900 326,506
Capital One Financial 8,300 399,956
Citigroup Inc 7,880 437,832
Freddie Mac 7,350 345,909
Providian Financial 3,240 295,043
================================================================================
1,805,246
13.33 INSURANCE
AFLAC Inc 5,600 264,250
American International Group 1,300 140,562
AXA Financial 6,500 220,187
Hartford Life Class A Shrs 5,700 250,800
Nationwide Financial Services Class A Shrs 6,100 170,419
Radian Group 3,300 157,575
Travelers Property Casualty Class A Shrs 2,800 95,900
================================================================================
1,299,693
4.48 INSURANCE BROKERS
Marsh & McLennan 4,560 436,335
================================================================================
8.02 INVESTMENT BANK/BROKER FIRM
Donaldson, Lufkin & Jenrette 1,000 48,375
Goldman Sachs Group 1,400 131,863
Morgan Stanley Dean Witter & Co 3,300 471,075
Schwab (Charles) Corp 3,400 130,475
================================================================================
781,788
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.69 RAILROADS
Kansas City Southern Industries 900 $ 67,163
================================================================================
1.80 SAVINGS & LOAN
Charter One Financial 9,200 175,950
================================================================================
2.67 SERVICES
Official Payments(a) 5,000 260,000
================================================================================
TOTAL COMMON STOCKS (Cost $8,783,954) 8,829,936
================================================================================
9.41 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at 2.800%,
repurchased at $917,214 (Collateralized
by US Treasury Inflationary Index Notes,
due 1/15/2007 at 3.375%, value $934,695)
(Cost $917,000) $ 917,000 917,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $9,700,954)
(Cost for Income Tax Purposes $9,718,441) $9,746,936
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
FINANCIAL
SERVICES
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 9,700,954
================================================================================
At Value(a) $ 9,746,936
Cash 1,256
Receivables:
Fund Shares Sold 44,879
Dividends and Interest 9,200
Prepaid Expenses and Other Assets 39
================================================================================
TOTAL ASSETS 9,802,310
================================================================================
LIABILITIES
Payable for Fund Shares Repurchased 618,673
Accrued Expenses and Other Payables 4,704
================================================================================
TOTAL LIABILITIES 623,377
================================================================================
NET ASSETS AT VALUE $ 9,178,933
================================================================================
NET ASSETS
Paid-in Capital(b) $ 8,989,549
Accumulated Undistributed Net Investment Income 8,846
Accumulated Undistributed Net Realized Gain
on Investment Securities 134,556
Net Appreciation of Investment Securities 45,982
================================================================================
NET ASSETS AT VALUE $ 9,178,933
================================================================================
Shares Outstanding 826,911
NET ASSET VALUE, Offering and Redemption Price per Share $ 11.10
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $917,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Financial Services Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
PERIOD ENDED DECEMBER 31, 1999 (NOTE 1)
FINANCIAL
SERVICES
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 13,769
Interest 11,112
================================================================================
TOTAL INCOME 24,881
================================================================================
EXPENSES
Investment Advisory Fees 9,483
Transfer Agent Fees 1,389
Administrative Fees 6,128
Custodian Fees and Expenses 3,361
Professional Fees and Expenses 12,324
Other Expenses 83
================================================================================
TOTAL EXPENSES 32,768
Fees and Expenses Absorbed by Investment Adviser (14,434)
Fees and Expenses Paid Indirectly (2,299)
================================================================================
NET EXPENSES 16,035
================================================================================
NET INVESTMENT INCOME 8,846
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 134,556
Change in Net Appreciation of Investment Securities 45,982
================================================================================
NET GAIN ON INVESTMENT SECURITIES 180,538
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 189,384
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FINANCIAL SERVICES FUND
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999
(Note 1)
OPERATIONS
Net Investment Income $ 8,846
Net Realized Gain on Investment Securities 134,556
Change in Net Appreciation of Investment Securities 45,982
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 189,384
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 14,141,157
Amounts Paid for Repurchases of Shares (5,399,608)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 8,741,549
================================================================================
TOTAL INCREASE IN NET ASSETS 8,930,933
NET ASSETS
Initial Subscription 248,000
Beginning of Period 0
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $8,846) $ 9,178,933
================================================================================
--------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription 24,800
Shares Sold 1,317,359
================================================================================
1,342,159
Shares Repurchased (515,248)
================================================================================
NET INCREASE IN FUND SHARES 826,911
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT
FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund (the "Fund", presented herein), Health Sciences Fund, High Yield Fund,
Market Neutral Fund, Realty Fund, Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. The investment
objective of the Fund is to seek capital appreciation through investments in a
specific business sector. The Fund commenced investment operations on September
21, 1999. The Fund is registered under the Investment Company Act of 1940 (the
"Act") as a diversified, open-end management investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
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. Interest income, which may be comprised of stated coupon rate,
<PAGE>
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Cost is determined on the specific identification basis. The
cost of foreign securities is translated into U.S. dollars at the rates of
exchange prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries. Such concentrations may subject the Fund to additional risks
resulting from future political or economic conditions.
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.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for nontaxable dividends, net operating losses and expired capital loss
carryforwards.
F. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% of average net assets.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $10,306,934 and $1,657,537, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $537,987 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $509,492, resulting in net
appreciation of $28,495.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the period ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
<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 INVESCO Variable
Financial Services Fund (one of the portfolios constituting INVESCO Variable
Investment Funds, Inc., hereafter referred to as the "Fund") at December 31,
1999, and the results of its operations, the changes in its net assets and the
financial highlights for the period September 21, 1999 (commencement of
investment operations) through December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards generally
accepted in the United States, 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
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01
Net Gains on Securities
(Both Realized and Unrealized) 1.09
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.10
================================================================================
Net Asset Value--End of Period $ 11.10
================================================================================
TOTAL RETURN(b) 11.00%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 9,179
Ratio of Expenses to Average Net Assets(d)(e) 1.39%(f)
Ratio of Net Investment Income to Average Net Assets(d) 0.67%(f)
Portfolio Turnover Rate 37%(c)
(a) From September 21, 1999, commencement of investment operations, through
December 31, 1999.
(b) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the period
ended December 31, 1999. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.48% (annualized),
and ratio of net investment income to average net assets would have been
(0.42%) (annualized).
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(f) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(TM)
[INVESCO ICON] INVESCO
We're easy to stay in touch with:
Advisor Sales: 1-800-884-4229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A757 9040 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- --------------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-HEALTH SCIENCES FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
<PAGE>
If the Fed was intending to cool off the robust stock market it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The chart and other total return
figures cited reflect the fund's operating expenses, but the index does have
expenses, which would, of course, have lowered its performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-HEALTH SCIENCES FUND
VIF-HEALTH SCIENCES FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/991
1 year 4.86%
----------------------------------------------------------
Since inception (5/97) 21.22%
----------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Health Sciences Fund gained
4.86%. This return lagged its benchmark, the S&P 500 Index, which over the same
period returned 21.03%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
In a year that was difficult for many health care firms, biotechnology
companies were the market leaders in the health sciences sector in 1999. The
genomics revolution and promise of monoclonal antibodies has driven the
performance of these stocks. The genomics field holds the potential to identify
more specific drug targets in a shorter time frame. Monoclonal antibodies have
been recognized as a new way to treat cancers, arthritis and asthma, and will
better serve these relatively unmet medical needs. Performance at the end of the
quarter was aided by the fund's biotech weighting. Biotechnology benefited from
interest in genomics companies, such as Human Genome Sciences, Affymetrix,
Abgenix Inc, and Millennium Pharmaceuticals. These companies will participate in
the enormous potential associated with the unraveling of the human genome, which
has sparked the interest of the investment community.
Graph: INVESCO VIF - Health Sciences Fund
Total Return Since Inception 5/97 vs S&P 500 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Health Sciences Fund to the value of a $10,000 investment in the S&P
500 Index, assuming in each case reinvestment of all dividends and capital
gain distributions, for the period from inception (5/97) through 12/31/99.
Because of our focus on drug companies, however, the fund underperformed
the S&P 500 Index for the year. Nevertheless, we continue to expect the
pharmaceutical industry be the largest weighting of the portfolio over the
near-term. The biotechnology weighting was increased during the fourth quarter,
and it also will remain a significant portion of the fund. We're encouraged by
the subsector's new product cycle, consolidation, and lack of Medicare reform
exposure. We will continue to underweight the medical devices industry, which is
exhibiting poor fundamentals. And we will continue to underweight the health
care services industry in light of recent litigation activity and Medicare
reform.
<PAGE>
FUND MANAGEMENT
VIF-Health Sciences Fund is managed by INVESCO Senior Vice President John R.
Schroer, a Chartered Financial Analyst. He launched his investment career in
1989, after earning an MBA and BA from the University of Wisconsin.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE NASDAQ IS AN UNMANAGED INDEX OF
STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND
100.00 COMMON STOCKS
36.97 BIOTECHNOLOGY
Abgenix Inc(a) 1,380 $ 182,850
Alexion Pharmaceuticals(a) 4,010 120,801
Amgen Inc(a) 11,600 696,725
Biogen Inc(a) 6,270 529,815
Chiron Corp(a) 7,500 317,812
Collateral Therapeutics(a) 300 5,737
Enzon Inc(a) 600 26,025
Genentech Inc(a) 4,510 606,595
Gilead Sciences(a) 690 37,346
Human Genome Sciences(a) 1,040 158,730
ICOS Corp(a) 1,570 45,922
IDEC Pharmaceuticals(a) 3,570 350,752
ILEX Oncology(a) 3,040 73,340
Immunex Corp(a) 2,570 280,933
Medarex Inc(a) 4,050 150,863
MedImmune Inc(a) 2,220 368,243
Millennium Pharmaceuticals(a) 910 111,020
Protein Design Labs(a) 510 35,700
Titan Pharmaceuticals(a) 4,080 77,520
Transkaryotic Therapies(a) 3,790 145,915
================================================================================
4,322,644
0.13 COMPUTER RELATED
SciQuest.com Inc(a) 200 15,900
================================================================================
0.19 CONGLOMERATES
Monsanto Co 640 22,800
================================================================================
4.02 ELECTRONICS -- INSTRUMENTS
PE Corp-PE Biosystems Group 2,600 312,813
Waters Corp 2,970 157,410
================================================================================
470,223
45.91 HEALTH CARE DRUGS -- PHARMACEUTICALS
Alkermes Inc(a) 1,790 87,934
Allergan Inc 3,190 158,702
American Home Products 3,275 129,158
AstraZeneca Group PLC Sponsored ADR
Representing Ord Shrs 10,940 456,745
Bristol-Myers Squibb 1,810 116,179
Forest Laboratories(a) 4,370 268,482
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Glaxo Wellcome PLC Sponsored ADR
Representing 2 Ord Shrs 5,020 $ 280,493
Inhale Therapeutic Systems(a) 1,490 63,418
Johnson & Johnson 6,585 613,228
Lilly (Eli) & Co 7,330 487,445
Merck & Co 9,010 604,233
Pfizer Inc 7,860 254,959
Pharmacia & Upjohn 1,930 86,850
QLT PhotoTherapeutics(a) 1,130 66,388
Schering-Plough Corp 13,475 568,477
Shire Pharmaceuticals Group PLC(a) 1,465 14,780
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 6,045 389,525
Takeda Chemical Industries Ltd 1,190 58,807
Warner-Lambert Co 7,385 605,108
Yamanouchi Pharmaceutical Ltd 1,630 56,944
================================================================================
5,367,855
2.97 HEALTH CARE -- SERVICES
Columbia/HCA Healthcare 7,870 230,689
Healtheon/WebMD Corp(a) 3,100 116,250
================================================================================
346,939
9.81 MEDICAL EQUIPMENT & DEVICES
Bard (C R) Inc 2,750 145,750
Bausch & Lomb 2,720 186,150
Baxter International 6,370 400,116
Guidant Corp 1,680 78,960
Medtronic Inc 8,064 293,832
VISX Inc(a) 810 41,918
================================================================================
1,146,726
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $10,784,087)
(Cost for Income Tax Purposes $10,947,440) $ 11,693,087
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
HEALTH
SCIENCES
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost $ 10,784,087
================================================================================
At Value $ 11,693,087
Receivables:
Investment Securities Sold 12,199
Fund Shares Sold 312,778
Dividends and Interest 2,519
Prepaid Expenses and Other Assets 83
================================================================================
TOTAL ASSETS 12,020,666
================================================================================
LIABILITIES
Payables:
Custodian 92
Fund Shares Repurchased 47
Borrowings on Line of Credit 367,000
Accrued Expenses and Other Payables 2,004
================================================================================
TOTAL LIABILITIES 369,143
================================================================================
NET ASSETS AT VALUE $ 11,651,523
================================================================================
NET ASSETS
Paid-in Capital(a) $ 10,576,023
Accumulated Undistributed Net Investment Income 11,775
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 154,738
Net Appreciation of Investment Securities and Foreign
Currency Transactions 908,987
================================================================================
NET ASSETS AT VALUE $ 11,651,523
================================================================================
Shares Outstanding 727,350
NET ASSET VALUE, Offering and Redemption Price per Share $ 16.02
================================================================================
(a) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Health Sciences Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
HEALTH
SCIENCES
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 21,853
Interest 30,876
Foreign Taxes Withheld (288)
================================================================================
TOTAL INCOME 52,441
================================================================================
EXPENSES
Investment Advisory Fees 24,354
Transfer Agent Fees 5,000
Administrative Fees 18,605
Custodian Fees and Expenses 12,094
Directors' Fees and Expenses 8,115
Interest Expenses 66
Professional Fees and Expenses 16,856
Registration Fees and Expenses 39
Reports to Shareholders 8,562
Other Expenses 513
================================================================================
TOTAL EXPENSES 94,204
Fees and Expenses Absorbed by Investment Adviser (45,308)
Fees and Expenses Paid Indirectly (8,242)
================================================================================
NET EXPENSES 40,654
================================================================================
NET INVESTMENT INCOME 11,787
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on:
Investment Securities 168,854
Foreign Currency Transactions 418
================================================================================
Total Net Realized Gain 169,272
================================================================================
Change in Net Appreciation of:
Investment Securities 498,282
Foreign Currency Transactions 6,964
================================================================================
Total Net Appreciation 505,246
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND FOREIGN CURRENCY TRANSACTIONS 674,518
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 686,305
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
HEALTH SCIENCES FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Income $ 11,787 $ 4,656
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 169,272 63,995
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 505,246 369,979
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 686,305 438,630
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
================================================================================
Net Investment Income (5,893) (4,154)
Net Realized Gain on Investment Securities and Foreign
Currency Transactions 0 (47,939)
In Excess of Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (13,061)
================================================================================
TOTAL DISTRIBUTIONS (5,893) (65,154)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 19,779,104 5,323,628
Reinvestment of Distributions 5,893 65,154
================================================================================
19,784,997 5,388,782
Amounts Paid for Repurchases of Shares (11,191,495) (3,807,607)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS 8,593,502 1,581,175
================================================================================
TOTAL INCREASE IN NET ASSETS 9,273,914 1,954,651
NET ASSETS
Beginning of Period 2,377,609 422,958
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $11,775 and $277,
respectively) $11,651,523 $ 2,377,609
================================================================================
------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 1,318,340 403,110
Shares Issued from Reinvestment of Distributions 392 4,472
================================================================================
1,318,732 407,582
Shares Repurchased (746,864) (290,418)
================================================================================
Net Increase in Fund Shares 571,868 117,164
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT
FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund (the "Fund", presented herein), High Yield Fund,
Market Neutral Fund, Realty Fund, Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. The investment
objective of the Fund is to seek capital appreciation through investments in a
specific business sector. The Fund is registered under the Investment Company
Act of 1940 (the "Act") as a diversified, open-end management investment
company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
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
<PAGE>
including accrued interest. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
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.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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, 1999, 47.40% qualified for the
dividends received deduction available to the Fund's corporate shareholders.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
<PAGE>
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the year ended December 31, 1999, the Fund reclassified
$5,604 from accumulated undistributed net realized gain on investment securities
to accumulated undistributed net investment income. Net investment income, net
realized gains, paid-in capital and net assets were not affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% on the first $350 million of average net assets;
reduced to 0.65% on the next $350 million of average net assets; reduced to
0.55% of average net assets in excess of $700 million; reduced to 0.45% of
average net assets in excess of $2 billion; reduced to 0.40% of average net
assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $14,334,316 and $5,502,219, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $1,121,736 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $376,089, resulting in net
appreciation of $745,647.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999,
Health Sciences Fund had an outstanding loan under the line of credit at an
interest rate of 6.500%. The amount of the borrowing and the related accrued
interest are presented in the Statement of Assets and Liabilities. On January 3,
2000, Health Sciences Fund paid the loan in full, including interest.
---------------------------------------------
<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 INVESCO Variable
Health Sciences Fund (one of the portfolios constituting INVESCO Variable
Investment Funds, Inc., hereafter referred to as the "Fund") at December 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the two years in the period then ended and for the period
May 22, 1997 (commencement of investment operations) through December 31, 1997,
in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States,
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, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998(a) 1997(b)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 15.29 $ 11.04 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.05 0.10
Net Gains on Securities (Both Realized
and Unrealized) 0.72 4.66 0.94
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.74 4.71 1.04
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.01 0.03 0.00
Distributions from Capital Gains 0.00 0.34 0.00
In Excess of Capital Gains 0.00 0.09 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.01 0.46 0.00
================================================================================
Net Asset Value-- End of Period $ 16.02 $ 15.29 $ 11.04
================================================================================
TOTAL RETURN(c) 4.86% 42.85% 10.40%(d)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 11,652 $ 2,378 $ 423
Ratio of Expenses to Average Net
Assets(e)(f) 1.48% 1.27% 0.60%(g)
Ratio of Net Investment Income to Average
Net Assets(e) 0.36% 0.35% 2.34%(g)
Portfolio Turnover Rate 173% 107% 112%(d)
(a) The per share information was computed based on average shares.
(b) From May 22, 1997, commencement of investment operations, to December 31,
1997.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of the expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 2.85%, 4.20% and 21.45% (annualized), respectively,
and ratio of net investment income (loss) to average net assets would have
been (1.01%), (2.58%) and (18.51%) (annualized), respectively.
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
We're easy to stay in touch with:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A12 9041 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
- --------------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-HIGH YIELD FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the periods from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the index does not have
expenses, which would, of course, have lowered its performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-HIGH YIELD FUND
VIF-HIGH YIELD FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 9.20%
-------------------------------------------------
5 years 12.65%
-------------------------------------------------
Since inception (5/94) 11.34%
-------------------------------------------------
For the one-year period ended 12/31/99, VIF-High Yield Fund had a total
return of 9.20%. The fund greatly outperformed its benchmark, the Merrill Lynch
High Yield Master Index, which over the same period had a total return of 1.57%.
(Of course, past performance is not a guarantee of future results.)(1),(2)
Within a difficult high-yield environment this past year, our superior
performance has been driven by the ability to choose issues within specific
investment themes that are most likely to experience positive events, and
through the avoidance of problem credits and defaults. The fund's outperformance
has resulted from avoidance of credit risk experiences (i.e., defaults and
credit quality decline), continued "big bang" positive events leading to
significant credit improvement, and the improvement of situations where the
issuer's credit quality has recovered from declines experienced in 1998.
Continuing high yield market default activity has further differentiated the
fund's performance from its peer group. We feel that credit selection/avoidance
and "big bang" events will be the key determinants of continued success through
2000.
Graph: INVESCO VIF - High Yield Fund
Total Return Since Inception (5/94) through 12/31/99 vs Merrill Lynch
High Yield Master Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-High Yield Fund to the value of a $10,000 investment in the Merrill
Lynch High Yield Master Index, assuming in each case reinvestment of all
dividends and capital gain distributions, for the period from inception
(5/94) through 12/31/99.
We continue to focus on energy, gaming, broadcasting, communications,
electric utilities, and special situations. The fundamentals brought on by
continuing domestic economic growth and a stronger global economy are not fully
reflected in current valuations within the high-yield market. Thus, we feel that
the current environment provides an excellent opportunity for the long-term
investor. Eventually, valuations will be driven by the continuing strength of
the economy and the associated effect on fundamentals that underlie the credits.
<PAGE>
FUND MANAGEMENT
VIF-High Yield Fund is managed by Senior Vice President and Director of
Fixed-Income Investments Jerry Paul. Jerry began his investment career in 1976;
before joining INVESCO, he worked for Stein, Roe & Farnham Inc., as well as
Quixote Investment Management. He earned an MBA from the University of Northern
Iowa, and a BBA from the University of Iowa. He is a Chartered Financial Analyst
and Certified Public Accountant. Jerry recently was named Morningstar's 1999
Fixed-Income Manager of the Year.
(1) 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.
(2) THE MERRILL LYNCH HIGH YIELD INDEX IS AN UNMANAGED INDEX INDICATIVE OF THE
HIGH-YIELD MARKETS. THE NASDAQ IS AN UNMANAGED INDEX OF STOCKS TRADED OVER THE
COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
HIGH YIELD FUND
91.02 FIXED INCOME SECURITIES
91.02 CORPORATE BONDS
0.97 BIOTECHNOLOGY
Packard BioScience,
Sr Sub Notes,
Series B, 9.375%, 3/1/2007 $ 650,000 $ 552,500
================================================================================
5.02 BROADCASTING
Brill Media LLC/Brill Media
Management, Gtd Sr Step-Up Notes
12.000%(a), 12/5/2007 $ 250,000 177,500
Chancellor Media of Los Angeles,
Gtd Sr Sub Notes, Series B,
10.500%, 1/15/2007 $ 400,000 434,000
LIN Holdings, Sr Discount Step-Up
Notes, Zero Coupon(a), 3/1/2008 $ 1,200,000 808,500
LIN Television, Gtd Sr Sub Notes,
8.375%, 3/1/2008 $ 500,000 465,000
Sinclair Broadcast Group, Gtd Sr Sub
Notes, 10.000%, 9/30/2005 $ 500,000 495,000
Young Broadcasting, Gtd Sr Sub Notes,
Series B, 9.000%, 1/15/2006 $ 500,000 481,250
================================================================================
2,861,250
8.83 CABLE
Charter Communications Holdings,
Sr Discount Step-Up Notes
Zero Coupon(a), 4/1/2011 $ 500,000 293,125
Comcast Cable Partners Ltd,
Sr Discount Step-Up Deb
Zero Coupon(a), 11/15/2007 $ 1,450,000 1,381,125
Mediacom LLC/Mediacom Capital,
Sr Notes, 7.875%, 2/15/2011 $ 250,000 220,000
NTL Inc, Sr Deferred Coupon
Step-Up Notes, Series B,
Zero Coupon(a), 2/1/2006 $ 500,000 452,500
Zero Coupon(a), 4/1/200 $ 500,000 345,000
Renaissance Media Group LLC,
Gtd Sr Discount Step-Up Notes
Zero Coupon(a), 4/15/2008 $ 1,000,000 700,000
TeleWest PLC, Sr Discount Step-Up
Deb, Zero Coupon(a), 10/1/2007 $ 1,500,000 1,398,750
United International Holdings,
Sr Secured Discount
Step-Up Notes, Series B
Zero Coupon(a), 2/15/2008 $ 380,000 243,200
================================================================================
5,033,700
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
1.93 CHEMICALS
Huntsman Corp, Sr Sub Notes(b),
9.500%, 7/1/2007 $ 500,000 473,750
Huntsman Polymers, Sr Notes,
11.750%, 12/1/2004 $ 600,000 627,000
================================================================================
1,100,750
1.52 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
World Access, Sr Notes, Series B,
13.250%, 1/15/2008 $ 500,000 450,000
Worldwide Fiber, Sr Notes,
12.500%, 12/15/2005 $ 400,000 416,000
================================================================================
866,000
5.22 COMPUTER RELATED
Metromedia Fiber Network, Sr Notes,
Series B, 10.000%, 11/15/2008 $ 1,250,000 1,278,125
PSINet
Sr Notes, 11.000%, 8/1/2009 $ 500,000 515,000
Sr Notes(b), 10.500%, 12/1/2006 $ 1,000,000 1,007,500
WAM!NET, Gtd Sr Discount
Step-Up Notes, Series B,
Zero Coupon(a), 3/1/2005 $ 300,000 $ 174,000
================================================================================
2,974,625
4.12 ELECTRIC UTILITIES
Cleveland Electric Illuminating,
Sr Secured Notes, Series D,
7.880%, 11/1/2017 $ 1,000,000 941,489
El Paso Electric, 1st Mortgage,
Series D, 8.900%, 2/1/2006 $ 1,000,000 1,029,663
Niagara Mohawk Power, Sr Discount
Step-Up Notes, Series H
Zero Coupon(a), 7/1/2010 $ 500,000 377,673
================================================================================
2,348,825
0.36 ELECTRICAL EQUIPMENT
Alpine Group, Gtd Sr Secured Notes,
Series B, 12.250%, 7/15/2003 $ 200,000 206,000
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.32 ENGINEERING & CONSTRUCTION
Ryland Group, Sr Sub Notes,
8.250%, 4/1/2008 $ 200,000 182,000
================================================================================
3.43 GAMING
Aztar Corp, Sr Sub Notes,
8.875%, 5/15/2007 $ 1,000,000 960,000
Isle of Capri Casinos, Sr Sub
Notes, 8.750%, 4/15/2009 $ 500,000 460,000
Station Casinos, Sr Sub Notes,
9.750%, 4/15/2007 $ 300,000 301,500
Venetian Casino Resort LLC/Las Vegas
Sands, Gtd Mortgage Notes
12.250%, 11/15/2004 $ 271,000 233,738
================================================================================
1,955,238
1.30 HEALTH CARE RELATED
PharMerica Inc, Gtd Sr Sub Notes,
8.375%, 4/1/2008 $ 1,000,000 740,000
================================================================================
0.64 HOUSEHOLD PRODUCTS
Home Products International,
Gtd Sr Sub Notes,
9.625%, 5/15/2008 $ 400,000 365,000
================================================================================
1.24 IRON & STEEL
Inland Steel, 1st Mortgage,
Series R, 7.900%, 1/15/2007 $ 488,000 464,820
National Steel, 1st Mortgage,
8.375%, 8/1/2006 $ 250,000 238,750
================================================================================
703,570
0.40 LODGING -- HOTELS
Signature Resorts, Sr Sub Notes,
9.750%, 10/1/2007 $ 250,000 225,000
================================================================================
0.61 METALS MINING
Bulong Operations Property Ltd,
Sr Secured Notes,
12.500%, 12/15/2008 $ 500,000 350,000
================================================================================
4.36 OIL & GAS RELATED
Belco Oil & Gas, Sr Sub Notes,
Series B, 8.875%, 9/15/2007 $ 400,000 382,000
Canadian Forest Oil Ltd, Gtd Sr Sub
Notes, 8.750%, 9/15/2007 $ 700,000 669,375
Cliffs Drilling, Gtd Sr Notes,
Series B, 10.250%, 5/15/2003 $ 360,000 363,600
Coda Energy, Gtd Sr Sub Notes,
Series B, 10.500%, 4/1/2006 $ 200,000 205,000
Forest Oil, Gtd Sr Sub Notes,
10.500%, 1/15/2006 $ 150,000 151,500
GulfMark Offshore, Gtd Sr Notes,
8.750%, 6/1/2008 $ 250,000 230,000
Houston Exploration, Sr Sub Notes,
Series B, 8.625%, 1/1/2008 $ 500,000 482,500
================================================================================
2,483,975
1.84 PAPER & FOREST PRODUCTS
Bear Island Paper LLC/Bear Island
Finance II, Sr Secured Notes
Series B, 10.000%, 12/1/2007 $ 600,000 586,500
Doman Industries Ltd, Sr Notes,
Series B, 9.250%, 11/15/2007 $ 250,000 200,000
SD Warren, Sub Exchangeable Deb,
14.000%, 12/15/2006 $ 231,750 259,560
================================================================================
1,046,060
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.45 PERSONAL CARE
Revlon Consumer Products, Sr Notes,
8.125%, 2/1/2006 $ 350,000 $ 257,250
================================================================================
1.57 POLLUTION CONTROL
Allied Waste North America, Sr Sub
Notes(b), 10.000%, 8/1/2009 $ 1,000,000 895,000
================================================================================
4.44 SERVICES
Heritage Media, Sr Sub Notes,
8.750%, 2/15/2006 $ 500,000 505,625
NationsRent Inc, Gtd Sr Sub Notes,
10.375%, 12/15/2008 $ 625,000 615,625
United Rentals, Gtd Sr Sub Notes, Series B,
9.000%, 4/1/2009 $ 750,000 708,750
8.800%, 8/15/2008 $ 750,000 700,312
================================================================================
2,530,312
0.17 SHIPPING
TBS Shipping International Ltd,
1st Pfd Shipping Mortgage Notes(c)
10.000%, 5/1/2005 $ 250,000 95,000
================================================================================
1.20 SPECIALTY PRINTING
MDC Communications, Sr Sub Notes,
10.500%, 12/1/2006 $ 500,000 493,750
World Color Press, Sr Sub Notes,
7.750%, 2/15/2009 $ 200,000 190,000
================================================================================
683,750
4.16 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Esat Holdings Ltd, Sr Deferred Step-Up Notes,
Series B Zero Coupon(a), 2/1/2007 $ 650,000 539,500
Microcell Telecommunications,
Sr Discount Step-Up Notes, Series B
Zero Coupon(a), 6/1/2006 $ 700,000 617,750
Rogers Cantel, Sr Secured Deb,
9.750%, 6/1/2016 $ 250,000 280,000
Telecorp PCS, Sr Discount Step-Up
Notes, Zero Coupon(a), 4/15/2009 $ 650,000 409,500
Williams Communications Group,
Sr Notes, 10.875%, 10/1/2009 $ 500,000 522,500
================================================================================
2,369,250
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
15.90 TELECOMMUNICATIONS -- LONG DISTANCE
Call-Net Enterprises, Sr Discount Step-Up
Notes, Zero Coupon(a), 5/15/2009 $ 1,000,000 492,500
Esprit Telecom Group PLC, Sr Notes,
11.500%, 12/15/2007 $ 750,000 751,875
GCI Inc, Sr Notes, 9.750%, 8/1/2007 $ 495,000 460,350
Global Crossing Holdings Ltd,
Gtd Sr Notes, 9.625%, 5/15/2008 $ 500,000 500,000
GlobeNet Communications Group, Sr
Notes(b), 13.000%, 7/15/2007 $ 300,000 305,625
GST Network Funding, Sr Secured
Discount Step-Up Notes
Zero Coupon(a), 5/1/2008 $ 400,000 193,000
IXC Communications, Sr Sub Notes,
9.000%, 4/15/2008 $ 2,500,000 2,525,000
Level 3 Communications
Sr Discount Step-Up Notes, Zero
Coupon(a), 12/1/2008 $ 2,600,000 1,573,000
Sr Notes, 9.125%, 5/1/2008 $ 500,000 471,250
Primus Telecommunications Group, Sr
Notes, Series B, 9.875%, 5/15/2008 $ 250,000 228,750
Qwest Communications International,
Sr Discount Step-Up Notes, Series B
Zero Coupon(a)
10/15/2007 $ 900,000 729,000
2/1/2008 $ 250,000 193,125
Startec Global Communications, Sr
Notes, 12.000%, 5/15/2008 $ 150,000 131,250
Viatel Inc, Sr Notes,
11.500%, 3/15/2009 $ 500,000 506,250
================================================================================
9,060,975
19.41 TELEPHONE
Diamond Cable Communications, PLC,
Sr Discount Step-Up Notes
13.250%, 9/30/2004 $ 750,000 $ 803,438
Zero Coupon(a)
12/15/2005 $ 500,000 472,500
2/15/2007 $ 400,000 328,000
Focal Communications, Sr Discount
Step-Up Notes, Zero Coupon(a),
2/15/2008 $ 500,000 325,000
Intermedia Communications
Sr Discount Step-Up Notes, Series B,
Zero Coupon(a), 3/1/2009 $ 1,750,000 1,043,437
Sr Notes, 8.500%, 1/15/2008 $ 250,000 228,750
McLeodUSA Inc
Sr Discount Step-Up Notes,
Zero Coupon(a), 3/1/2007 $ 250,000 205,000
Sr Notes, 8.125%, 2/15/2009 $ 500,000 466,250
MetroNet Communications, Sr Discount
Step-Up Notes, Zero Coupon(a)
11/1/2007 $ 250,000 207,500
6/15/2008 $ 1,650,000 1,295,250
Netia Holdings BV, Gtd Sr Discount
Step-Up Notes, Series B
Zero Coupon(a), 11/1/2007 $ 525,000 341,250
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
NEXTLINK Communications
Sr Discount Step-Up Notes,
Zero Coupon(a), 4/15/2008 $ 1,000,000 640,000
Sr Notes
10.750%, 11/15/2008 $ 500,000 515,000
9.625%, 10/1/2007 $ 250,000 243,750
NEXTLINK Communications LLC/NEXTLINK
Capital, Sr Notes,
12.500%, 4/15/2006 $ 1,000,000 1,077,500
RCN Corp
Sr Discount Step-Up Notes,
Series B, Zero Coupon(a),
2/15/2008 $ 1,000,000 655,000
Sr Notes, 10.125%, 1/15/2010 $ 500,000 497,500
Rhythms NetConnections, Sr Discount
Step-Up Notes, Series B
Zero Coupon(a), 5/15/2008 $ 500,000 268,750
United Pan-Europe Communications NV
Sr Discount Step-Up Notes,
Zero Coupon(a), 8/1/2009 $ 1,250,000 703,125
Sr Notes(b), 10.875%, 11/1/2007 $ 500,000 507,500
US WEST Communications,
Notes, 5.650%, 11/1/2004 $ 250,000 233,933
================================================================================
11,058,433
1.61 TEXTILE -- APPAREL MANUFACTURING
WestPoint Stevens, Sr Notes,
7.875%, 6/15/2005 $ 1,000,000 915,000
================================================================================
TOTAL FIXED INCOME SECURITIES
(Cost $54,273,258) 51,859,463
================================================================================
0.04 COMMON STOCKS & WARRANTS
0.03 COMPUTER RELATED
WAM!NET Warrants(d) (Exp 2005) 900 20,475
================================================================================
0.00 TELECOMMUNICATIONS -- LONG DISTANCE
Startec Global Communications
Warrants(b)(d) (Exp 2008) 150 1,500
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.01 TELEPHONE
Intermedia Communications(d) 89 $ 3,454
================================================================================
TOTAL COMMON STOCKS & WARRANTS (Cost $2,857) 25,429
================================================================================
3.73 PREFERRED STOCKS
0.54 PUBLISHING
PRIMEDIA Inc, Exchangeable Pfd,
Series H Shrs, 8.625% 3,500 304,500
================================================================================
0.78 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Nextel Communications, Exchangeable
Pfd(e), Series E Shrs, 11.125% 445 445,000
================================================================================
1.76 TELECOMMUNICATIONS -- LONG DISTANCE
Global Crossing Holdings Ltd, Sr
Exchangeable Pfd(e), 10.500% 10,000 1,005,000
================================================================================
0.65 TELEPHONE
Intermedia Communications
Depository Shr Representing 1/100 Conv
Jr Pfd, Series F Shrs, 7.000% 6,500 173,063
Pfd(e), Series B Shrs, 13.500% 199 195,020
================================================================================
368,083
TOTAL PREFERRED STOCKS (Cost $2,135,468) 2,122,583
================================================================================
5.21 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $2,968,693
(Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007
at 3.375%, value $3,027,598)
(Cost $2,968,000) $ 2,968,000 2,968,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $59,379,583)
(Cost for Income Tax Purposes $59,380,993) $ 56,975,475
================================================================================
(a) Step-up bonds are obligations which increase the interest payment rate at a
specified point in time. Rate shown reflects current rate which may step up
at a future date.
(b) Securities are acquired pursuant to Rule 144A. The Fund deems such
securities to be "liquid" because an institutional market exists.
(c) Security is a defaulted security with respect to cumulative interest
payments of $12,500 at December 31, 1999.
(d) Security is non-income producing.
(e) Security is a payment-in-kind (PIK) security. PIK securities may make
interest payment in additional securities.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
HIGH
YIELD
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 59,379,583
================================================================================
At Value(a) $ 56,975,475
Cash 297,206
Receivables:
Investment Securities Sold 21,146
Fund Shares Sold 680,705
Dividends and Interest 772,555
Prepaid Expenses and Other Assets 1,202
================================================================================
TOTAL ASSETS 58,748,289
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 303,732
Fund Shares Repurchased 60,569
Accrued Expenses and Other Payables 5,383
================================================================================
TOTAL LIABILITIES 369,684
================================================================================
NET ASSETS AT VALUE $ 58,378,605
================================================================================
NET ASSETS
Paid-in Capital(b) $ 61,603,930
Accumulated Undistributed Net Investment Income 478,163
Accumulated Undistributed Net Realized Loss on
Investment Securities (1,299,380)
Net Depreciation of Investment Securities (2,404,108)
================================================================================
NET ASSETS AT VALUE $ 58,378,605
================================================================================
Shares Outstanding 5,073,218
NET ASSET VALUE, Offering and Redemption Price per Share $ 11.51
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $2,968,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
High Yield Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
HIGH
YIELD
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 207,574
Interest 4,616,816
================================================================================
TOTAL INCOME 4,824,390
================================================================================
EXPENSES
Investment Advisory Fees 293,782
Transfer Agent Fees 5,000
Administrative Fees 122,285
Custodian Fees and Expenses 13,738
Directors' Fees and Expenses 10,126
Professional Fees and Expenses 21,298
Registration Fees and Expenses 52
Reports to Shareholders 31,560
Other Expenses 15,023
================================================================================
TOTAL EXPENSES 512,864
Fees and Expenses Paid Indirectly (10,430)
================================================================================
NET EXPENSES 502,434
================================================================================
NET INVESTMENT INCOME 4,321,956
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (925,346)
Change in Net Appreciation of Investment Securities 716,141
================================================================================
NET LOSS ON INVESTMENT SECURITIES (209,205)
================================================================================
Net Increase in Net Assets from Operations $ 4,112,751
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
HIGH YIELD FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Income $ 4,321,956 $ 3,373,382
Net Realized Gain (Loss) on Investment Securities (925,346) 694,287
Change in Net Appreciation (Depreciation) of
Investment Securities 716,141 (3,509,648)
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 4,112,751 558,021
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (3,850,861) (3,379,839)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (797,161)
In Excess of Net Realized Gain on Investment
Securities and Foreign Currency Transactions (4,126) (380,864)
================================================================================
TOTAL DISTRIBUTIONS (3,854,987) (4,557,864)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 42,185,089 39,772,368
Reinvestment of Distributions 3,854,987 4,557,864
================================================================================
46,040,076 44,330,232
Amounts Paid for Repurchases of Shares (29,944,825) (29,185,713)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 16,095,251 15,144,519
================================================================================
TOTAL INCREASE IN NET ASSETS 16,353,015 11,144,676
NET ASSETS
Beginning of Period 42,025,590 30,880,914
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
of $478,163 and $6,969, respectively) $58,378,605 $ 42,025,590
================================================================================
----------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 3,541,193 3,145,683
Shares Issued from Reinvestment of Distributions 339,049 401,574
================================================================================
3,880,242 3,547,257
Shares Repurchased (2,522,474) (2,310,193)
================================================================================
NET INCREASE IN FUND SHARES 1,357,768 1,237,064
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT
FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund (the "Fund", presented herein),
Market Neutral Fund, Realty Fund, Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. The investment
objective of the Fund is to seek a high level of current income by investing
primarily in lower rated bonds, other debt securities and preferred stock. The
Fund is registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. 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 accounting principles
generally accepted in the United States 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 income and expenses during the reporting
period. Actual results could differ from those estimates.
A. SECURITY VALUATION -- 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 one or more dealers making a market for such
securities.
Equity securities traded on national securities exchanges or in the
over-the-counter market are valued at the last sales price at the close of the
regular trading day on that exchange (generally 4:00 p.m. Eastern time) in the
market where such securities are primarily traded. If last sales prices are not
available, securities are valued at the highest closing bid prices at the close
of the regular trading day and 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
<PAGE>
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. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Interest on payment-in-kind debt securities is accrued based
on the yield to maturity at purchase date method. Discounts and premiums 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 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.
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, 1999, the Fund had $1,155,674 in net capital loss carryovers
which expire in the year 2007.
The Fund incurred and elected to defer post-October 31 net capital losses of
$142,295 to the year ended December 31, 2000. To the extent future capital gains
are offset by capital loss carryovers, such gains will not be distributed to
shareholders.
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, 1999, 4.48% qualified for the dividends
received deduction available to the Fund's corporate shareholders.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the year ended December 31, 1999, the Fund reclassified $99
from accumulated undistributed net realized gain on investment securities to
accumulated undistributed net investment income. Net investment income, net
realized gains, paid-in capital and net assets were not affected.
F. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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.
<PAGE>
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.60% on the first $500 million of average net assets;
reduced to 0.55% on the next $500 million of average net assets; reduced to
0.45% of average net assets in excess of $1 billion; reduced to 0.40% of average
net assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $79,202,858 and $66,397,626 respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $413,637 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $2,819,155 resulting in net
depreciation of $2,405,518.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses for the year ended December 31, 1999, included in Directors'
Fees and Expenses in the Statement of Operations were $906. Unfunded accrued
pension costs of $0 and pension liability of $1,653 are included in Prepaid
Expenses and Accrued Expenses, respectively, in the Statement of Assets and
Liabilities.
<PAGE>
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
----------------------------------------------------------
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 INVESCO Variable High Yield Fund
(one of the portfolios constituting INVESCO Variable Investment Funds, Inc.,
hereafter referred to as the "Fund") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
PER SHARE DATA
Net Asset Value--
Beginning of Period $ 11.31 $ 12.46 $ 11.78 $ 11.04 $ 10.01
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.93 0.97 0.78 0.72 0.55
Net Gains or (Losses) on
Securities (Both Realized and
Unrealized) 0.11 (0.80) 1.26 1.11 1.43
================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 1.04 0.17 2.04 1.83 1.98
================================================================================
LESS DISTRIBUTIONS
Dividends from
Net Investment Income 0.84 0.98 0.78 0.71 0.55
Distributions from
Capital Gains(a) 0.00 0.23 0.58 0.38 0.40
In Excess of Capital Gains 0.00 0.11 0.00 0.00 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.84 1.32 1.36 1.09 0.95
================================================================================
Net Asset Value--
End of Period $ 11.51 $ 11.31 $ 12.46 $ 11.78 $ 11.04
================================================================================
TOTAL RETURN(b) 9.20% 1.42% 17.33% 16.59% 19.76%
RATIOS
Net Assets--End of Period
($000 Omitted) $ 58,379 $ 42,026 $ 30,881 $ 14,033 $ 5,233
Ratio of Expenses to
Average Net Assets(c)(d) 1.05% 0.85% 0.83% 0.87% 0.97%
Ratio of Net Investment Income
to Average Net Assets(c) 8.81% 8.99% 8.67% 9.19% 8.79%
Portfolio Turnover Rate 143% 245% 344% 380% 310%
(a) Distributions from capital gains for the year ended December 31, 1999,
aggregated less than $0.01 on a per share basis.
(b) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1997, 1996, and 1995. If such expenses had not been
voluntarily abosorbed, ratio of expenses to average net assets would have
been 0.94%, 1.32% and 2.71%, respectively, and ratio of net investment
income to average net assests would have been 8.56%, 8.74% and 7.05%,
respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(TM)
[INVESCO ICON] INVESCO
We're easy to stay in touch with:
Advisor Sales: 1-800-884-4229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A14 9035 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- -------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- -------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-MARKET NEUTRAL FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the periods from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the indexes do not have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-MARKET NEUTRAL FUND
VIF-MARKET NEUTRAL FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
Since inception (11/99) 2.30%
------------------------------------------------------
For the one-month period ended 12/31/99, VIF-Market Neutral Fund had a
total return of 2.30%. This exceeded the return on the 90-day Treasury bill,
which over the same period had a total return of 0.43%. The S&P 500 Index had a
total return of 5.88% for the same period. (Of course, past performance is not a
guarantee of future results.)(1),(2)
VIF-Market Neutral is a large-capitalization, market-neutral strategy that
utilizes a fundamentally-based stock selection process. This process is combined
with rigorous risk control to create an attractive risk/return relationship. Its
benchmark is the 90-day Treasury bill rate of return. The portfolio's
value-added is a function of the return spread between the long and the short
portfolios, combined with our ability to minimize transaction costs through
state-of-the-art trading techniques. The goal of the fund is to outperform
90-day Treasury bills by 4% before fees, while maintaining a tracking error of
less than 5%.
Graph: INVESCO VIF - Market Neutral Fund
Total Return since Inception (11/99) through 12/31/99 vs. S&P 500 Index
and 90-Day Treasury Bill
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Market Neutral Fund to the value of a $10,000 investment in the S&P
500 Index and a $10,000 investment in the 90-Day Treasury Bill, assuming
in each case reinvestment of all dividends and capital gain distributions,
for the period from inception (11/99) through 12/31/99.
FUND MANAGEMENT
VIF-Market Neutral is team managed by INVESCO Inc. of New York.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE NASDAQ IS AN UNMANAGED INDEX OF
STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
December 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
MARKET NEUTRAL FUND
98.54 LONG POSITIONS
91.28 COMMON STOCKS(b)
2.24 AEROSPACE & DEFENSE
Northrop Grumman 1,600 $ 86,500
United Technologies 2,200 143,000
================================================================================
229,500
0.67 AIRLINES
Delta Air Lines 400 19,925
Southwest Airlines 3,000 48,562
================================================================================
68,487
1.30 AUTO PARTS
Cummins Engine 1,700 82,131
Johnson Controls 900 51,187
================================================================================
133,318
1.36 AUTOMOBILES
Ford Motor 2,600 138,938
================================================================================
3.80 BANKS
Chase Manhattan 1,900 147,606
Fifth Third Bancorp 1,200 88,050
Mellon Financial 1,300 44,281
Morgan (J P) & Co 500 63,313
SouthTrust Corp 1,200 45,375
================================================================================
388,625
1.63 BIOTECHNOLOGY
Biogen Inc(a) 800 67,600
MedImmune Inc(a) 600 99,525
================================================================================
167,125
0.35 BUILDING MATERIALS
Masco Corp 1,400 35,525
================================================================================
1.03 CABLE
Comcast Corp Class A Shrs 2,100 105,525
================================================================================
1.04 CHEMICALS
Dow Chemical 800 106,900
================================================================================
3.96 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
ADC Telecommunications(a) 1,100 79,819
Comverse Technology(a) 700 101,325
QUALCOMM Inc(a) 800 141,000
Tellabs Inc(a) 1,300 83,444
================================================================================
405,588
7.58 COMPUTER RELATED
Adobe Systems 1,000 67,250
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Apple Computer(a) 500 $ 51,406
Cisco Systems(a) 900 96,412
Electronic Arts(a) 400 33,600
EMC Corp(a) 900 98,325
Galileo International 1,300 38,919
Hewlett-Packard Co 300 34,181
Intuit Inc(a) 1,100 65,931
Legato Systems(a) 500 34,406
Microsoft Corp(a) 900 105,075
Network Appliance(a) 1,000 83,063
Siebel Systems(a) 400 33,600
Synopsys Inc(a) 500 33,375
================================================================================
775,543
0.39 CONGLOMERATES
Fortune Brands 1,200 39,675
================================================================================
0.71 CONTAINERS
Temple-Inland Inc 1,100 72,531
================================================================================
4.48 ELECTRIC UTILITIES
Ameren Corp 1,300 42,575
Constellation Energy Group 1,500 43,500
FirstEnergy Corp 1,900 43,106
GPU Inc 1,400 41,912
PP&L Resources 1,900 43,463
Public Service Enterprise Group 1,900 66,144
Reliant Energy 4,400 100,650
Southern Co 700 16,450
Texas Utilities 1,700 60,456
================================================================================
458,256
1.59 ELECTRICAL EQUIPMENT
Rockwell International 1,800 86,175
Solectron Corp(a) 800 76,100
================================================================================
162,275
1.76 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 1,800 89,212
Xilinx Inc(a) 2,000 90,938
================================================================================
180,150
2.68 EQUIPMENT -- SEMICONDUCTOR
Applied Materials(a) 1,100 139,356
Novellus Systems(a) 1,100 134,784
================================================================================
274,140
2.03 FINANCIAL
Ambac Financial Group 1,800 93,938
CIT Group Class A Shrs 2,500 52,812
Freddie Mac 1,300 61,181
================================================================================
207,931
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
4.75 FOODS
Bestfoods Inc 2,800 $ 147,175
General Mills 2,500 89,375
Nabisco Group Holdings 3,700 39,313
Quaker Oats 2,300 150,938
SYSCO Corp 1,500 59,344
================================================================================
486,145
2.29 HEALTH CARE DRUGS -- PHARMACEUTICALS
Allergan Inc 2,000 99,500
Schering-Plough Corp 3,200 135,000
================================================================================
234,500
3.71 HEALTH CARE RELATED
Bard (C R) Inc 1,900 100,700
Biomet Inc 1,100 44,000
Columbia/HCA Healthcare 2,500 73,281
United HealthCare 2,300 122,188
Wellpoint Health Networks(a) 600 39,563
================================================================================
379,732
0.89 HOUSEHOLD FURNITURE & APPLIANCES
Whirlpool Corp 1,400 91,087
================================================================================
0.76 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 1,200 78,000
================================================================================
3.36 INSURANCE
Aetna Inc 1,100 61,394
AFLAC Inc 1,100 51,906
AXA Financial 2,300 77,912
Jefferson-Pilot Corp 1,000 68,250
MGIC Investment 1,400 84,263
===============================================================================
343,725
1.68 INSURANCE BROKERS
Marsh & McLennan Cos 1,800 172,238
================================================================================
3.55 INVESTMENT BANKER/BROKER FIRM
Lehman Brothers Holdings 2,100 177,844
Morgan Stanley Dean Witter & Co 1,300 185,575
================================================================================
363,419
0.61 LEISURE TIME
Carnival Corp 1,300 62,156
================================================================================
1.08 MACHINERY
Ingersoll-Rand Co 2,000 110,125
================================================================================
0.30 MANUFACTURING
Textron Inc 400 30,675
================================================================================
0.47 OFFICE EQUIPMENT & SUPPLIES
Pitney Bowes 1,000 48,313
================================================================================
4.46 OIL & GAS RELATED
Amerada Hess 1,700 96,475
Burlington Resources 1,300 42,981
Coastal Corp 700 24,806
Noble Drilling(a) 1,500 49,125
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Occidental Petroleum 1,100 $ 23,788
Phillips Petroleum 800 37,600
R&B Falcon(a) 2,400 31,800
Tidewater Inc 1,500 54,000
USX-Marathon Group 3,900 96,281
================================================================================
456,856
4.33 PAPER & FOREST PRODUCTS
Boise Cascade 1,400 56,700
Champion International 700 43,356
Georgia-Pacific Group 1,500 76,125
International Paper 1,200 67,725
Kimberly-Clark Corp 1,400 91,350
Weyerhaeuser Co 1,500 107,719
================================================================================
442,975
0.45 PERSONAL CARE
Dial Corp 1,900 46,194
================================================================================
0.91 PHOTOGRAPHY & IMAGING
Eastman Kodak 1,400 92,750
================================================================================
0.28 POLLUTION CONTROL
Republic Services(a) 2,000 28,750
================================================================================
3.13 PUBLISHING
Donnelley (R R) & Sons 2,100 52,106
Gannett Co 1,300 106,031
Knight Ridder 500 29,750
Tribune Co 2,400 132,150
================================================================================
320,037
0.85 RAILROADS
Union Pacific 2,000 87,250
================================================================================
0.40 RESTAURANTS
Wendy's International 2,000 41,250
================================================================================
7.11 RETAIL
Bed Bath & Beyond(a) 2,100 72,975
Circuit City Stores-Circuit City Group 1,900 85,619
Dayton Hudson 1,900 139,531
Federated Department Stores(a) 1,200 60,675
Gap Inc 2,700 124,200
Kroger Co(a) 2,400 45,300
May Department Stores 1,200 38,700
TJX Cos 1,100 22,481
Wal-Mart Stores 2,000 138,250
================================================================================
727,731
1.67 SAVINGS & LOAN
Golden West Financial 5,100 170,850
================================================================================
3.05 SERVICES
Fiserv Inc(a) 900 34,481
IMS Health 2,100 57,094
Interpublic Group 1,300 74,994
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Paychex Inc 2,200 $ 88,000
VERITAS Software(a) 400 57,250
================================================================================
311,819
0.70 TELECOMMUNICATIONS-- CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 700 72,188
================================================================================
0.66 TEXTILE -- APPAREL MANUFACTURING
Tommy Hilfiger(a) 2,900 67,606
================================================================================
0.69 TOBACCO
UST Inc 2,800 70,525
================================================================================
0.54 TOYS
Hasbro Inc 2,900 55,281
================================================================================
TOTAL COMMON STOCK (Cost $8,806,954) 9,342,209
================================================================================
7.26 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at 2.800%,
repurchased at $743,173 (Collateralized
by US Treasury Bonds, due 11/15/2016
at 7.500%, value $761,256)
(Cost $743,000) $ 743,000 743,000
================================================================================
TOTAL LONG POSITIONS (Cost $9,549,954) 10,085,209
================================================================================
(88.67) COMMON STOCKS -- SHORT POSITIONS
(0.45) AEROSPACE & DEFENSE
Lockheed Martin (2,100) (45,938)
================================================================================
(1.16) AIRLINES
AMR Corp(a) (900) (60,300)
Northwest Airlines(a) (2,600) (57,850)
================================================================================
(118,150)
(1.26) AUTO PARTS
AutoZone Inc(a) (2,600) (84,012)
Goodyear Tire & Rubber (1,600) (45,100)
================================================================================
(129,112)
(0.69) AUTOMOBILES
Harley-Davidson Inc (1,100) (70,469)
================================================================================
(3.93) BANKS
Bank of New York (3,900) (156,000)
Summit Bancorp (2,600) (79,625)
US Bancorp (7,000) (166,688)
================================================================================
(402,313)
(1.71) BEVERAGES
Coca-Cola Co (1,800) (104,850)
PepsiCo Inc (2,000) (70,500)
================================================================================
(175,350)
(1.30) BIOTECHNOLOGY
Gilead Sciences(a) (800) (43,300)
Sepracor Inc(a) (900) (89,269)
================================================================================
(132,569)
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
(0.86) CABLE
Cox Communications Class A Shrs(a) (1,700) $ (87,550)
================================================================================
(3.18) COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Lucent Technologies (1,100) (82,294)
Motorola Inc (1,100) (161,975)
Nortel Networks (800) (80,800)
================================================================================
(325,069)
(7.29) COMPUTER RELATED
BMC Software(a) (1,000) (79,937)
Compaq Computer (2,000) (54,125)
Dell Computer(a) (2,100) (107,100)
Gateway Inc(a) (400) (28,825)
International Business Machines (1,600) (172,800)
Lexmark International Group Class A Shrs(a) (600) (54,300)
NCR Corp(a) (2,200) (83,325)
Networks Associates(a) (1,300) (34,694)
Parametric Technology(a) (2,100) (56,831)
PeopleSoft Inc(a) (3,500) (74,594)
================================================================================
(746,531)
(0.69) CONGLOMERATES
Unilever NV New York Registered Shrs (1,300) (70,769)
================================================================================
(1.24) CONSUMER FINANCE
SLM Holding (3,000) (126,750)
================================================================================
(0.51) CONTAINERS
Owens-Illinois Inc(a) (2,100) (52,631)
================================================================================
(5.92) ELECTRIC UTILITIES
AES Corp(a) (1,400) (104,650)
Cinergy Corp (1,700) (41,012)
Duke Energy (3,300) (165,412)
Entergy Corp (4,600) (118,450)
FPL Group (2,000) (85,625)
Montana Power (1,400) (50,488)
Pinnacle West Capital (1,300) (39,731)
================================================================================
(605,368)
(1.94) ELECTRICAL EQUIPMENT
Emerson Electric (1,300) (74,587)
Grainger (W W) Inc (2,600) (124,312)
================================================================================
(198,899)
(3.23) ELECTRONICS
General Motors Class H Shrs(a) (1,000) (96,000)
Loral Space & Communications(a) (4,300) (104,544)
PE Corp-PE Biosystems Group (500) (60,156)
Symbol Technologies (1,100) (69,919)
================================================================================
(330,619)
(2.72) ELECTRONICS -- SEMICONDUCTOR
Analog Devices(a) (300) (27,900)
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Intel Corp (2,200) $ (181,087)
Linear Technology (300) (21,469)
Texas Instruments (500) (48,438)
================================================================================
(278,894)
(2.18) ENTERTAINMENT
Disney (Walt) Co (4,400) (128,700)
Time Warner (1,300) (94,169)
================================================================================
(222,869)
(0.91) FINANCIAL
Capital One Financial (600) (28,912)
Franklin Resources (2,000) (64,125)
================================================================================
(93,037)
(3.33) FOODS
Campbell Soup (2,500) (96,719)
Hershey Foods (2,700) (128,250)
Wrigley (William) Jr (1,400) (116,113)
================================================================================
(341,082)
(0.63) FOOTWEAR
NIKE Inc Class B Shrs (1,300) (64,431)
================================================================================
(0.24) GAMING
Mirage Resorts(a) (1,600) (24,500)
================================================================================
(0.22) GOLD & PRECIOUS METALS MINING
Barrick Gold (1,300) (22,994)
================================================================================
(3.03) HEALTH CARE DRUGS -- PHARMACEUTICALS
Forest Laboratories(a) (1,200) (73,725)
Lilly (Eli) & Co (1,100) (73,150)
Merck & Co (800) (53,650)
Mylan Laboratories (1,500) (37,781)
Watson Pharmaceuticals(a) (2,000) (71,625)
================================================================================
(309,931)
(4.05) HEALTH CARE REALTED
Baxter International (700) (43,969)
Becton Dickinson (700) (18,725)
Guidant Corp(a) (700) (32,900)
Health Management Associates Class A Shrs(a) (3,600) (48,150)
McKesson HBOC (1,400) (31,588)
Medtronic Inc (3,100) (112,956)
Quintiles Transnational(a) (2,000) (37,375)
St Jude Medical(a) (600) (18,413)
Tenet Healthcare(a) (3,000) (70,500)
================================================================================
(414,576)
(0.84) HOUSEHOLD PRODUCTS
Clorox Co (900) (45,337)
Newell Rubbermaid (1,400) (40,600)
================================================================================
(85,937)
(4.39) INSURANCE
Allstate Corp (4,600) (110,400)
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
CIGNA Corp (1,200) $ (96,675)
Hartford Financial Services Group (2,000) (94,750)
Progressive Corp (1,100) (80,438)
SAFECO Corp (2,700) (67,163)
================================================================================
(449,426)
(1.96) INVESTMENT BANK/BROKER FIRM
Bear Stearns (1,900) (81,225)
Schwab (Charles) Corp (3,100) (118,963)
================================================================================
(200,188)
(0.43) LODGING -- HOTELS
Marriott International Class A Shrs (1,400) (44,188)
================================================================================
(2.66) MACHINERY
Caterpillar Inc (2,200) (103,537)
Deere & Co (3,900) (169,162)
================================================================================
(272,699)
(0.75) MANUFACTURING
Corning Inc (200) (25,787)
Eaton Corp (700) (50,837)
================================================================================
(76,624)
(1.31) NATURAL GAS
Williams Cos (4,400) (134,475)
================================================================================
(0.29) OFFICE EQUIPMENT & SUPPLIES
Office Depot(a) (1,500) (16,406)
Xerox Corp (600) (13,613)
================================================================================
(30,019)
(3.39) OIL & GAS RELATED
Halliburton Co (2,700) (108,675)
Schlumberger Ltd (1,900) (106,875)
Sunoco Inc (2,800) (65,800)
Transocean Sedco Forex (367) (12,363)
Unocal Corp (1,600) (53,700)
================================================================================
(347,413)
(3.33) PAPER & FOREST PRODUCTS
Bowater Inc (2,300) (124,919)
Fort James (4,400) (120,450)
Mead Corp (2,200) (95,563)
================================================================================
(340,932)
(0.97) PERSONAL CARE
Gillette Co (2,400) (98,850)
================================================================================
(0.18) POLLUTION CONTROL
Waste Management (1,100) (18,906)
================================================================================
(0.81) PUBLISHING
New York Times Class A Shrs (600) (29,475)
Times Mirror Class A Shrs (800) (53,600)
================================================================================
(83,075)
(0.61) RAILROADS
CSX Corp (2,000) (62,750)
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
(0.37) REAL ESTATE INVESTMENT TRUST
Starwood Hotels & Resorts Worldwide
SBI Class B Shrs (1,600) $ (37,600)
================================================================================
(0.78) RESTAURANTS
Starbucks Corp(a) (3,300) (80,025)
================================================================================
(4.96) RETAIL
Abercrombie & Fitch Class A Shrs(a) (800) (21,350)
Best Buy(a) (600) (30,112)
Dillard's Inc Class A Shrs (4,000) (80,750)
Dollar General (3,300) (75,075)
Kmart Corp(a) (4,900) (49,306)
Nordstrom Inc (3,600) (94,275)
Penney (J C) Co (800) (15,950)
Rite Aid (1,800) (20,138)
Saks Inc(a) (4,400) (68,475)
Sears Roebuck (1,700) (51,744)
================================================================================
(507,175)
(1.09) SAVINGS & LOAN
Washington Mutual (4,300) (111,800)
================================================================================
(4.22) SERVICES
AutoNation Inc(a) (4,400) (40,700)
Ceridian Corp(a) (3,100) (66,844)
Electronic Data Systems (2,200) (147,262)
Equifax Inc (3,200) (75,400)
Robert Half International(a) (2,000) (57,125)
Sterling Commerce(a) (1,300) (44,281)
================================================================================
(431,612)
(1.85) TELECOMMUNICATIONS -- LONG DISTANCE
Global Crossing Ltd(a) (1,400) (70,000)
Global TeleSystems Group(a) (600) (20,775)
Level 3 Communications(a) (1,200) (98,250)
================================================================================
(189,025)
(0.21) TEXTILE -- APPAREL MANUACTURING
VF Corp (700) (21,000)
================================================================================
(0.60) TRANSPORTATION
FDX Corp(a) (1,500) (61,406)
================================================================================
TOTAL SHORT POSITIONS (Proceeds $8,814,981) (9,075,526)
================================================================================
9.87 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $734,973)
(Cost for Income Tax Purposes $744,062) $ 1,009,683
================================================================================
90.13 OTHER ASSETS IN EXCESS OF LIABILITIES $ 9,284,147
- --------------------------------------------------------------------------------
100.00 TOTAL NET ASSETS $10,293,830
================================================================================
(a) Security is non-income producing.
(b) Securities are pledged with broker as collateral for short sales.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
MARKET
NEUTRAL
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 9,549,954
================================================================================
At Value(a) $10,085,209
Cash 812
Deposit With Custodian Bank for Securities Sold Short 9,244,791
Receivables for Dividends and Interest 50,103
================================================================================
TOTAL ASSETS 19,380,915
================================================================================
LIABILITIES
Securities Sold Short at Value (Proceeds $8,814,981) 9,075,526
Payables for Dividends on Securities Sold Short 5,154
Accrued Expenses and Other Payables 6,405
================================================================================
TOTAL LIABILITIES 9,087,085
================================================================================
NET ASSETS AT VALUE $10,293,830
================================================================================
NET ASSETS
Paid-in Capital(b) $10,001,000
Accumulated Undistributed Net Investment Income 60,639
Accumulated Undistributed Net Realized Loss on
Investment Securities and Securities Sold Short (42,519)
Net Appreciation of Investment Securities and
Securities Sold Short 274,710
================================================================================
NET ASSETS AT VALUE $10,293,830
================================================================================
Shares Outstanding 1,000,100
NET ASSET VALUE, Offering and Redemption Price per Share $ 10.29
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $743,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 200 million have been allocated to
Market Neutral Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
PERIOD ENDED DECEMBER 31, 1999 (NOTE 1)
MARKET
NEUTRAL
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 17,541
Interest 74,984
================================================================================
TOTAL INCOME 92,525
================================================================================
EXPENSES
Dividends on Securities Sold Short 14,064
Investment Advisory Fees 10,488
Transfer Agent Fees 708
Administrative Fees 5,123
Custodian Fees and Expenses 1,304
Professional Fees and Expenses 16,317
================================================================================
TOTAL EXPENSES 48,004
Fees and Expenses Absorbed by Investment Adviser (15,164)
Fees and Expenses Paid Indirectly (954)
================================================================================
NET EXPENSES 31,886
================================================================================
NET INVESTMENT INCOME 60,639
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 38,920
Securities Sold Short (81,439)
================================================================================
Total Net Realized Loss (42,519)
================================================================================
Change in Net Appreciation of:
Investment Securities 535,255
Securities Sold Short (260,545)
================================================================================
Total Net Appreciation 274,710
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND SECURITIES SOLD SHORT 232,191
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 292,830
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
MARKET NEUTRAL FUND
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999
(Note 1)
OPERATIONS
Net Investment Income $ 60,639
Net Realized Loss on Investment Securities
and Securities Sold Short (42,519)
Change in Net Appreciation of Investment Securities
and Securities Sold Short 274,710
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 292,830
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 10,000,000
================================================================================
TOTAL INCREASE IN NET ASSETS 10,292,830
NET ASSETS
Initial Subscription 1,000
Beginning of Period 0
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $60,639) $10,293,830
================================================================================
---------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription 100
Shares Sold 1,000,000
================================================================================
NET INCREASE IN FUND SHARES 1,000,100
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund, Market Neutral Fund (the "Fund",
presented herein), Realty Fund, Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. The investment
objective of the Fund is to outperform the return on three-month U.S. Treasury
bills regardless of the movements of the broad securities market. The Fund
commenced investment operations on November 10, 1999. The Fund is registered
under the Investment Company Act of 1940 (the "Act") as a diversified, open-end
management investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
<PAGE>
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
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.
<PAGE>
The Fund incurred and elected to defer post-October 31 net capital losses of
$33,430 to the year ended December 31, 2000. To the extent future capital gains
are offset by capital loss carryovers, such gains will not be distributed to
shareholders.
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.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the period ended December 31, 1999, these differences were
insignificant.
F. SHORT SALES -- The Fund engages in short sales as part of its normal
investment activities. Short sales are transactions in which the Fund sells a
security it does not own in anticipation of an expected decline in the price of
that security. The Fund will incur a loss as a result of the short sale if the
price of the borrowed security increases between the date of the short sale and
the date on which the Fund replaces such security. The Fund will realize a gain
if there is a decline in price of the security between those dates, which
decline exceeds the cost of borrowing the security and other transaction costs.
There can be no assurance that the Fund will be able to close out a short
position at any particular time. Although the potential for gain is limited to
the difference between the price at which the Fund sold the security short and
the cost of borrowing the security, its potential for loss could be unlimited
because there is no limit to the replacement cost of the borrowed security.
Until the Fund replaces a borrowed security, it will maintain at all times cash
or liquid securities or other collateral with a broker or other custodian in an
amount equal or higher than the current market value of the security sold short.
The Fund receives interest on the collateral it deposits. The liability account
is valued to reflect the current value of the securities sold short and is
presented in the Statement of Assets and Liabilities.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
<PAGE>
Under an agreement between the Fund and the Fund's Custodian for long position
investments, 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% of average net assets.
A Sub-Advisory Agreement between IFG and INVESCO (NY), Inc. ("INY"), an
affiliate of IFG, provides that investment decisions of the Fund are made by
INY. Fees for such sub-advisory services are paid by IFG.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the period ended December 31, 1999.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended
December 31, 1999, 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:
POSITION PURCHASES SALES
- --------------------------------------------------------------------------------
Long Positions $ 10,840,982 $ 2,072,948
Short Positions 2,202,878 10,936,420
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, 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 (depreciation) were as follows:
NET
GROSS GROSS APPRECIATION
POSITION APPRECIATION DEPRECIATION (DEPRECIATION)
- --------------------------------------------------------------------------------
Long Positions $ 832,877 $ 306,711 $ 526,166
Short Positions 357,949 618,494 (260,545)
Resulting in net appreciation of $265,621.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or INY.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the period ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
-----------------------------------------------------------------
<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 INVESCO Variable Market Neutral
Fund (one of the portfolios constituting INVESCO Variable Investment Funds,
Inc., hereafter referred to as the "Fund") at December 31, 1999, and the results
of its operations, the changes in its net assets and the financial highlights
for the period November 10, 1999 (commencement of investment operations) through
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. 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 auditing standards generally accepted in
the United States, 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
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
MARKET NEUTRAL FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06
Net Gains on Securities (Both Realized and Unrealized) 0.23
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.29
================================================================================
Net Asset Value-- End of Period $ 10.29
================================================================================
TOTAL RETURN(b) 2.90%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 10,294
Ratio of Expenses to Average Net Assets(d)(e) 2.26%(f)
Ratio of Net Investment Income to Average Net Assets(d) 4.17%(f)
Portfolio Turnover Rate 72%(c)
(a) From November 10, 1999, commencement of investment operations, to December
31, 1999.
(b) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the period
ended December 31, 1999. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 3.30% (annualized)
and ratio of net investment loss to average net assets would have been 3.13%
(annualized).
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(f) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A778 9039 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- --------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-REALTY FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The chart and other total return
figures cited reflect the fund's operating expenses, but the index does have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-REALTY FUND
VIF-REALTY FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/991
1 year 0.35%
---------------------------------------------------------------
Since inception (4/98) (9.21%)
---------------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Realty Fund returned 0.35%.
This return outpaced the NAREIT Equity Index, which over the same period
declined 4.62%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
This was another difficult year for realty stocks, but by numerous
traditional valuation measures, Real Estate Investment Trusts (REITs) are
attractively priced. REIT multiple valuations have continued to decline, and
currently trade at 7.5 times calendar-year-earnings estimates. This is down from
a forward multiple of 14-times-earnings at the beginning of 1997. REIT earnings
yields are about 5.4% above 10-year Treasuries. Current dividend yields now
average 8.7%, and the companies are expected to increase their dividends in 2000
by 4% to 5%. Finally, REIT stocks are trading at an average
discount-to-net-asset-values of approximately 20%.
Graph: INVESCO VIF - Realty Fund
Total Return since Inception (5/98) through 12/31/99 vs. NAREIT Index
This line graph compares the value of a $10,000 investment in
INVESCO VIF-Realty Fund to the value of a $10,000 investment in the NAREIT
Index, assuming in each case reinvestment of all dividends and capital
gain distributions, for the period from inception (5/98) through 12/31/99.
<PAGE>
Any one or a combination of the following catalysts could spur renewed
interest in REITs and aid in achieving long-term, implied expected total returns
of between 11% to 13% for year 2000: a rotation back to value and income
investments; continued positive underlying real estate fundamentals; continued
share buyback programs; expectations of stable REIT earnings growth rates in the
8% to 9% range; REITs continuing to prudently seek and employ alternative
capital funding sources through joint ventures, strategic asset sales, and
private placements; emerging technology playing a greater role in real estate
operations and their valuations; and the enhancement of the REIT structure with
the enactment of the REIT Modernization Act. Indeed, the REIT rally in the last
two weeks of 1999 approximately cut in half the negative returns for the year.
FUND MANAGEMENT
Effective January 27, 2000, Sean Katof of INVESCO Funds Group was named
portfolio manager of the fund. Sean joined INVESCO in 1994. He earned his MS in
finance and BS in Business Administration from the University of
Colorado-Boulder.
(1) 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.
(2) THE NAREIT EQUITY INDEX IS AN UNMANAGED INDEX INDICATIVE OF THE U.S. REAL
ESTATE INVESTMENT TRUST MARKET. THE NASDAQ IS AN UNMANAGED INDEX OF STOCKS
TRADED OVER THE COUNTER.
- --------------------------------------------------------------------------------
REALTY FUND TO GET A NEW NAME
Please note that VIF-Realty Fund will be getting a new name effective
February 15, 2000. The new name will be VIF-Real Estate Opportunity Fund. While
the objective of the fund has not changed, we believe the new name will better
reflect the fund's mission of finding opportunities for investors in all areas
of the real estate sector. For more information about the fund, please refer to
the prospectus.
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
REALTY FUND
100.00 COMMON STOCKS
96.98 REAL ESTATE INVESTMENT TRUST
Apartment Investment & Management Class A Shrs 200 $ 7,963
Arden Realty 1,250 25,078
Avalonbay Communities 400 13,725
Boston Properties 1,100 34,237
Brandywine Realty Trust SBI 1,500 24,562
CarrAmerica Realty 1,200 25,350
CenterPoint Properties 700 25,112
Duke-Weeks Realty 1,300 25,350
Equity Office Properties Trust SBI 1,000 24,625
Equity Residential Properties Trust SBI 700 29,881
Essex Property Trust 500 17,000
First Industrial Realty Trust 300 8,231
General Growth Properties 900 25,200
Highwoods Properties 500 11,625
Hospitality Properties Trust SBI 500 9,531
JDN Realty 1,000 16,125
Kilroy Realty 925 20,350
Kimco Realty 700 23,713
Liberty Property Trust SBI 700 16,975
ProLogis Trust 1,500 28,875
Public Storage 1,000 22,688
Reckson Associates Realty 900 18,450
SL Green Realty 500 10,875
Spieker Properties 500 18,219
Sun Communities 500 16,094
Taubman Centers 2,000 21,500
Vornado Realty Trust SBI 700 22,750
================================================================================
544,084
3.02 REAL ESTATE RELATED
Trizec Hahn 1,000 16,875
Vornado Operating(a) 15 90
================================================================================
16,965
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $576,315)
(Cost for Income Tax Purposes $589,986) $ 561,049
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
REALTY
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost $ 576,315
================================================================================
At Value $ 561,049
Cash 62,303
Receivables:
Fund Shares Sold 237
Dividends and Interest 5,040
Prepaid Expenses 60
================================================================================
TOTAL ASSETS 628,689
================================================================================
LIABILITIES
Accrued Expenses and Other Payables 3,211
================================================================================
TOTAL LIABILITIES 3,211
================================================================================
NET ASSETS AT VALUE $ 625,478
================================================================================
NET ASSETS
Paid-in Capital(a) $ 718,746
Accumulated Undistributed Net Investment Income 5,925
Accumulated Undistributed Net Realized Loss on
Investment Securities (83,927)
Net Depreciation of Investment Securities (15,266)
================================================================================
NET ASSETS AT VALUE $ 625,478
================================================================================
Shares Outstanding 79,051
NET ASSET VALUE, Offering and Redemption Price per Share $ 7.91
================================================================================
(a) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated
to Realty Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
REALTY
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 31,435
Interest 410
================================================================================
TOTAL INCOME 31,845
================================================================================
EXPENSES
Investment Advisory Fees 5,110
Transfer Agent Fees 5,000
Administrative Fees 11,222
Custodian Fees and Expenses 4,190
Directors' Fees and Expenses 6,013
Professional Fees and Expenses 16,755
Registration Fees and Expenses 38
Reports to Shareholders 6,538
Other Expenses 445
================================================================================
TOTAL EXPENSES 55,311
Fees and Expenses Absorbed by Investment Adviser (44,380)
Fees and Expenses Paid Indirectly (3,252)
================================================================================
NET EXPENSES 7,679
================================================================================
NET INVESTMENT INCOME 24,166
================================================================================
REALIZED AND UNREALIZED LOSS ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (15,584)
Change in Net Depreciation of Investment Securities (5,585)
================================================================================
NET LOSS ON INVESTMENT SECURITIES (21,169)
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,997
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
REALTY FUND
YEAR PERIOD
ENDED ENDED
DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
(Note 1)
OPERATIONS
Net Investment Income $ 24,166 $ 14,039
Net Realized Loss on Investment Securities (15,584) (66,609)
Change in Net Depreciation of Investment Securities (5,585) (9,681)
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 2,997 (62,251)
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (24,214) (9,800)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 395,598 604,356
Reinvestment of Distributions 24,214 9,800
================================================================================
419,812 614,156
Amounts Paid for Repurchases of Shares (274,539) (41,683)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS 145,273 572,473
================================================================================
TOTAL INCREASE IN NET ASSETS 124,056 500,422
NET ASSETS
Initial Subscription 0 1,000
Beginning of Period 501,422 0
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $5,925 and $6,159,
respectively) $ 625,478 $ 501,422
================================================================================
--------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription 0 100
Shares Sold 48,226 64,719
Shares Issued from Reinvestment of Distributions 3,241 1,223
================================================================================
51,467 66,042
Shares Repurchased (33,396) (5,062)
================================================================================
NET INCREASE IN FUND SHARES 18,071 60,980
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements -- INVESCO VARIABLE INVESTMENT
FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund, Market Neutral Fund, Realty Fund
(the "Fund", presented herein), Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. Effective January
27, 2000, Realty Fund's name changed to INVESCO Variable Investment Funds, Inc.
- - Real Estate Opportunity Fund. The investment objective of the Fund is to seek
appreciation and income on securities principally engaged in a specific business
sector. The Fund commenced investment operations on April 1, 1998. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
<PAGE>
B. 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. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Cost is determined on the specific identification basis.
C. 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, 1999, the Fund had $33,434 and $30,852 in net capital loss
carryovers which expire in the years 2007 and 2006, respectively.
The Fund incurred and elected to defer post-October 31 net capital losses of
$5,970 to the year ended December 31, 2000. To the extent future capital gains
are offset by capital loss carryovers, such gains will not be distributed to
shareholders.
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, 1999, 3.48% qualified for the dividends
received deduction available to the Fund's corporate shareholders.
D. 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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the year ended December 31, 1999, the Fund reclassified $186
from accumulated undistributed net investment income to accumulated
undistributed net realized gain on investment securities. Net investment income,
net realized gains, paid in capital and net assets were not affected.
<PAGE>
E. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.90% on the first $500 million of average net assets;
reduced to 0.75% on the next $500 million of average net assets; reduced to
0.65% of average net assets in excess of $1 billion; reduced to 0.45% of average
net assets in excess of $2 billion; reduced to 0.40% of average net assets in
excess of $4 billion; reduced to 0.375% of average net assets in excess of $6
billion and 0.35% of average net assets over $8 billion.
A Sub-Advisory Agreement between IFG and INVESCO Realty Advisors, Inc. ("IRAI"),
an affiliate of IFG, provides that investment decisions of the Fund are made by
IRAI. Fees for such sub-advisory services are paid by IFG. Effective January 27,
2000, the sub-advisory agreement with IRIA was terminated and such
responsibilities were transferred to IFG.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Agreement, the Fund pays IFG an annual fee
of $10,000 (the "Base Fee"), plus an additional amount computed at an annual
rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $2,482,409 and $2,296,236, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $14,517 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $43,454, resulting in net
depreciation of $28,937.
<PAGE>
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or IRAI.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liability were
insignificant for Realty Fund.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
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 INVESCO Variable Realty Fund (one
of the portfolios constituting INVESCO Variable Investment Funds, Inc.,
hereafter referred to as the "Fund") at December 31, 1999, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period April 1, 1998
(commencement of investment operations) through December 31, 1998, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
REALTY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR PERIOD
ENDED ENDED
DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 8.22 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.29 0.29
Net Losses on Securities (Both Realized
and Unrealized) (0.28) (1.88)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.01 (1.59)
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.32 0.19
================================================================================
Net Asset Value-- End of Period $ 7.91 $ 8.22
================================================================================
TOTAL RETURN(b) 0.35% (15.88%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 625 $ 501
Ratio of Expenses to Average Net Assets(d)(e) 1.92% 1.90%(f)
Ratio of Net Investment Income to Average Net
Assets(d) 4.25% 4.94%(f)
Portfolio Turnover Rate(g)(h) 465% 200%(c)
(a) From April 1, 1998, commencement of investment operations, through December
31, 1998.
(b) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended December 31, 1999 and the period ended December 31, 1998. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 9.72% and 8.54% (annualized), respectively, and
ratio of net investment loss to average net assets would have been (3.55%)
and (1.70%) (annualized), respectively.
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(f) Annualized
(g) Portfolio turnover was greater than expected during the period ended
December 31, 1998, due to active trading undertaken in response to market
conditions at a time when the Fund's assets were still relatively small and
before the Fund was fully invested.
(h) Portfolio turnover was greater than expected during the year ended December
31, 1999, due to active trading undertaken in response to market
conditions.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
We're easy to stay in touch with:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A17 9042 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- -------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- ------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-SMALL COMPANY GROWTH FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower- growing
company stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the periods from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the index does not have
expenses, which would, of course, have lowered its performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF- SMALL COMPANY GROWTH FUND
VIF- SMALL COMPANY GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 91.06%
------------------------------------------------------------------
Since inception (8/97) 39.89%
------------------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Small Company Growth Fund
gained 91.06%, greatly outperforming its benchmark, the Russell 2000 Index,
which over the same period returned 21.26%. (Of course, past performance is not
a guarantee of future results.)(1),(2)
A variety of companies, many in the technology sector, fueled performance.
Going forward, management intends to use a bottom-up, analytical approach to
uncover companies with accelerating earnings growth due to rapid sales growth,
and new products or services. Consistency and stability of earnings will
continue to be a central theme in 2000 as we intend to focus on companies whose
product lines can remain strong, even in the face of recent international market
turmoil. Communication services and equipment remain a strong area of focus, as
well as business services companies. The financial sector continues to be driven
by mergers and consolidation. Our technology positions are focused on software,
communications equipment, and other areas that should exhibit sustainable
earnings growth even in a mild economic slowdown. Low unemployment, strong
consumer confidence and increasing disposable income are driving the consumer
cyclical sector.
Graph: INVESCO VIF - Small Company Growth Fund
Total Return from Inception (8/97) through 12/31/99 vs.
Russell 2000 Index
This line graph compares the value of a $10,000 investment in INVESCO VIF-
Small Company Growth Fund to the value of a $10,000 investment in the
Russel 2000 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (8/97) through
12/31/99.
FUND MANAGEMENT
Stacie L. Cowell is the portfolio manager of VIF-Small Company Growth Fund.
She earned her BA in Economics from Colgate University, her MS in Finance from
the University of Colorado, and she is a Chartered Financial Analyst. Prior to
joining INVESCO, Stacie was a senior equities analyst with Founders Asset
Management, and a capital markets and trading analyst with Chase Manhattan Bank.
She is assisted by co-managers Tim J. Miller and Trent E. May.
(1) 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.
(2) THE RUSSELL 2000 IS AN UNMANAGED INDEX INDICATIVE OF SMALLER-CAPITALIZATION
STOCKS. THE NASDAQ IS AN UNMANAGED INDEX OF STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
91.37 COMMON STOCKS
0.55 AUTO PARTS
O'Reilly Automotive(a) 1,300 $ 27,950
================================================================================
1.02 BANKS
City National 1,590 52,371
================================================================================
3.12 BIOTECHNOLOGY
Celgene Corp(a) 400 28,000
Cytyc Corp(a) 700 42,744
Incyte Pharmaceuticals(a) 500 30,000
Protein Design Labs(a) 400 28,000
Trimeris Inc(a) 1,300 30,713
================================================================================
159,457
3.21 BROADCASTING
Citadel Communications(a) 750 48,656
Cumulus Media Class A(a) 800 40,600
Emmis Communications Class A Shrs(a) 350 43,624
Salem Communications Class A Shrs(a) 1,400 31,675
================================================================================
164,555
8.28 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
Airnet Communications(a) 400 14,550
AudioCodes Ltd(a) 300 27,600
Digital Microwave(a) 2,200 51,562
Gilat Satellite Networks Ltd(a) 300 35,625
Harmonic Inc(a) 400 37,975
Natural MicroSystems(a) 1,300 60,856
NICESystems Ltd Sponsored ADR Representing
Ord Shrs(a) 800 39,350
Polycom Inc(a) 800 50,950
REMEC Inc(a) 1,550 39,525
Tekelec(a) 2,050 46,125
ViaSat Inc(a) 400 19,950
================================================================================
424,068
22.17 COMPUTER RELATED
Advanced Digital Information(a) 500 24,312
AppNet Inc(a) 700 30,625
Aspect Development(a) 600 41,100
BindView Development(a) 1,350 67,078
Broadbase Software Inc(a) 200 22,500
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Business Objects SA Sponsored ADR
Representing Ord Shrs(a) 200 $ 26,725
C-COR.net Corp(a) 350 26,819
CBT Group PLC Sponsored ADR Representing
Ord Shrs(a) 1,600 53,600
DSET Corp(a) 1,500 56,062
Entrust Technologies(a) 500 29,969
eSoft Inc(a) 800 23,300
IONA Technologies PLC Sponsored ADR
Representing Ord Shrs(a) 1,000 54,500
Macromedia Inc(a) 200 14,625
Mediaplex Inc(a) 700 43,925
Mercury Interactive(a) 230 24,826
MICROS Systems(a) 700 51,800
Mission Critical Software(a) 500 35,000
MTI Technology(a) 600 22,125
National Information Consortium(a) 600 19,200
NetIQ Corp(a) 700 36,444
NetRatings Inc(a) 700 33,688
Open Market(a) 800 36,100
Peregrine Systems(a) 300 25,256
Pilot Network Services(a) 800 19,200
Primus Knowledge Solutions(a) 300 13,594
Quest Software(a) 200 20,400
S1 Corp(a) 400 31,250
SilverStream Software(a) 300 35,700
Technology Solutions(a) 1,100 36,025
Tumbleweed Communications(a) 400 33,900
USinternetworking Inc(a) 375 26,203
Visual Networks(a) 600 47,550
WorldGate Communications(a) 800 38,050
Xircom Inc(a) 450 33,750
================================================================================
1,135,201
0.95 DISTRIBUTION
Insight Enterprises(a) 1,200 48,750
================================================================================
1.41 ELECTRICAL EQUIPMENT
DII Group(a) 500 35,484
Universal Electronics(a) 800 36,800
================================================================================
72,284
0.74 ELECTRONICS
Anaren Microwave(a) 700 37,887
================================================================================
5.19 ELECTRONICS -- SEMICONDUCTOR
ANADIGICS Inc(a) 800 37,750
Cree Research(a) 300 25,612
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Galileo Technology Ltd(a) 1,000 $ 24,125
QLogic Corp(a) 200 31,975
Semtech Corp(a) 700 36,488
TranSwitch Corp(a) 900 65,306
Zoran Corp(a) 800 44,600
================================================================================
265,856
2.86 EQUIPMENT -- SEMICONDUCTOR
Advanced Energy Industries(a) 800 39,400
Asyst Technologies(a) 500 32,781
Brooks Automation(a) 950 30,934
Cymer Inc(a) 500 23,000
LTX Corp(a) 900 20,137
================================================================================
146,252
0.78 GAMING
Harrah's Entertainment(a) 1,500 39,656
================================================================================
2.54 HEALTH CARE DRUGS -- PHARMACEUTICALS
Accredo Health(a) 800 24,600
Alkermes Inc(a) 600 29,475
DUSA Pharmaceuticals(a) 1,600 45,600
Jones Pharmaceutical 700 30,406
================================================================================
130,081
1.34 HEALTH CARE RELATED
Caliper Technologies(a) 400 26,700
Invitrogen Corp(a) 400 24,000
Province Healthcare(a) 950 18,050
================================================================================
68,750
1.07 INVESTMENT BANK/BROKER FIRM
Affiliated Managers Group(a) 1,350 54,591
================================================================================
1.32 LEISURE TIME
Intrawest Corp 2,175 37,655
Steiner Leisure Ltd(a) 1,800 30,038
================================================================================
67,693
4.27 OIL & GAS RELATED
Atwood Oceanics(a) 600 23,175
Basin Exploration(a) 1,400 24,675
Dril-Quip Inc(a) 1,000 30,375
Evergreen Resources(a) 1,300 25,675
Louis Dreyfus Natural Gas(a) 1,500 27,187
Newfield Exploration(a) 1,200 32,100
Precision Drilling(a) 1,100 28,256
Unit Corp(a) 3,500 26,906
================================================================================
218,349
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.52 PERSONAL CARE
Playtex Products(a) 1,725 $ 26,522
================================================================================
5.79 RETAIL
Callaway Golf 2,700 47,756
Cost Plus(a) 812 28,927
E-Stamp Corp(a) 800 17,800
InterTAN Inc(a) 700 18,287
Men's Wearhouse(a) 1,812 53,228
Pacific Sunwear of California(a) 1,500 48,281
REX Stores(a) 1,000 35,000
Topps Co(a) 2,100 21,788
Wild Oats Markets(a) 1,137 25,227
================================================================================
296,294
16.28 SERVICES
About.com Inc(a) 200 17,950
Agency.com Inc(a) 900 45,900
AHL Services(a) 1,000 20,875
Corporate Executive Board(a) 200 11,175
Digital Impact(a) 800 40,100
Getty Images(a) 750 36,656
Henry (Jack) & Associates 695 37,313
HotJobs.com Ltd(a) 1,000 43,687
Interep National Radio Sales Class A Shrs(a) 1,800 24,075
InterVoice-Brite Inc(a) 2,000 47,313
IntraNet Solutions(a) 1,400 51,800
Intraware Inc(a) 400 31,600
ISS Group(a) 800 56,900
Jupiter Communications(a) 800 24,200
Metamor Worldwide(a) 1,100 32,038
NCO Group(a) 1,092 32,897
Pegasus Systems(a) 300 18,094
Precision Response(a) 1,900 46,075
PROVANT Inc(a) 1,000 25,250
Quintus Corp(a) 570 26,149
Regis Corp 2,100 39,638
Sykes Enterprises(a) 900 39,488
TSI International Software Ltd(a) 700 39,638
24/7 Media(a) 800 45,000
================================================================================
833,811
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
1.89 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Pinnacle Holdings(a) 1,500 $ 63,563
Proxim Inc(a) 300 33,000
================================================================================
96,563
3.18 TELECOMMUNICATIONS -- LONG DISTANCE
Dycom Industries(a) 785 34,589
Esat Telecom Group PLC Sponsored ADR
Representing 2 Ord Shrs(a) 500 45,750
FirstCom Corp(a) 1,200 44,100
Viatel Inc(a) 720 38,610
================================================================================
163,049
1.40 TELEPHONE
CTC Communications Group(a) 1,300 50,720
Inet Technologies(a) 300 20,962
================================================================================
71,682
0.31 TEXTILE -- APPAREL MANUFACTURING
Quiksilver Inc(a) 1,035 16,043
================================================================================
0.60 TEXTILE -- HOME FURNISHINGS
Linens 'n Things(a) 1,040 30,810
================================================================================
0.58 TOYS
JAKKS Pacific(a) 1,600 29,900
================================================================================
TOTAL COMMON STOCKS (Cost $3,286,366) 4,678,425
================================================================================
8.63 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at 2.800%,
repurchased at $442,103 (Collateralized
by US Treasury Inflationary Index Notes,
due 1/15/2007 at 3.375%, value $452,108)
(Cost $442,000) $ 442,000 442,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $3,728,366)
(Cost for Income Tax Purposes $3,730,112) $ 5,120,425
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
SMALL
COMPANY
GROWTH
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 3,728,366
================================================================================
At Value(a) $ 5,120,425
Receivables:
Investment Securities Sold 67,918
Dividends and Interest 54
Prepaid Expenses and Other Assets 90
================================================================================
TOTAL ASSETS 5,188,487
================================================================================
LIABILITIES
Payables:
Custodian 4,435
Investment Securities Purchased 99,153
Fund Shares Repurchased 132,300
Accrued Expenses and Other Payables 2,312
================================================================================
TOTAL LIABILITIES 238,200
================================================================================
NET ASSETS AT VALUE $ 4,950,287
================================================================================
NET ASSETS
Paid-in Capital(b) $ 2,808,720
Accumulated Undistributed Net Investment Loss (16)
Accumulated Undistributed Net Realized Gain on
Investment Securities 749,524
Net Appreciation of Investment Securities 1,392,059
================================================================================
NET ASSETS AT VALUE $ 4,950,287
================================================================================
Shares Outstanding 224,947
NET ASSET VALUE, Offering and Redemption Price per Share $ 22.01
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $442,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Small Company Growth Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
SMALL
COMPANY
GROWTH
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,460
Interest 10,433
================================================================================
TOTAL INCOME 11,893
================================================================================
EXPENSES
Investment Advisory Fees 16,772
Transfer Agent Fees 5,000
Administrative Fees 14,763
Custodian Fees and Expenses 14,743
Directors' Fees and Expenses 8,067
Professional Fees and Expenses 16,782
Registration Fees and Expenses 38
Reports to Shareholders 14,895
Other Expenses 482
================================================================================
TOTAL EXPENSES 91,542
Fees and Expenses Absorbed by Investment Adviser (53,048)
Fees and Expenses Paid Indirectly (10,455)
================================================================================
NET EXPENSES 28,039
================================================================================
NET INVESTMENT LOSS (16,146)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 808,066
Change in Net Appreciation of Investment Securities 1,241,758
================================================================================
NET GAIN ON INVESTMENT SECURITIES 2,049,824
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,033,678
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SMALL COMPANY GROWTH FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Loss $ (16,146) $ (3,352)
Net Realized Gain (Loss) on Investment Securities 808,066 (41,761)
Change in Net Appreciation (Depreciation) of
Investment Securities 1,241,758 152,667
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 2,033,678 107,554
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
In Excess of Net Investment Income 0 (579)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 2,769,422 775,372
Reinvestment of Distributions 0 579
================================================================================
2,769,422 775,951
Amounts Paid for Repurchases of Shares (888,919) (93,382)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 1,880,503 682,569
================================================================================
TOTAL INCREASE IN NET ASSETS 3,914,181 789,544
NET ASSETS
Beginning of Period 1,036,106 246,562
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Loss of $16 and $0, respectively) $4,950,287 $ 1,036,106
================================================================================
----------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 197,791 74,069
Shares Issued from Reinvestment of Distributions 0 55
================================================================================
197,791 74,124
Shares Repurchased (62,825) (9,027)
================================================================================
NET INCREASE IN FUND SHARES 134,966 65,097
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements -- INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund, Market Neutral Fund, Realty Fund,
Small Company Growth Fund (the "Fund", presented herein), Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. The investment
objective of the Fund is to seek long-term capital growth. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
<PAGE>
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. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Cost is determined on the specific identification basis.
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.
Net capital loss carryovers utilized in 1999 amounted to $39,861.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for mortgage-backed securities, market discounts, amortized premiums, foreign
currency transactions, nontaxable dividends, net operating losses and expired
capital loss carryforwards. For the year ended December 31, 1999, the Fund
reclassified $16,130 from accumulated undistributed net realized gain on
investment securities to accumulated undistributed net investment income. Net
<PAGE>
investment income, net realized gains, paid-in capital and net assets were not
affected.
F. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% on the first $350 million of average net assets;
reduced to 0.65% on the next $350 million of average net assets; reduced to
0.55% of average net assets in excess of $700 million; reduced to 0.45% of
average net assets in excess of $2 billion; reduced to 0.40% of average net
assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.015% of average net assets plus, effective July 8, 1998, an
additional amount computed at an annual rate of 0.25% of new assets (the
"Incremental Fees") to provide administrative, accounting and clerical services.
The fee is accrued daily and paid monthly. IFG may pay all or a portion of the
Base Fee and the Incremental Fees to other companies that assist in providing
the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $5,874,017 and $4,184,663, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $1,455,976 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $65,663, resulting in net
appreciation of $1,390,313.
<PAGE>
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
---------------------------------------------------
<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 INVESCO Variable Small Company
Growth Fund (one of the portfolios constituting INVESCO Variable Investment
Funds, Inc., hereafter referred to as the "Fund") at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the two years in the period then ended and for the period August 25,
1997 (commencement of investment operations) through December 31, 1997, in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
SMALL COMPANY GROWTH FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 11.51 $ 9.91 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.00) (0.01) 0.02
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 10.50 1.62 (0.11)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 10.50 1.61 (0.09)
================================================================================
LESS DISTRIBUTIONS
In Excess of Net Investment Income 0.00 0.01 0.00
================================================================================
Net Asset Value-- End of Period $ 22.01 $ 11.51 $ 9.91
================================================================================
TOTAL RETURN(c) 91.06% 16.38% (0.90%)(d)
RATIOS
Net Assets-- End of Period
($000 Omitted) $ 4,950 $ 1,036 $ 247
Ratio of Expenses to Average Net
Assets(e)(f) 1.70% 1.87% 0.61%(g)
Ratio of Net Investment Income (Loss)
to Average Net Assets(e) (0.71%) (0.90%) 0.52%(g)
Portfolio Turnover Rate 201%(h) 92% 25%(d)
(a) From August 25, 1997, commencement of investment operations, to December
31, 1997.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share
basis for the year ended December 31, 1999.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of the expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 4.05%, 12.46% and 35.99% (annualized),
respectively, and ratio of net investment loss to average net assets would
have been (3.06%), (11.49%) and (34.86%) (annualized), respectively.
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
(h) Portfolio turnover was greater than expected during this period due to
active trading undertaken in response to market conditions.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A14 9038 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- ------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- ------------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-TECHNOLOGY FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for overseas
economies, while the U.S. economy remained as healthy as it had been in decades.
The results were generally very positive for world markets, although some
investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S. stock
advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than worldwide
depression loomed largest in many investors' minds. Signs of renewed economic
strength abroad and remarkable growth figures at home led many to believe that
the Federal Reserve would soon reverse course and tighten the money supply to
cool down the economy. Indeed, market interest rates crept upward as the central
bank raised short-term rates twice during the summer. Too much growth rather
than too little encouraged many to head for cyclical industries poised to
benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed their
upward trajectory in the fourth quarter. Most astonishing of all was the NASDAQ,
which shot up by nearly one half in the quarter, crossing the 4000 barrier just
a month after rocketing past the 3000 mark for the first time. Overseas, most of
the major exchanges followed, with many going on to establish new record highs.
The factors driving the bullish advance were largely the same as those that
had done so in the first few months of 1999. The promise of new technologies and
healthy profit increases fueled investor optimism. At the same time, the advance
remained narrow, with technology and telecommunications firms widening their
lead over the rest of the market. Indeed, some of 1998's star performers --
particularly the major drug companies -- lagged seriously, as investors became
even more selective in looking for high unit growth rates and expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the find, plus reinvested
dividends and capital gain distributions. The chart and other total return
figures cited reflect the fund's operating expenses, but the index does not have
expenses, which would, of course, have lowered its performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-TECHNOLOGY FUND
VIF- TECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 158.93%
----------------------------------------------------------
Since inception (5/97) 65.49%
----------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Technology Fund gained 158.93%,
greatly outperforming its benchmark, the S&P 500 Index, which over the same
period returned 21.03%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Technology stocks wrapped up a tremendous year of outperformance with an
even stronger fourth quarter. The markets not merely climbed, but sprinted over
the Y2K "wall of worry." The breadth within the technology sector was also
strong, and most technology companies and sectors participated in the strong
upswing of prices. Within the technology sector, there were, as usual, many
crosscurrents. Semiconductor stocks were among the weaker sectors, as investors
became concerned about potential Y2K inventory stocking leading to a correction
in the first quarter. Software stocks, especially e-commerce and middleware
companies, continued to be among the market leaders. Service companies also
maintained their strong performance, and numerous laggards began to improve.
<PAGE>
Graph: INVESCO VIF-Technology Fund
Total Return from Inception (5/97) through 12/31/99 vs. S&P 500 Index
This line graph compares the value of a $10,000 investment in
INVESCO VIF-Technology Fund to the value of a $10,000 investment in the S&P
500 Index, assuming in each case reinvestment of all dividends and capital
gain distributions, for the period from inception (5/97) through 12/31/99.
In the short-term, we believe the first quarter of the new year could
continue to show high volatility among technology stocks. At year-end there was
a significant amount of cash on the sidelines in case of a Y2K debacle, and that
cash will have to be invested. Technology stocks should garner their fair share
of this reinvested money. Fundamentals appear to be sound, and earnings reports
in January should be quite strong.
We would note that tech stocks underperformed during the earnings reporting
seasons in 1999 and could do so again. While sounding like a broken record, we
point out the very high valuations in the sector. Valuations have not been an
impediment to performance, but in an environment of rising interest rates, this
is clearly a risk.
FUND MANAGEMENT
In January 1999, William R. Keithler, a Chartered Financial Analyst with 15
years experience in the investment industry, rejoined INVESCO and assumed the
responsibilities of portfolio manager for VIF-Technology Fund. Bill has an MS
from the University of Wisconsin-Madison, and BS from Webster College. An
INVESCO senior vice president and portfolio manager from 1986 to 1993, most
recently he served as vice president and portfolio manager with Berger
Associates.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE NASDAQ IS AN UNMANAGED INDEX OF
STOCKS TRADING OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY FUND
91.45 COMMON STOCKS
0.78 BROADCASTING
EchoStar Communications Class A Shrs(a) 7,400 $ 721,500
================================================================================
11.33 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 12,600 724,500
Finisar Corp(a) 1,200 107,850
General Instrument(a) 7,700 654,500
Harmonic Inc(a) 4,500 427,219
JDS Uniphase(a) 8,800 1,419,550
Lucent Technologies 8,000 598,500
Nokia Corp Sponsored ADR Representing Ord Shrs 9,600 1,824,000
Nortel Networks 8,100 818,100
PairGain Technologies(a) 19,500 276,656
Polycom Inc(a) 11,300 719,669
Powerwave Technologies(a) 8,000 467,000
QUALCOMM Inc(a) 6,400 1,128,000
Scientific-Atlanta Inc 12,100 673,062
Tellabs Inc(a) 10,000 641,875
================================================================================
10,480,481
25.04 COMPUTER SOFTWARE & SERVICE
Active Software(a) 5,100 469,200
Art Technology Group(a) 6,000 780,000
Aspect Development(a) 7,200 493,200
BEA Systems(a) 21,100 1,475,681
BMC Software(a) 10,300 823,356
BroadVision Inc(a) 7,300 1,241,456
CBT Group Public Ltd Sponsored ADR
Representing Ord Shrs(a) 28,100 941,350
Check Point Software Technologies(a) 2,100 417,375
Citrix Systems(a) 8,100 996,300
Inktomi Corp(a) 4,200 372,750
Internet HOLDRs Trust Depositary Receipts(a) 4,400 743,875
Intuit Inc(a) 14,800 887,075
IONA Technologies PLC Sponsored ADR
Representing Ord Shrs(a) 1,800 98,100
i2 Technologies(a) 3,900 760,500
Keane Inc(a) 3,800 120,650
Legato Systems(a) 13,400 922,087
Mercury Interactive(a) 7,200 777,150
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Microsoft Corp(a) 16,000 $ 1,868,000
National Information Consortium(a) 20,100 643,200
NetIQ Corp(a) 4,900 255,106
Networks Associates(a) 22,300 595,131
New Era of Networks(a) 11,800 561,975
Oracle Corp(a) 9,100 1,019,769
Parametric Technology(a) 25,400 687,387
Peregrine Systems(a) 14,000 1,178,625
SAP AG Sponsored ADR Representing 1/12 Ord Shr 13,200 687,225
Siebel Systems(a) 7,100 596,400
SOFTBANK Corp 700 669,929
Software.com Inc(a) 7,900 758,400
Symantec Corp(a) 6,500 381,063
Technology Solutions(a) 5,400 176,850
Verio Inc(a) 8,500 392,594
Verity Inc(a) 5,600 238,350
Vignette Corp(a) 800 130,400
================================================================================
23,160,509
1.21 COMPUTER SYSTEMS
Apple Computer(a) 10,900 1,120,656
================================================================================
2.18 COMPUTERS -- HARDWARE
E-Tek Dynamics(a) 6,500 875,062
Sun Microsystems(a) 14,700 1,138,331
================================================================================
2,013,393
7.28 COMPUTERS -- NETWORKING
Cisco Systems(a) 15,700 1,681,862
Extreme Networks(a) 2,500 208,750
InfoSpace.com Inc(a) 2,300 492,200
Internet Capital Group(a) 5,000 850,000
Juniper Networks(a) 1,600 544,000
Network Appliance(a) 13,900 1,154,569
Redback Networks(a) 2,800 497,000
3Com Corp(a) 8,600 404,200
Whittman-Hart Inc(a) 16,900 906,262
================================================================================
6,738,843
2.09 COMPUTERS -- PERIPHERALS
Advanced Digital Information(a) 13,300 646,713
EMC Corp(a) 9,800 1,070,650
SanDisk Corp(a) 2,200 211,750
================================================================================
1,929,113
4.38 ELECTRICAL EQUIPMENT
Celestica Inc(a) 19,400 1,076,700
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Flextronics International Ltd(a) 15,400 $ 708,400
Furukawa Electric Ltd 27,000 409,531
Jabil Circuit(a) 7,500 547,500
Sanmina Corp(a) 4,300 429,463
Solectron Corp(a) 9,300 884,663
================================================================================
4,056,257
0.66 ELECTRONICS -- INSTRUMENTS
SCI Systems(a) 7,400 608,188
================================================================================
14.66 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 12,900 639,356
Analog Devices(a) 8,100 753,300
Applied Micro Circuits(a) 9,000 1,145,250
Atmel Corp(a) 22,500 665,156
Conexant Systems(a) 19,700 1,307,587
Cypress Semiconductor(a) 15,500 501,813
LSI Logic(a) 10,100 681,750
Maxim Integrated Products(a) 14,000 660,625
Microchip Technology(a) 7,600 520,125
National Semiconductor(a) 6,900 295,406
PMC-Sierra Inc(a) 6,000 961,875
QLogic Corp(a) 4,900 783,388
RF Micro Devices(a) 13,100 896,531
SDL Inc(a) 6,500 1,417,000
Texas Instruments 11,200 1,085,000
Vitesse Semiconductor(a) 13,400 702,662
Xilinx Inc(a) 12,000 545,625
================================================================================
13,562,449
1.84 ENTERTAINMENT
Gemstar International Group Ltd(a) 23,900 1,702,875
================================================================================
6.00 EQUIPMENT -- SEMICONDUCTOR
Applied Materials(a) 6,900 874,144
ASM Lithography Holding NV New York
Registered Shrs(a) 8,200 932,750
Credence Systems(a) 9,700 839,050
KLA-Tencor Corp(a) 4,600 512,325
Lam Research(a) 9,900 1,104,469
Novellus Systems(a) 2,400 294,075
Taiwan Semiconductor Manufacturing
Ltd Sponsored ADR
Representing 5 Ord Shrs(a) 13,399 602,955
Teradyne Inc(a) 5,900 389,400
================================================================================
5,549,168
0.99 MANUFACTURING
Corning Inc 7,100 915,456
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
9.09 SERVICES
America Online(a) 17,700 $ 1,335,244
Ariba Inc(a) 600 106,425
CMGI Inc(a) 3,400 941,375
Concord EFS(a) 18,100 466,075
Critical Path(a) 2,700 254,813
Diamond Technology Partners(a) 6,150 528,516
Fiserv Inc(a) 17,100 655,144
Proxicom Inc(a) 1,100 136,744
Safeguard Scientifics(a) 4,900 794,106
Sapient Corp(a) 6,400 902,000
TSI International Software Ltd(a) 8,300 469,988
VeriSign Inc(a) 4,600 877,450
VERITAS Software(a) 6,600 944,625
================================================================================
8,412,505
2.59 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 8,800 907,500
Proxim Inc(a) 6,700 737,000
Vodafone AirTouch PLC Sponsored ADR
Representing 10 Ord Shrs 4,900 242,550
WinStar Communications(a) 6,800 509,150
================================================================================
2,396,200
0.78 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 14,200 720,650
================================================================================
0.55 TELEPHONE
Amdocs Ltd(a) 14,780 509,910
================================================================================
TOTAL COMMON STOCKS (Cost $62,936,412) 84,598,153
================================================================================
8.55 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
12/31/1999 due 1/3/2000 at 2.800%, repurchased
at $7,915,847 (Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007 at
3.375%, value $8,061,741) (Cost $7,914,000) $ 7,914,000 7,914,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $70,850,412)
(Cost for Income Tax Purposes $71,172,320) $92,512,153
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
TECHNOLOGY
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 70,850,412
================================================================================
At Value(a) $ 92,512,153
Receivables:
Fund Shares Sold 1,622,444
Dividends and Interest 4,274
Prepaid Expenses and Other Assets 125
================================================================================
TOTAL ASSETS 94,138,996
================================================================================
LIABILITIES
Payables:
Custodian 1,107
Investment Securities Purchased 109,248
Fund Shares Repurchased 37,063
Accrued Expenses and Other Payables 21
================================================================================
TOTAL LIABILITIES 147,439
================================================================================
NET ASSETS AT VALUE $ 93,991,557
================================================================================
NET ASSETS
Paid-in Capital(b) $ 71,614,849
Accumulated Undistributed (Distributions in Excess of)
Net Investment Loss (74)
Accumulated Undistributed Net Realized Gain on
Investment Securities and Foreign Currency Transactions 715,041
Net Appreciation of Investment Securities and
Foreign Currency Transactions 21,661,741
================================================================================
NET ASSETS AT VALUE $ 93,991,557
================================================================================
Shares Outstanding 2,531,485
NET ASSET VALUE, Offering and Redemption Price per Share $ 37.13
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $7,914,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Technology Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
TECHNOLOGY
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 5,989
Interest 96,198
Foreign Taxes Withheld (241)
================================================================================
TOTAL INCOME 101,946
================================================================================
EXPENSES
Investment Advisory Fees 92,023
Transfer Agent Fees 5,000
Administrative Fees 42,515
Custodian Fees and Expenses 20,207
Directors' Fees and Expenses 8,161
Professional Fees and Expenses 17,061
Registration Fees and Expenses 39
Reports to Shareholders 8,567
Other Expenses 576
================================================================================
TOTAL EXPENSES 194,149
Fees and Expenses Absorbed by Investment Adviser (26,323)
Fees and Expenses Paid Indirectly (14,184)
================================================================================
NET EXPENSES 153,642
================================================================================
NET INVESTMENT LOSS (51,696)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on:
Investment Securities 857,384
Foreign Currency Transactions 307
================================================================================
Total Net Realized Gain 857,691
================================================================================
Change in Net Appreciation of:
Investment Securities 21,371,751
Foreign Currency Transaction 15,726
================================================================================
Total Net Appreciation 21,387,477
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 22,245,168
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 22,193,472
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TECHNOLOGY FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Loss $ (51,696) $ (1,065)
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions 857,691 (90,677)
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 21,387,477 291,455
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 22,193,472 199,713
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (621)
In Excess of Net Investment Income 0 (1,061)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (6,100)
================================================================================
TOTAL DISTRIBUTIONS 0 (7,782)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 103,325,672 4,805,752
Reinvestment of Distributions 0 7,782
================================================================================
103,325,672 4,813,534
Amounts Paid for Repurchases of Shares (33,104,826) (3,842,652)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 70,220,846 970,882
================================================================================
TOTAL INCREASE IN NET ASSETS 92,414,318 1,162,813
NET ASSETS
Beginning of Period 1,577,239 414,426
================================================================================
End of Period (Including Accumulated
Undistributed (Distributions in Excess
of) Net Investment Loss of ($74) and ($3),
respectively) $ 93,991,557 $ 1,577,239
================================================================================
-------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 3,731,704 383,014
Shares Issued from Reinvestment of Distributions 0 607
================================================================================
3,731,704 383,621
Shares Repurchased (1,310,179) (309,738)
================================================================================
NET INCREASE IN FUND SHARES 2,421,525 73,883
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund),
Dynamics Fund, Equity Income Fund (formerly Industrial Income Fund),
Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund, Realty Fund, Small Company Growth Fund, Technology Fund (the
"Fund", presented herein), Telecommunications Fund, Total Return Fund and
Utilities Fund. The investment objective of the Fund is to seek capital
appreciation through investments in a specific business sector. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. 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 accounting principles
generally accepted in the United States 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 income 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 at the close of the regular trading day on that exchange (generally
4:00 p.m. Eastern time) in the market where such securities are primarily
traded. If last sales prices are not available, securities are valued at the
highest closing bid prices at the close of the regular trading day and
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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under
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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one
or more banks or dealers on the date of valuation.
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. In the event of default on the
obligation to repurchase, the Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation.
<PAGE>
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, original issue
discount and amortized premium, is recorded on the accrual basis. Income and
expenses on foreign securities are translated into U.S dollars at rates of
exchange prevailing when accrued. Cost is determined on the specific
identification basis. The cost of foreign securities is translated into U.S.
dollars at the rates of exchange prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in
specific industries or 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 investment securities includes fluctuations from
currency exchange rates and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject
it to certain risks as a result of unanticipated movements in foreign
exchange rates. The Fund does not hold short-term forward foreign currency
contracts for trading purposes. The Fund may hold foreign currency in
anticipation of settling foreign security transactions and not for investment
purposes.
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. Net capital loss carryovers utilized in 1999 by the
Fund amounted to $85,392.
To the extent future capital gains are offset by capital loss carryovers,
such gains will not be distributed to shareholders.
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.
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 accounting principles generally accepted in the United States. These
differences are primarily due to differing treatments for market discounts,
amortized premiums, foreign currency transactions, nontaxable dividends, net
operating losses and expired capital loss carryforwards. For the year
ended December 31, 1999, the Fund reclassified $51,625 from accumulated
undistributed net realized gain on investment securities to accumulated
undistributed net investment loss. Net investment loss, net realized gains,
paid-in capital and net assets were not affected.
<PAGE>
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term
forward foreign currency contracts in connection with planned purchases or
sales of securities as a hedge against fluctuations in foreign exchange rates
pending the settlement of transactions in foreign securities. A forward
foreign currency contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate.
These contracts are marked-to-market daily and the related appreciation or
depreciation of the contracts is presented in the Statement of Assets and
Liabilities. Any realized gain or loss incurred by the Fund upon the sale of
securities is included in the Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf
and, in addition, the Fund bears a portion of general expenses, based on the
relative net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% on the first $350 million of average net assets;
reduced to 0.65% on the next $350 million of average net assets; reduced to
0.55% of average net assets in excess of $700 million; reduced to 0.45% of
average net assets in excess of $2 billion; reduced to 0.40% of average net
assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at
an annual rate of 0.265% of average net assets (the "Incremental Fee") to
provide administrative, accounting and clerical services. The fee is accrued
daily and paid monthly. IFG may pay all or a portion of the Base Fee and the
Incremental Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by
the Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and
short-term securities) were $73,755,132 and $12,734,572, respectively. There
were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax
cost amounted to $21,552,218 and the gross depreciation of securities in
which there was an excess of tax cost over value amounted to $212,385,
resulting in net appreciation of $21,339,833.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum
of the retainer fee at the time of retirement plus the meeting attendance
fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year ended December 31, 1999.
<PAGE>
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the
INVESCO Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The
LOC permits borrowings to a maximum of 10% of the Net Assets at Value of the
Fund. The Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. At
December 31, 1999, there were no such borrowings.
---------------------------------------------------------------
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 INVESCO Variable
Technology Fund (one of the portfolios constituting INVESCO Variable Investment
Funds, Inc., hereafter referred to as the "Fund") at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the two years in the period then ended and for the period May 21,
1997 (commencement of investment operations) through December 31, 1997, in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 14.34 $ 11.49 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.00) (0.03) 0.05
Net Gains on Securities (Both Realized
and Unrealized) 22.79 2.96 1.44
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 22.79 2.93 1.49
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.01 0.00
In Excess of Net Investment Income 0.00 0.01 0.00
Distributions from Capital Gains 0.00 0.06 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.00 0.08 0.00
================================================================================
Net Asset Value-- End of Period $ 37.13 $ 14.34 $ 11.49
================================================================================
TOTAL RETURN(c) 158.93% 25.69% 14.80%(d)
RATIOS
Net Assets-- End of Period ($000
Omitted) $ 93,992 $ 1,577 $ 414
Ratio of Expenses to Average Net
Assets(e)(f) 1.31% 1.40% 0.48%(g)
Ratio of Net Investment Income (Loss) to
Average Net Assets(e) (0.40%) (0.14%) 0.95%(g)
Portfolio Turnover Rate 95% 239% 102%(d)
(a) From May 21, 1997, commencement of investment operations, to December 31,
1997.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis
for the year ended December 31, 1999.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 1.52%, 6.47% and 19.25% (annualized), respectively,
and ratio of net investment loss to average net assets would have been
(0.61%), (5.21%) and (17.82%) (annualized), respectively.
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A13 9043 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- -------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- ------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-TELECOMMUNICATIONS FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW JANUARY 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, outdistanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecommunications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers -- particularly the major drug companies -- lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years
running, its ability to dodge a slowdown seemed especially remarkable given the
rising interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed engineered another quarter-point increase in
short-term interest rates in November, the third such increase of the year. The
central bank's tightening helped drive long-term bond yields to their highest
levels since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
<PAGE>
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive --
not to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The charts and other total return
figures cited reflect the fund's operating expenses, but the indexes do not have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF - TELECOMMUNICATIONS FUND
VIF-TELECOMMUNICATIONS FUND
AVERAGE ANNUAL TOTAL REVENUE
AS OF 12/31/99(1)
Since inception (9/99) 64.50%
-------------------------------------------------------------
For the three months ended 12/31/99, VIF-Telecommunications Fund gained
59.40%. This return greatly exceeded both the S&P 500, which over the same
period returned 14.87%, and the Morgan Stanley-European/Australia/Far East
Index, which rose 17.05%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
The fund's performance was driven by shares of Internet, component, and
telecommunication equipment companies. Internet companies Yahoo! Inc. and CMGI
Inc, enjoyed returns in excess of 80% in December 1999 alone. Yahoo! Inc
advanced on the news of its inclusion into the S&P 500 index, and CMGI Inc
announced stronger-than-expected earnings which boosted its performance.
Component stocks also drove the fund's performance, including Broadcom Corp, JDS
Uniphase, Qualcomm Inc, and SDL Inc. Qualcomm Inc benefited from the sale of its
handset division, while JDS Uniphase, SDL Inc., and Broadcom Corp advanced as
investors discounted strong growth prospects for 2000.
<PAGE>
Graph: INVESCO VIF - Telecommunications Fund
Total Return from Inception (9/99) through 2/31/99 vs. S&P 500 Index
and MSCI-EAFE.
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Telecommunications Fund to the value of a $10,000 investment in the
S&P 500 Index and a $10,000 investment in the MSCI-EAFE Index, assuming
in each case reinvestment of all dividends and capital gain
distributions, for the period from inception (9/99) through 12/31/99.
We remain bullish on the outlook for the telecommunications sector,
particularly equipment. Optical networking equipment sales are expected to
accelerate during the year. We will focus on equipment companies with broad
product lines and global exposure. To a lesser extent, the fund will invest in
smaller, faster-growing communication equipment stocks. It is anticipated that
the fund could become more heavily weighted in telecommunication equipment
stocks, given the superior growth prospects we see in that sector. We will also
focus on the migration of voice traffic from wireline networks to wireless, as
cellular rates decline and new service providers ramp up service. Wireless data
services will become an increasingly important investment theme in 2000 and
beyond. Overall, we will continue to exercise diligence in selecting the
companies we believe will offer the best potential for performance. We expect to
see volatility within the telecom sector following the strong performance of
1999, but we believe our strategy of buying and holding industry leaders will
continue to serve us well regardless of market fluctuations.
FUND MANAGEMENT
The fund is managed by Brian B. Hayward. Previously, he was a senior
equity analyst for Mississippi Valley Advisors in St. Louis, Missouri and began
his investment career in 1985. Brian earned a BA in Mathematics and a MA in
Economics from the University of Missouri. He is a Chartered Financial Analyst.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE MSCI-EAFE IS AN UNMANAGED INDEX
THAT REFLECTS THE PERFORMANCE OF THE EUROPEAN/AUSTRALIAN/FAR EASTERN STOCK
MARKETS. THE NASDAQ IS AN UNMANAGED INDEX OF STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
December 31, 1999
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
84.23 COMMON STOCKS
2.96 BROADCASTING
EchoStar Communications Class A Shrs(a) 21,410 $ 2,087,475
================================================================================
1.15 CABLE
NTL Inc(a) 6,470 807,132
================================================================================
16.35 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 4,900 281,750
Comverse Technology(a) 8,000 1,158,000
Copper Mountain Networks(a) 5,700 277,875
General Instrument(a) 10,500 892,500
JDS Uniphase(a) 13,600 2,193,850
Lucent Technologies 11,960 894,758
Metasolv Software(a) 1,700 138,975
Motorola Inc 1,120 164,920
Nokia Corp Sponsored ADR Representing
Ord Shrs FI 10,680 2,029,200
Nortel Networks CA 12,720 1,284,720
QUALCOMM Inc(a) 7,840 1,381,800
Scientific-Atlanta Inc 4,580 254,763
Tellabs Inc(a) 9,080 582,823
================================================================================
11,535,934
14.02 COMPUTER RELATED
Cisco Systems(a) 15,640 1,675,435
EMC Corp(a) 14,070 1,537,147
Exodus Communications(a) 10,300 914,769
Inktomi Corp(a) 6,480 575,100
Internap Network Services(a) 3,400 588,200
Juniper Networks(a) 800 272,000
Metromedia Fiber Network Class A Shrs(a) 14,940 716,186
Microsoft Corp(a) 4,640 541,720
PSINet Inc(a) 12,060 744,705
Redback Networks(a) 3,580 635,450
Sycamore Networks(a) 600 184,800
Verio Inc(a) 6,860 316,846
Yahoo! Inc(a) 2,750 1,189,891
================================================================================
9,892,249
9.06 ELECTRONICS -- SEMICONDUCTOR
Applied Micro Circuits(a) 7,740 984,915
Broadcom Corp Class A Shrs(a) 2,760 751,755
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Conexant Systems(a) 10,360 $ 687,645
PMC-Sierra Inc(a) CA 6,320 1,013,175
RF Micro Devices(a) 8,990 615,253
SDL Inc(a) 6,080 1,325,440
Texas Instruments 3,000 290,625
Vitesse Semiconductor(a) 13,780 722,589
================================================================================
6,391,397
2.66 ENTERTAINMENT
Gemstar International Group Ltd(a) 26,320 1,875,300
================================================================================
2.15 MACHINERY
Mannesmann AG Registered Shrs GM 6,210 1,513,490
================================================================================
0.49 MANUFACTURING
Corning Inc 2,700 348,131
================================================================================
0.73 RETAIL
Tandy Corp 10,440 513,518
================================================================================
4.06 SERVICES
America Online(a) 13,060 985,214
CMGI Inc(a) 4,350 1,204,406
CSG Systems International(a) 16,930 675,084
================================================================================
2,864,704
7.65 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
China Telecom Ltd(a) HK 42,000 262,601
Crown Castle International(a) 11,720 376,505
Nextel Communications Class A Shrs(a) 4,400 453,750
NTT Mobile Communications Network JA 25 961,444
Partner Communications Ltd ADR
Representing Ord Shrs(a) IS 14,800 382,950
Telecom Italia Mobile SpA IT 24,810 277,096
Teligent Inc Class A Shrs(a) 4,130 255,028
Tritel Inc(a) 8,400 266,175
Vodafone AirTouch PLC Sponsored ADR
Representing 10 Ord Shrs UK 8,000 396,000
VoiceStream Wireless(a) 7,700 1,095,806
WinStar Communications(a) 8,960 670,880
================================================================================
5,398,235
12.32 TELECOMMUNICATIONS -- LONG DISTANCE
Allegiance Telecom(a) 5,610 517,522
AT&T Corp 9,940 504,455
Equant NV New York Shrs(a) NL 3,740 418,880
Esat Telecom Group PLC Sponsored ADR
Representing 2 Ord Shrs(a) IE 9,390 859,185
Global Crossing Ltd(a) BD 22,435 1,121,750
Global TeleSystems Group(a) 24,360 843,465
Infonet Services Class B Shrs(a) 16,900 443,625
ITC DeltaCom(a) 10,500 290,062
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
KPNQwest NV Class C Shrs(a) NL 9,500 $ 605,625
MCI WorldCom(a) 7,760 411,765
Nippon Telegraph & Telephone JA 45 770,623
Qwest Communications International(a) 14,230 611,890
Sprint Corp 11,830 796,307
Viatel Inc(a) 9,260 496,568
================================================================================
8,691,722
10.63 TELEPHONE
Amdocs Ltd(a) 29,770 1,027,065
AT&T Canada Class B Depository Receipts(a) CA 16,820 677,005
BellSouth Corp 9,960 466,253
Cable & Wireless PLC UK 6,300 106,678
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) UK 6,820 1,391,280
Covad Communications Group(a) 6,640 371,425
GTE Corp 3,200 225,800
Illuminet Holdings(a) 5,200 286,000
McLeodUSA Inc(a) 10,550 621,131
NEXTLINK Communications Class A Shrs(a) 7,100 589,744
RCN Corp(a) 7,260 352,110
Rhythms NetConnections(a) 7,150 221,650
SBC Communications 14,840 723,450
Time Warner Telecom Class A Shrs(a) 2,800 139,825
US WEST 4,200 302,400
================================================================================
7,501,816
TOTAL COMMON STOCKS (Cost $46,645,395) 59,421,103
================================================================================
15.77 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $11,131,597
(Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007
at 3.375%, value $11,338,252)
(Cost $11,129,000) $ 11,129,000 11,129,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $57,774,395)
(Cost for Income Tax Purposes $57,865,680) $ 70,550,103
================================================================================
(a) Security is non-income producing.
<PAGE>
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
- --------------------------------------------------------------------------------
Bermuda BD 1.59% $ 1,121,750
Canada CA 4.22 2,974,900
Finland FI 2.88 2,029,200
Germany GM 2.15 1,513,490
Hong Kong HK 0.37 262,601
Ireland IE 1.22 859,185
Israel IS 0.54 382,950
Italy IT 0.39 277,096
Japan JA 2.46 1,732,067
Netherlands NL 1.45 1,024,505
United Kingdom UK 2.68 1,893,958
United States US 80.05 56,478,401
================================================================================
100.00% $70,550,103
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
TELECOMMUNICATIONS
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 57,774,395
================================================================================
At Value(a) $ 70,550,103
Cash 2,290
Receivables:
Fund Shares Sold 794,158
Dividends and Interest 5,656
================================================================================
TOTAL ASSETS 71,352,207
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 3,699,672
Accrued Expenses and Other Payables 2,753
================================================================================
TOTAL LIABILITIES 3,702,425
================================================================================
NET ASSETS AT VALUE $ 67,649,782
================================================================================
NET ASSETS
Paid-in Capital(b) $ 54,356,847
Accumulated Undistributed Net Investment Income 8,131
Accumulated Undistributed Net Realized Gain on
Investment Securities and Foreign Currency Transactions 509,096
Net Appreciation of Investment Securities and Foreign
Currency Transactions 12,775,708
================================================================================
NET ASSETS AT VALUE $ 67,649,782
================================================================================
Shares Outstanding 4,113,118
NET ASSET VALUE, Offering and Redemption Price per Share $ 16.45
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $11,129,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Telecommunications Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
PERIOD ENDED DECEMBER 31, 1999 (NOTE 1)
TELECOMMUNICATIONS
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 6,205
Interest 88,757
Foreign Taxes Withheld (144)
================================================================================
TOTAL INCOME 94,818
================================================================================
EXPENSES
Investment Advisory Fees 50,901
Transfer Agent Fees 1,389
Administrative Fees 20,763
Custodian Fees and Expenses 6,253
Directors' Fees and Expenses 40
Professional Fees and Expenses 12,421
Other Expenses 106
================================================================================
TOTAL EXPENSES 91,873
Fees and Expenses Absorbed by Investment Adviser (1,193)
Fees and Expenses Paid Indirectly (3,993)
================================================================================
NET EXPENSES 86,687
================================================================================
NET INVESTMENT INCOME 8,131
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 510,579
Foreign Currency Transactions (1,483)
================================================================================
Total Net Realized Gain 509,096
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 12,785,701
Foreign Currency Transactions (9,993)
================================================================================
Total Net Appreciation 12,775,708
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND FOREIGN CURRENCY TRANACTIONS 13,284,804
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 13,292,935
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TELECOMMUNICATIONS FUND
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999
(Note 1)
OPERATIONS
Net Investment Income $ 8,131
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 509,096
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 12,775,708
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 13,292,935
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 70,669,026
Amounts Paid for Repurchases of Shares (16,560,179)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 54,108,847
================================================================================
TOTAL INCREASE IN NET ASSETS
67,401,782
NET ASSETS
Initial Subscription (Note 1) 248,000
Beginning of Period 0
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $8,131) $ 67,649,782
================================================================================
--------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 24,800
Shares Sold 5,225,874
Shares Repurchased (1,137,556)
================================================================================
NET INCREASE IN FUND SHARES 4,113,118
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements -- INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund, Market Neutral Fund, Realty Fund,
Small Company Growth Fund, Technology Fund, Telecommunications Fund (the "Fund",
presented herein), Total Return Fund and Utilities Fund. The investment
objective of the Fund is to seek capital appreciation and income on securities
principally engaged in a specific business sector. The Fund commenced investment
operations on September 21, 1999. The Fund is registered under the Investment
Company Act of 1940 (the "Act") as a diversified, open-end management investment
company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
<PAGE>
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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
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.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards.
<PAGE>
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term
forward foreign currency contracts in connection with planned purchases or sales
of securities as a hedge against fluctuations in foreign exchange rates pending
the settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund. Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% of average net assets.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $49,924,138 and $3,787,839 respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $12,956,404 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $271,981 resulting in net
appreciation of $12,684,423.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
<PAGE>
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the period ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
----------------------------------------------------------
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 INVESCO Variable
Telecommunications Fund (one of the portfolios constituting INVESCO Variable
Investment Funds, Inc., hereafter referred to as the "Fund") at December 31,
1999, and the results of its operations, the changes in its net assets and the
financial highlights for the period September 21, 1999 (commencement of
investment operations) through December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards generally
accepted in the United States, 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
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income(b) 0.00
Net Gains on Securities (Both Realized and Unrealized 6.45
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 6.45
================================================================================
Net Asset Value-- End of Period $ 16.45
================================================================================
TOTAL RETURN(c) 64.50%(d)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 67,650
Ratio of Expenses to Average Net Assets(e)(f) 1.27%(g)
Ratio of Net Investment Income to Average Net Assets(e) 0.11%(g)
Portfolio Turnover Rate 15%(d)
(a) From September 21, 1999, commencement of investment operations, to December
31, 1999.
(b) Net Investment Income aggregated less than $0.01 on a per share basis for
the period ended December 31, 1999.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the period
ended December 31, 1999. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.28% (annualized)
and ratio of net investment income to average net assets would have been
0.10% (annualized).
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed
by Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A739 9044 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- -------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- -------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-TOTAL RETURN FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, out-distanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecom-munications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers--particularly the major drug companies--lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought--roughly 3.5% instead of 2.5%--gross domestic product growth
easily surpassed even this target in both the first and third quarters. To stave
off inflation, the Fed engineered another quarter-point increase in short-term
interest rates in November, the third such increase of the year. The central
bank's tightening helped drive long-term bond yields to their highest levels
since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive--not
to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The chart and other total return
figures cited reflect the fund's operating expenses, but the indexes do not have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF - TOTAL RETURN FUND
VIF- TOTAL RETURN FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year (3.40%)
----------------------------------------------------------------
5 years 12.38%
----------------------------------------------------------------
Since inception (6/94) 11.36%
----------------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Total Return Fund fell 3.40%.
This lagged both the S&P 500 Index, which over the same period gained 21.03%,
and the Lehman Government/Corporate Bond Index, which fell 2.15%. (Of course,
past performance is not a guarantee of future results.)(1),(2)
The fund suffered throughout most of the year from its focus on value
stocks in a market that has increasingly favored high-growth, high-multiple
growth stocks. At the end of the year, the equity portion of the fund was
overweight relative to the benchmark in basic materials, capital goods and
consumer cyclical stocks. The fund focused on companies within those sectors
because they continued to offer the most attractive valuations, combined with
strong or improving business dynamics. We witnessed early signs of strength in
the basic materials and consumer cyclicals sector in the fourth quarter, and we
benefited from an underweight position in the poor-performing energy sector.
This was not enough to offset the solid underweight position in technology,
however, along with declines of several holdings in the capital goods and
consumer cyclical sectors. We did, however, benefit from the asset allocation of
our portfolio in that equities far exceeded the return of bonds during the
quarter, and the fund had a higher-than-normal weighting. The fixed-income
component held its own during a difficult bond market, with interest rates
rising throughout the year.
<PAGE>
Graph: INVESCO VIF - Total Return Fund
Total Return since Inception (6/94) through 12/31/99 vs. S&P 500 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Total Return Fund to the value of a $10,000 investment in the S&P 500
Index and a $10,000 investment in the 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 12/31/99.
The historical spread between the expected return on stocks and the
yield-to-maturity of longer-term bonds has averaged 3% over time. At that level,
the normal asset mix would be 60% stocks and 40% bonds. The current spread is
somewhat wider than historic norms, and the fund maintains a higher-than-neutral
equity position.
FUND MANAGEMENT
VIF-Total Return Fund 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. Ed began his investment career in 1969. He
is assisted by David S. Griffin, who began his investment career in 1982. David
holds an MBA from the College of William & Mary, as well as a BA from Ohio
Wesleyan University. He is a Chartered Financial Analyst.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE LEHMAN GOVERNMENT/CORPORATE BOND
INDEX IS AN UNMANAGED INDEX INDICATIVE OF THE BROAD FIXED-INCOME MARKET. THE
NASDAQ IS AN UNMANAGED INDEX OF STOCKS TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
69.79 COMMON STOCKS
1.72 AEROSPACE & DEFENSE
Boeing Co 4,500 $ 187,031
Lockheed Martin 8,000 175,000
Raytheon Co Class B Shrs 4,000 106,250
================================================================================
468,281
0.63 AIRLINES
Southwest Airlines 10,500 169,969
================================================================================
2.01 AUTO PARTS
Cooper Tire & Rubber 8,000 124,500
Genuine Parts 9,000 223,313
Johnson Controls 3,500 199,062
================================================================================
546,875
1.18 AUTOMOBILES
Ford Motor 6,000 320,625
================================================================================
5.09 BANKS
Bank of America 7,200 361,350
Bank One 7,000 224,438
Comerica Inc 2,000 93,375
First Union 6,000 196,875
FleetBoston Financial 5,000 174,062
National City 7,920 187,605
State Street 1,500 109,594
Wachovia Corp 500 34,000
================================================================================
1,381,299
1.37 BEVERAGES
Anheuser-Busch Cos 3,000 212,625
PepsiCo Inc 4,500 158,625
================================================================================
371,250
1.21 BUILDING MATERIALS
Lowe's Cos 2,000 119,500
Sherwin-Williams Co 10,000 210,000
================================================================================
329,500
1.39 CHEMICALS
Dow Chemical 1,600 213,800
Great Lakes Chemical 3,000 114,562
Praxair Inc 1,000 50,313
================================================================================
378,675
4.62 COMPUTER RELATED
Cadence Design Systems(a) 6,000 144,000
Compaq Computer 12,000 324,750
Computer Associates International 4,500 314,719
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Compuware Corp(a) 5,000 $ 186,250
Hewlett-Packard Co 2,500 284,844
================================================================================
1,254,563
2.58 CONGLOMERATES
Fortune Brands 5,000 165,312
Hanson PLC Sponsored ADR Representing 5 Ord Shrs 5,000 202,188
National Service Industries 6,000 177,000
Unilever NV New York Registered Shrs 2,857 155,528
================================================================================
700,028
0.34 CONSUMER FINANCE
Household International 2,500 93,125
================================================================================
0.33 CONTAINERS
Crown Cork & Seal 4,000 89,500
================================================================================
0.74 DISTRIBUTION
Supervalu Inc 10,000 200,000
================================================================================
3.36 ELECTRIC UTILITIES
CINergy Corp 3,700 89,262
DTE Energy 3,000 94,125
Edison International 5,000 130,937
Entergy Corp 10,000 257,500
GPU Inc 8,000 239,500
Unicom Corp 3,000 100,500
================================================================================
911,824
2.09 ELECTRICAL EQUIPMENT
Emerson Electric 1,500 86,062
General Electric 1,250 193,437
Grainger (W W) Inc 3,000 143,437
Rockwell International 3,000 143,625
================================================================================
566,561
0.45 ELECTRONICS -- SEMICONDUCTOR
Intel Corp 1,500 123,469
================================================================================
0.34 FINANCIAL
Fannie Mae 1,500 93,656
================================================================================
1.09 FOODS
Archer-Daniels-Midland Co 12,600 153,563
Heinz (H J) Co 3,550 141,334
================================================================================
294,897
0.78 HARDWARE & TOOLS
Snap-On Inc 8,000 212,500
================================================================================
3.38 HEALTH CARE DRUGS -- PHARMACEUTICALS
Abbott Laboratories 5,000 181,562
American Home Products 3,600 141,975
Bristol-Myers Squibb 4,000 256,750
Lilly (Eli) & Co 3,200 212,800
Mylan Laboratories 5,000 125,937
================================================================================
919,024
1.60 HEALTH CARE RELATED
Columbia/HCA Healthcare 10,000 293,125
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
Quintiles Transnational(a) 7,500 $ 140,156
================================================================================
433,281
1.06 HOUSEHOLD FURNITURE & APPLIANCES
Shaw Industries 6,000 92,625
Whirlpool Corp 3,000 195,188
================================================================================
287,813
5.86 INSURANCE
Allstate Corp 9,000 216,000
American General 1,000 75,875
Lincoln National 5,000 200,000
Loews Corp 3,000 182,062
MGIC Investment 5,000 300,937
Ohio Casualty 16,000 257,000
Old Republic International 9,000 122,625
SAFECO Corp 6,000 149,250
Torchmark Corp 3,000 87,188
================================================================================
1,590,937
1.06 INSURANCE BROKERS
Marsh & McLennan 3,000 287,062
================================================================================
1.58 INVESTMENT BANKER/BROKER FIRM
Morgan Stanley Dean Witter & Co 3,000 428,250
================================================================================
1.01 IRON & STEEL
Nucor Corp 5,000 274,062
================================================================================
1.67 MACHINERY
Caterpillar Inc 5,000 235,312
Deere & Co 5,000 216,875
================================================================================
452,187
3.17 MANUFACTURING
Federal Signal 10,000 160,625
Illinois Tool Works 3,000 202,687
Minnesota Mining & Manufacturing 1,300 127,237
Precision Castparts 7,000 183,750
Textron Inc 1,000 76,688
York International 4,000 109,750
================================================================================
860,737
0.74 METALS MINING
Phelps Dodge 3,000 201,375
================================================================================
1.49 OFFICE EQUIPMENT & SUPPLIES
IKON Office Solutions 25,000 170,312
Office Depot(a) 7,000 76,563
Xerox Corp 7,000 158,813
================================================================================
405,688
3.46 OIL & GAS RELATED
Exxon Mobil 3,500 281,969
Norsk Hydro A/SA Sponsored ADR Representing
Ord Shrs 5,000 213,750
Phillips Petroleum 2,000 94,000
Repsol SA Sponsored ADR Representing Ord Shrs 15,000 348,750
================================================================================
938,469
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.48 PAPER & FOREST PRODUCTS
Kimberly-Clark Corp 2,000 $ 130,500
================================================================================
0.58 POLLUTION CONTROL
Waste Management 9,100 156,406
================================================================================
0.95 PUBLISHING
American Greetings Class A Shrs 4,000 94,500
Gannett Co 2,000 163,125
================================================================================
257,625
0.92 RAILROADS
CSX Corp 8,000 251,000
================================================================================
2.64 RETAIL
Albertson's Inc 3,000 96,750
Dillard's Inc Class A Shrs 10,000 201,875
Penney (J C) Co 7,000 139,563
Rite Aid 25,000 279,688
================================================================================
717,876
1.16 SERVICES
Deluxe Corp 7,000 192,062
First Data 2,500 123,281
================================================================================
315,343
1.21 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 6,500 329,875
================================================================================
1.70 TELEPHONE
Bell Atlantic 2,000 123,125
Telefonos de Mexico SA de CV Sponsored ADR
Representing 20 Series L Shrs 3,000 337,500
================================================================================
460,625
1.90 TEXTILE -- APPAREL MANUFACTURING
Liz Claiborne 4,000 150,500
Unifi Inc(a) 15,000 184,688
VF Corp 6,000 180,000
================================================================================
515,188
0.68 TOBACCO
Philip Morris 8,000 185,500
================================================================================
0.17 TOYS
Mattel Inc 3,500 45,937
================================================================================
TOTAL COMMON STOCKS (Cost $17,240,324) 18,951,357
================================================================================
24.00 FIXED INCOME SECURITIES
4.37 US GOVERNMENT OBLIGATIONS
US Treasury Bonds
8.125%, 8/15/2019 $ 200,000 227,875
7.625%, 2/15/2025 $ 350,000 387,844
7.250%, 8/15/2022 $ 350,000 369,031
US Treasury Notes
7.500%, 11/15/2001 $ 100,000 102,188
6.375%, 8/15/2002 $ 100,000 100,188
================================================================================
TOTAL US GOVERNMENT OBLIGATIONS (Amortized
Cost $1,225,818) 1,187,126
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
4.01 US GOVERNMENT AGENCY OBLIGATIONS
Fannie Mae
Benchmark Notes, 5.125%, 2/13/2004 $ 208,000 $ 195,162
Gtd Mortgage Pass-Through Certificates
8.500%, 3/1/2010 $ 45,241 46,793
7.000%, 12/1/2027 $ 133,935 129,737
6.500%, 5/1/2026 $ 97,818 92,980
6.000%, 5/1/2009 $ 87,900 84,828
Freddie Mac, Gold, Participation Certificates
8.000%, 10/1/2010 $ 25,188 25,727
6.500%, 7/1/2001 $ 33,604 33,445
6.500%, 1/1/2029 $ 234,055 221,190
Government National Mortgage Association I
Pass-Through Certificates
7.500%, 3/15/2026 $ 41,300 40,924
7.000%, 4/15/2028 $ 224,597 217,135
================================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Amortized Cost $1,125,691) 1,087,921
================================================================================
1.44 ASSET-BACKED SECURITIES
1.44 CONSUMER FINANCE
Chase Manhattan Credit Card Master Trust,
Series 1996-3 Class A, 7.040%, 2/15/2005 $ 200,000 200,724
Discover Card Master Trust I, Series 1998-7
Class A, 5.600%, 5/16/2006 $ 200,000 190,500
================================================================================
TOTAL ASSET-BACKED SECURITIES (Amortized
Cost $408,271) 391,224
================================================================================
14.18 CORPORATE BONDS
0.70 AUTO PARTS
Dana Corp, Notes, 6.250%, 3/1/2004 $ 200,000 190,611
================================================================================
1.37 AUTOMOBILES
Ford Motor, Bonds, 6.500%, 8/1/2018 $ 200,000 176,514
General Motors Acceptance, Global Bonds,
5.500%, 1/14/2002 $ 200,000 194,387
================================================================================
370,901
2.47 BANKS
ABN Amro Bank NV, Sub Notes, 7.550%,
6/28/2006 $ 200,000 199,650
NationsBank Corp, Sub Notes, 6.500%,
3/15/2006 $ 100,000 95,867
SunTrust Banks, Sr Notes, 6.250%, 6/1/2008 $ 300,000 276,828
Wachovia Bank, Euro Medium-Term Notes
Series 3, 7.000%, 10/17/2008 $ 100,000 97,264
================================================================================
669,609
0.89 BUILDING MATERIALS
Sherwin-Williams Co, Notes, 6.850%, 2/1/2007 $ 250,000 241,560
================================================================================
0.41 ELECTRIC UTILITIES
National Rural Utilities, Secured Collateral Trust
6.550%, 11/1/2018 $ 125,000 111,410
================================================================================
1.42 FINANCIAL
Associates Corp of North America, Sr Notes,
6.375%, 10/15/2002 $ 200,000 196,689
CIT Group, Notes, 5.625%, 10/15/2003 $ 200,000 188,980
================================================================================
385,669
<PAGE>
- --------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
- --------------------------------------------------------------------------------
0.54 FOODS
Campbell Soup, Notes, 6.150%, 12/1/2002 $ 150,000 $ 147,665
================================================================================
0.68 HEALTH CARE RELATED
Guidant Corp, Notes, 6.150%, 2/15/2006 $ 200,000 184,499
================================================================================
1.05 HOUSEHOLD PRODUCTS
Procter & Gamble, Notes, 5.250%, 9/15/2003 $ 300,000 284,765
================================================================================
1.05 INSURANCE
Travelers Property Casualty, Sr Notes,
6.750%, 11/15/2006 $ 300,000 285,333
================================================================================
0.68 LEISURE TIME
Carnival Corp, Notes, 6.150%, 4/15/2008 $ 200,000 183,717
================================================================================
0.68 MACHINERY
Cooper Industries, Medium-Term Notes,
Series 3, 6.375%, 5/8/2008 $ 200,000 185,174
================================================================================
0.65 PERSONAL CARE
Colgate-Palmolive Co, Medium-Term Notes,
Series C, 5.580%, 11/6/2008 $ 200,000 177,711
================================================================================
0.95 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp, Notes, 6.500%, 3/15/2029 $ 300,000 256,847
================================================================================
0.64 TELEPHONE
GTE Northwest, Deb, 5.550%, 10/15/2008 $ 200,000 174,800
================================================================================
TOTAL CORPORATE BONDS (Cost $4,158,434) 3,850,271
================================================================================
TOTAL FIXED INCOME SECURITIES (Cost $6,918,214) 6,516,542
================================================================================
6.21 SHORT-TERM INVESTMENTS
3.12 US GOVERNMENT AGENCY OBLIGATIONS
Federal Farm Credit Bank, Medium-Term Notes,
6.150%, 9/1/2000 $ 500,000 499,433
Federal Home Loan Bank, 5.500%, 7/14/2000 $ 350,000 348,671
================================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Cost $849,908) 848,104
================================================================================
0.37 CORPORATE BONDS
0.37 BEVERAGES
PepsiCo Inc, Medium-Term Notes, 5.875%,
6/1/2000 (Cost $99,575) $ 100,000 99,905
================================================================================
2.72 REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 12/31/1999 due 1/3/2000
at 2.800%, repurchased at $738,172
(Collateralized by US Treasury
Inflationary Index Notes, due
1/15/2007 at 3.375%, value $751,820)
(Cost $738,000) $ 738,000 738,000
================================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $1,687,483) 1,686,009
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $25,846,021)
(Cost for Income Tax Purposes $25,846,142) $27,153,908
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
TOTAL
RETURN
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 25,846,021
================================================================================
At Value(a) $ 27,153,908
Cash 819
Receivables:
Fund Shares Sold 436,838
Dividends and Interest 153,153
Prepaid Expenses and Other Assets 1,117
================================================================================
TOTAL ASSETS 27,745,835
================================================================================
LIABILITIES
Accrued Expenses and Other Payables 6,988
================================================================================
NET ASSETS AT VALUE $ 27,738,847
================================================================================
NET ASSETS
Paid-in Capital(b) $ 23,821,745
Accumulated Undistributed Net Investment Income 84,705
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 2,524,510
Net Appreciation of Investment Securities and Foreign
Currency Transactions 1,307,887
================================================================================
NET ASSETS AT VALUE $ 27,738,847
================================================================================
Shares Outstanding 1,780,083
NET ASSET VALUE, Offering and Redemption Price per Share $ 15.58
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $738,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated to
Total Return Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
TOTAL
RETURN
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 485,224
Interest 593,771
Foreign Taxes Withheld (8,345)
================================================================================
TOTAL INCOME 1,070,650
================================================================================
EXPENSES
Investment Advisory Fees 244,455
Transfer Agent Fees 5,000
Administrative Fees 54,679
Custodian Fees and Expenses 10,192
Directors' Fees and Expenses 9,540
Professional Fees and Expenses 19,887
Registration Fees and Expenses 49
Reports to Shareholders 29,298
Other Expenses 7,115
================================================================================
TOTAL EXPENSES 380,215
Fees and Expenses Paid Indirectly (7,053)
================================================================================
NET EXPENSES 373,162
================================================================================
NET INVESTMENT INCOME 697,488
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 2,529,490
Foreign Currency Transactions (151)
================================================================================
Total Net Realized Gain 2,529,339
================================================================================
Change in Net Depreciation of Investment Securities (3,779,125)
================================================================================
NET LOSS ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS (1,249,786)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (552,298)
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Income $ 697,488 $ 733,314
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 2,529,339 765,809
Change in Net Appreciation (Depreciation) of
Investment Securities (3,779,125) 1,112,812
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (552,298) 2,611,935
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (637,406) (715,045)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions (106,292) (742,991)
================================================================================
TOTAL DISTRIBUTIONS (743,698) (1,458,036)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 10,278,231 16,770,585
Reinvestment of Distributions 743,698 1,458,036
================================================================================
11,021,929 18,228,621
Amounts Paid for Repurchases of Shares (17,617,152) (7,020,045)
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (6,595,223) 11,208,576
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (7,891,219) 12,362,475
NET ASSETS
Beginning of Period 35,630,066 23,267,591
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $84,705 and $23,680,
respectively) $27,738,847 $ 35,630,066
================================================================================
------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 616,233 1,020,295
Shares Issued from Reinvestment of Distributions 48,292 89,450
================================================================================
664,525 1,109,745
Shares Repurchased (1,033,568) (432,444)
================================================================================
NET INCREASE (DECREASE) IN FUND SHARES (369,043) 677,301
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund, Market Neutral Fund, Realty Fund,
Small Company Growth Fund, Technology Fund, Telecommunications Fund, Total
Return Fund (the "Fund", presented herein), and Utilities Fund. The investment
objective of the Fund is to seek a high total return on investment through
capital appreciation and current income. The Fund is registered under the
Investment Company Act of 1940 (the "Act") as a diversified, open-end management
investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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 one or more 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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
<PAGE>
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Discounts and premiums 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 cost of foreign securities
is translated into U.S. dollars at the rates of exchange prevailing when such
securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
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 U.S. Government.
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.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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, 1999, 58.98% qualified for the
dividends received deduction available to the Fund's corporate shareholders.
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.
<PAGE>
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for mortgage-backed securities, market discounts, amortized premiums, foreign
currency transactions, nontaxable dividends, net operating losses and expired
capital loss carryforwards. For the year ended December 31, 1999, the Fund
reclassified $943 from accumulated undistributed net realized gain on investment
securities to accumulated undistributed net investment income. Net investment
income, net realized gains, paid-in capital and net assets were not affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.75% on the first $500 million of average net assets;
reduced to 0.65% on the next $500 million of average net assets; reduced to
0.55% of average net assets in excess of $1 billion; reduced to 0.45% of average
net assets in excess of $2 billion; reduced to 0.40% of average net assets in
excess of $4 billion; reduced to 0.375% of average net assets in excess of $6
billion and 0.35% of average net assets over $8 billion.
A Sub-Advisory Agreement between IFG and INVESCO Capital Management, Inc.
("ICM"), an affiliate of IFG, provides that investment decisions of the Fund are
made by ICM. Fees for such sub-advisory services are paid by IFG.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
<PAGE>
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus effective July 8, 1998, an
additional amount computed at an annual rate of 0.015% of average net assets
plus, an additional amount computed at an annual rate of 0.25% of new assets
(the "Incremental Fees") to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly. IFG may pay all or a
portion of the Base Fee and the Incremental Fees to other companies that assist
in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $8,191,730 and $9,418,149 respectively. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
U.S. Government securities were $3,089,156 and $5,836,883, respectively.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $4,422,452 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $3,114,686 resulting in net
appreciation of $1,307,766.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or ICM.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses for the year ended December 31, 1999, included in Directors'
Fees and Expenses in the Statement of Operations were $720. Unfunded accrued
pension costs of $242 and pension liability of $1,652 are included in Prepaid
Expenses and Accrued Expenses, respectively, in the Statement of Assets and
Liabilities.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
<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 INVESCO Variable
Total Return Fund (one of the portfolios constituting INVESCO Variable
Investment Funds, Inc., hereafter referred to as the "Fund") at December 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
TOTAL RETURN FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
PER SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value-- Beginning of Period $ 16.58 $ 15.81 $ 13.21 $ 12.14 $ 10.09
==============================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.41 0.37 0.36 0.36 0.25
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.98) 1.13 2.66 1.12 2.05
==============================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.57) 1.50 3.02 1.48 2.30
==============================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.37 0.36 0.34 0.36 0.24
In Excess of Net Investment Income 0.00 0.00 0.00 0.05 0.00
Distributions from Capital Gains 0.06 0.37 0.08 0.00 0.01
==============================================================================================================
TOTAL DISTRIBUTIONS 0.43 0.73 0.42 0.41 0.25
==============================================================================================================
Net Asset Value-- End of Period $ 15.58 $ 16.58 $ 15.81 $ 13.21 $ 12.14
==============================================================================================================
TOTAL RETURN(a) (3.40%) 9.56% 22.91% 12.18% 22.79%
.
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 27,739 $ 35,630 $ 23,268 $ 13,513 $ 6,553
Ratio of Expenses to Average Net Assets(b)(c) 1.17% 1.01% 0.92% 0.94% 1.01%
Ratio of Net Investment Income
to Average Net Assets(b) 2.14% 2.50% 3.07% 3.44% 3.91%
Portfolio Turnover Rate 36% 17% 27% 12% 5%
</TABLE>
(a) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the periods shown.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1998, 1997, 1996 and 1995. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have
been 1.01%, 1.10%, 1.30% and 2.51%, respectively, and ratio of net
investment income to average net assets would have been 2.50%, 2.89%, 3.08%
and 2.41%, respectively.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-4229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A92 9034 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- -------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- -------------------------------------------------------------------------
INVESCO VARIABLE
INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-UTILITIES FUND
ANNUAL
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, out-distanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecom-munications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers--particularly the major drug companies--lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
<PAGE>
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought--roughly 3.5% instead of 2.5%--gross domestic product growth
easily surpassed even this target in both the first and third quarters. To stave
off inflation, the Fed engineered another quarter-point increase in short-term
interest rates in November, the third such increase of the year. The central
bank's tightening helped drive long-term bond yields to their highest levels
since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive--not
to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
12/31/99, the value of a $10,000 investment in the fund, plus reinvested
dividends and capital gain distributions. The chart and other total return
figures cited reflect the fund's operating expenses, but the indexes do not have
expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
VIF-UTILITIES FUND
VIF- UTILITIES FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 19.13%
----------------------------------------------------------------
Since inception (1/95) 17.83%
----------------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Utilities Fund gained 19.13%,
lagging its benchmark, the S&P 500 Index, which over the same period returned
21.03%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
The fund dramatically outperformed its utility benchmark during the year,
even though the fund and electric utility stocks, in general, underperformed the
broader market. Electric utility companies in the portfolio continued to be
pressured by rising interest rates. These stocks are trading at historically low
valuations, but investors remain uninterested, given the group's low earnings
potential relative to other market sectors and lingering regulatory uncertainty.
We may see rotation back into electric utility stocks should investors choose to
become more defensive, but there are no material fundamental changes on the
horizon that would result in a significant revaluation of the group.
Non-traditional telecom service companies (competitive local exchange carriers,
"CLECs") were the best performing stocks in the portfolio. Industry
consolidation is boosting valuations of most companies in the sector, and CLECs
appear to be prime targets.
Graph: INVESCO VIF - Utilities Fund
Total Return since Inception (1/95) through 12/31/99 vs. S&P 500 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Utilities Fund to the value of a $10,000 investment in the S&P 500
Index and a $10,000 investment in the S&P Utility Index, assuming in each
case reinvestment of all dividends and capital gain distributions, for
the period from inception (1/95) through 12/31/99.
We remain focused on companies with the best management teams, best
balance sheets and national, rather than regional, footprints. Holdings in the
electric utility sector will be skewed toward high-quality, low-cost operators,
with a bias toward companies that are exiting the generation business. Fund
holdings will remain focused in states where regulatory visibility is highest.
We have moved to a market-weight position in natural gas stocks until there is
better visibility on gas prices. The regional Bell operating companies continue
to deliver attractive growth relative to the electric utility group, with less
regulatory uncertainty and better dividend growth potential. Telecommunications
stocks will be monitored for valuation and regulatory changes, either one of
which could prompt an increase in or decrease the sector weighting.
<PAGE>
FUND MANAGEMENT
The fund is managed by Brian B. Hayward. Previously, he was a senior
equity analyst for Mississippi Valley Advisors in St. Louis, Missouri and began
his investment career in 1985. Brian earned a BA in Mathematics and a MA in
Economics from the University of Missouri. He is a Chartered Financial Analyst.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE S&P UTILITY INDEX IS AN
UNMANAGED INDEX OF UTILITIES STOCKS. THE NASDAQ IS AN UNMANAGED INDEX OF STOCKS
TRADED OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
UTILITIES FUND
93.74 COMMON STOCKS
0.74 COMMUNICATIONS -- EQUIPMENT
& MANUFACTURING
Lucent Technologies 900 $ 67,331
================================================================================
4.98 MACHINERY
Mannesmann AG Registered Shrs GM 1,850 450,879
================================================================================
0.98 OIL & GAS RELATED
Coastal Corp 2,500 88,594
================================================================================
13.92 TELECOMMUNICATIONS
AT&T Corp 1,800 91,350
Crown Castle International(a) 3,600 115,650
Infonet Services Class B Shrs(a) 2,450 64,312
ITC DeltaCom(a) 1,600 44,200
MCI WorldCom(a) 4,995 265,047
Nextel Communications Class A Shrs(a) 1,450 149,531
Qwest Communications International(a) 4,630 199,090
Sprint Corp 3,800 255,788
Vodafone AirTouch PLC Sponsored ADR
Representing 10 Ord Shrs UK 1,550 76,725
================================================================================
1,261,693
73.12 UTILITIES
28.66 ELECTRIC
AES Corp(a) 1,600 119,600
Alliant Energy 3,370 92,675
Ameren Corp 800 26,200
Calpine Corp(a) 2,900 185,600
CMS Energy 2,900 90,444
Consolidated Edison 3,300 113,850
DTE Energy 2,500 78,437
Duke Energy 4,126 206,816
Edison International 6,400 167,600
Florida Progress 1,500 63,469
FPL Group 1,900 81,344
GPU Inc 900 26,944
Montana Power 7,000 252,437
New Century Energies 2,800 85,050
Northern States Power 2,900 56,550
PG&E Corp 4,600 94,300
Pinnacle West Capital 2,300 70,294
Reliant Energy 3,600 82,350
SCANA Corp 3,900 104,813
ScottishPower PLC Sponsored ADR
Representing 4 Ord ShrsUK 5,742 160,776
Texas Utilities 5,000 177,812
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
TNP Enterprises 1,500 $ 61,875
Unicom Corp 5,900 197,650
================================================================================
2,596,886
7.22 NATURAL GAS
Columbia Energy Group 1,400 88,550
Enron Corp 6,400 284,000
New Jersey Resources 1,500 58,594
ONEOK Inc 1,350 33,919
Williams Cos 6,200 189,487
================================================================================
654,550
37.24 TELEPHONE
ALLTEL Corp 3,300 272,869
Amdocs Ltd(a) 7,200 248,400
AT&T Canada Class B
Depository Receipts(a) CA 12,000 483,000
BellSouth Corp 6,840 320,197
Cable & Wireless PLC UK 1,500 25,399
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) UK 3,800 775,200
GTE Corp 2,650 186,991
McLeodUSA Inc(a) 5,300 312,037
SBC Communications 7,906 385,418
Telefonica SA Sponsored ADR
Representing 3 Ord Shrs(a)SP 1,936 152,581
Time Warner Telecom Class A Shrs(a) 500 24,969
US WEST 2,600 187,200
================================================================================
3,374,261
TOTAL UTILITIES 6,625,697
================================================================================
TOTAL COMMON STOCKS (Cost $5,766,424) 8,494,194
================================================================================
6.26 SHORT-TERM INVESTMENTS-- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $567,132
(Collateralized by US Treasury
Inflationary Index Notes, due
1/15/2007 at 3.375%, value $576,104)
(Cost $567,000) $ 567,000 567,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $6,333,424)
(Cost for Income Tax Purposes $6,339,006) $ 9,061,194
================================================================================
(a) Security is non-income producing.
<PAGE>
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
- --------------------------------------------------------------------------------
Canada CA 5.33% $ 483,000
Germany GM 4.98 450,879
Spain SP 1.68 152,581
United Kingdom UK 11.46 1,038,100
United States US 76.55 6,936,634
================================================================================
100.00% $ 9,061,194
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
UTILITIES
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 6,333,424
================================================================================
At Value(a) $ 9,061,194
Cash 1,298
Receivables:
Fund Shares Sold 71,359
Dividends and Interest 13,981
Prepaid Expenses and Other Assets 245
================================================================================
TOTAL ASSETS 9,148,077
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 4,800
Accrued Expenses and Other Payables 6,095
================================================================================
TOTAL LIABILITIES 10,895
================================================================================
NET ASSETS AT VALUE $ 9,137,182
================================================================================
NET ASSETS
Paid-in Capital(b) $ 5,900,749
Accumulated Undistributed Net Investment Income 14,361
Accumulated Undistributed Net Realized Gain
on Investment Securities and
Foreign Currency Transactions 494,302
Net Appreciation of Investment Securities and
Foreign Currency Transactions 2,727,770
================================================================================
NET ASSETS AT VALUE $ 9,137,182
================================================================================
Shares Outstanding 435,717
NET ASSET VALUE, Offering and Redemption Price per Share $ 20.97
================================================================================
(a) Investment securities at cost and value at December 31, 1999 includes a
repurchase agreement of $567,000.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value of $0.01 per share. Of such shares, 100 million have been allocated
to Utilities Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
YEAR ENDED DECEMBER 31, 1999
UTILITIES
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 151,596
Interest 38,959
Foreign Taxes Withheld (535)
================================================================================
TOTAL INCOME 190,020
================================================================================
EXPENSES
Investment Advisory Fees 49,534
Transfer Agent Fees 5,000
Administrative Fees 19,441
Custodian Fees and Expenses 6,808
Directors' Fees and Expenses 8,345
Professional Fees and Expenses 16,400
Registration Fees and Expenses 46
Reports to Shareholders 20,259
Other Expenses 773
================================================================================
TOTAL EXPENSES 126,606
Fees and Expenses Absorbed by Investment Adviser (26,909)
Fees and Expenses Paid Indirectly (4,660)
================================================================================
NET EXPENSES 95,037
================================================================================
NET INVESTMENT INCOME 94,983
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 499,304
Foreign Currency Transactions (1,723)
================================================================================
Total Net Realized Gain 497,581
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 812,640
Foreign Currency Transactions (23,228)
================================================================================
Total Net Appreciation 789,412
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 1,286,993
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,381,976
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
UTILITIES FUND
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998
OPERATIONS
Net Investment Income $ 94,983 $ 93,355
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions 497,581 (4,109)
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 789,412 1,193,668
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 1,381,976 1,282,914
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (85,148) (90,004)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (9,475)
In Excess of Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (4,527)
================================================================================
TOTAL DISTRIBUTIONS (85,148) (104,006)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 3,712,650 2,414,172
Reinvestment of Distributions 85,148 104,006
================================================================================
3,797,798 2,518,178
Amounts Paid for Repurchases of Shares (2,950,097) (1,292,282)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 847,701 1,225,896
================================================================================
TOTAL INCREASE IN NET ASSETS 2,144,529 2,404,804
NET ASSETS
Beginning of Period 6,992,653 4,587,849
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $14,361 and $6,249,
respectively) $ 9,137,182 $ 6,992,653
================================================================================
------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 192,791 152,400
Shares Issued from Reinvestment of Distributions 4,301 6,183
================================================================================
197,092 158,583
Shares Repurchased (154,740) (83,915)
================================================================================
NET INCREASE IN FUND SHARES 42,352 74,668
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements -- INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Blue Chip Growth Fund (formerly Growth Fund), Dynamics
Fund, Equity Income Fund (formerly Industrial Income Fund), Financial Services
Fund, Health Sciences Fund, High Yield Fund, Market Neutral Fund, Realty Fund,
Small Company Growth Fund, Technology Fund, Telecommunications Fund, Total
Return Fund and Utilities Fund (the "Fund", presented herein). The investment
objective of the Fund is to seek capital appreciation and income through
investments in a specific business sectors. The Fund is registered under the
Investment Company Act of 1940 (the "Act") as a diversified, open-end management
investment company. 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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
<PAGE>
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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
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.
Net capital loss carryovers utilized in 1999 amounted to $5,000.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
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, 1999, 100.00% qualified for the
dividends received deduction available to the Fund's corporate shareholders.
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards. For the year ended December 31, 1999, the Fund reclassified
$1,723 from accumulated undistributed net investment income to accumulated
undistributed net realized gain on investment securities. Net investment income,
net realized gains, paid-in capital and net assets were not affected.
<PAGE>
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- The Fund bears expenses incurred specifically on its behalf and,
in addition, the Fund bears a portion of general expenses, based on the relative
net assets of the Fund.
Under an agreement between the Fund 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. INVESCO Funds Group, Inc.
("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 for the Fund is based on
the annual rate of 0.60% on the first $500 million of average net assets;
reduced to 0.55% on the next $500 million of average net assets; reduced to
0.45% of average net assets in excess of $1 billion; reduced to 0.40% of average
net assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average net assets over $8 billion.
IFG receives a transfer agent fee of $5,000 per year. The fee is paid monthly at
one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, the Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.015% of average net assets plus, effective July 8, 1998, an
additional amount computed at an annual rate of 0.25% of new assets (the
"Incremental Fees") to provide administrative, accounting and clerical services.
The fee is accrued daily and paid monthly. IFG may pay all or a portion of the
Base Fee and the Incremental Fees to other companies that assist in providing
the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
December 31, 1999, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $4,025,659 and $3,000,205, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $3,079,276 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $357,088, resulting in net
appreciation of $2,722,188.
<PAGE>
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year ended December 31, 1999.
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At December 31, 1999, there
were no such borrowings.
------------------------------------------------
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 INVESCO Variable Utilities Fund
(one of the portfolios constituting INVESCO Variable Investment Funds, Inc.,
hereafter referred to as the "Fund") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
UTILITIES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<CAPTION>
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period$ $ 17.78 $ 14.40 $ 11.95 $ 10.84 $ 10.00
==================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 0.25 0.31 0.13 0.07
Net Gains on Securities
(Both Realized and Unrealized) 3.17 3.41 2.48 1.26 0.84
==================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 3.39 3.66 2.79 1.39 0.91
==================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.20 0.24 0.29 0.13 0.07
In Excess of Net Investment Income 0.00 0.00 0.00 0.01 0.00
Distributions from Capital Gains 0.00 0.03 0.05 0.14 0.00
In Excess of Net Realized Gains 0.00 0.01 0.00 0.00 0.00
==================================================================================================
TOTAL DISTRIBUTIONS 0.20 0.28 0.34 0.28 0.07
==================================================================================================
Net Asset Value -- End of Period $ 20.97 $ 17.78 $ 14.40 $ 11.95 $ 10.84
==================================================================================================
TOTAL RETURN(a) 19.13% 25.48% 23.41% 12.76% 9.08%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 9,137 $ 6,993 $ 4,588 $ 2,660 $ 290
Ratio of Expenses to Average Net Assets(b)(c) 1.20% 1.08% 0.99% 1.16% 1.80%
Ratio of Net Investment Income
to Average Net Assets(b) 1.15% 1.73% 2.92% 2.92% 2.47%
Portfolio Turnover Rate 40% 35% 33% 48% 24%
</TABLE>
(a) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999, 1998, 1997, 1996 and 1995. If such expenses had
not been voluntarily absorbed, ratio of expenses to average net assets
would have been 1.53%, 1.60%, 2.07%, 5.36%, and 57.13% respectively, and
ratio of net investment income (loss) to average net assets would have been
0.82%, 1.21%, 1.84%, (1.28%) and (52.86%), respectively.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(TM)
[INVESCO ICON] INVESCO
WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-4229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a
current prospectus.
Printed on recycled paper.
A94 9045 1/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
- --------------------------------------------------------------------------------
INVESCO VARIABLE FUNDS
ANNUAL REPORT
MUTUAL FUNDS SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-DYNAMICS FUND
VIF-FINANCIAL SERVICES FUND
VIF-HEALTH SCIENCES FUND
VIF-TECHNOLOGY FUND
VIF-TELECOMMUNICATIONS FUND
ANNUAL REPORT
ANNUAL REPORT | December 31, 1999 [INVESCO ICON] INVESCO
<PAGE>
MARKET OVERVIEW January 2000(2)
The first six months of 1999 witnessed a welcome global healing for
overseas economies, while the U.S. economy remained as healthy as it had been in
decades. The results were generally very positive for world markets, although
some investors enjoyed much more robust returns than others did.
Throughout the winter, the largest, fastest-growing companies led U.S.
stock advances as investors kept one eye on the continuing problems overseas and
another on the blossoming technological promise of the American economy. The
firms most directly tied to technological innovations, such as
telecommunications companies and Internet providers, out-distanced the pack.
Meanwhile, cyclical issues suffered, as did many small or slower-growing company
stocks.
By spring, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and tighten the money
supply to cool down the economy. Indeed, market interest rates crept upward as
the central bank raised short-term rates twice during the summer. Too much
growth rather than too little encouraged many to head for cyclical industries
poised to benefit from improving markets.
The markets drifted throughout the summer and early fall, but resumed
their upward trajectory in the fourth quarter. Most astonishing of all was the
NASDAQ, which shot up by nearly one half in the quarter, crossing the 4000
barrier just a month after rocketing past the 3000 mark for the first time.
Overseas, most of the major exchanges followed, with many going on to establish
new record highs.
The factors driving the bullish advance were largely the same as those
that had done so in the first few months of 1999. The promise of new
technologies and healthy profit increases fueled investor optimism. At the same
time, the advance remained narrow, with technology and telecom-munications firms
widening their lead over the rest of the market. Indeed, some of 1998's star
performers--particularly the major drug companies--lagged seriously, as
investors became even more selective in looking for high unit growth rates and
expanding markets.
For a bull market that has surprised bearish pessimists for years running,
its ability to dodge a slowdown seemed especially remarkable given the rising
interest rate environment. With world growth reaccelerating following the
emerging markets crisis of 1998, inflation again seemed a real threat to the
advanced economies. Indeed, commodity prices surged as worldwide demand picked
up. Helped along by OPEC, oil more than doubled its price of 1998. Rising
gasoline prices helped to push the producer price index (PPI) up 3% in 1999, and
the consumer price index (CPI) rose 2.7%, well above the 1.6% recorded in 1998.
However, minus the volatile food and energy sectors, the PPI rose only 0.9% and
the CPI gained just 1.9%.
Given the surging economy, however, modest inflationary signs were not
enough to ease Federal Reserve concerns. Although many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought--roughly 3.5% instead of 2.5%--gross domestic product growth
easily surpassed even this target in both the first and third quarters. To stave
off inflation, the Fed engineered another quarter-point increase in short-term
interest rates in November, the third such increase of the year. The central
bank's tightening helped drive long-term bond yields to their highest levels
since 1997. On one score, the Fed's action worked as intended, as higher
mortgage interest rates caused a slowdown in the red-hot property sector.
<PAGE>
If the Fed was intending to cool off the robust stock market, it failed.
Although higher interest rates should theoretically lower price-to-earnings
ratios, multiples remained roughly the same as they had been at the end of 1998.
As profits increased, so did stock prices for many companies. Thus, interest
rates and stock prices headed higher together, baffling many "old paradigm"
market watchers.
In fact, as the year ended, enthusiasm for technology stocks seemed
virtually without bounds. Pessimists worried that a dangerous bubble in
technology stocks was emerging. But optimists pointed to the remarkable
worldwide demand for technology by businesses seeking to remain competitive--not
to mention consumers desiring computers, cell phones, and other convenient
gadgets of the digital age. Periods of economic and technological change like
this come along once in a lifetime, they argued, and the real risk to investors
was in not adjusting their portfolios accordingly.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graphs on the following pages illustrate, for the periods from
inception through 12/31/99, the value of a $10,000 investment in the funds, plus
reinvested dividends and capital gain distributions. The charts and other total
return figures cited reflect the funds' operating expenses, but the indexes do
not have expenses, which would, of course, have lowered their performance. (Past
performance is not a guarantee of future results.)(1),(2)
<PAGE>
VIF-DYNAMICS FUND
VIF-DYNAMICS FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 55.60%
----------------------------------------------------------
Since inception (8/97) 31.95%
----------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Dynamics Fund gained 55.60%,
greatly outperforming its benchmark, the S&P Midcap 400, which over the same
period gained 14.72%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Throughout the period, financial markets faced the scenario of
continuously higher interest rates, yet the overall strength in the economy,
combined with a favorable outlook for corporate earnings, helped equities to
post strong returns. The communications and technology sectors experienced
strong appreciation, as individual stocks, such as VoiceStream Wireless and
VeriSign Inc, contributed materially to the fund's performance. The consumer
sector, although mixed on the whole, produced several strong contributors,
including TMP Worldwide and Westwood One. At the end of the year, the fund
increased its weighting in health care, where several biotech stocks, including
Idec Pharmaceutical and Immunex Corp benefited from a rally in that group. The
energy sector saw moderate gains, as the price of oil rose modestly, and service
stocks, such as BJ Services, were meaningful contributors. The fund trimmed its
exposure to financial services issues in the final quarter, where the burden of
higher interest rates continued to result in underperformance.
<PAGE>
The attractiveness of high-quality, mid-capitalization growth companies
should continue to gain recognition now that the global economy appears to be in
a recovery phase. Our strategy will focus on leading, high-return mid-caps in
the major growth sectors of technology, communications, consumer, financial
services, and health care. Attractive consumer groups include ad agencies, radio
and outdoor companies, and the gaming sector. The technology sector has already
experienced a strong year, but the software services, networking, and Internet
groups remain of interest. The services and equipment segments of the
communications sector continue to show excellent growth, and while the health
care sector is attractive, the leading mid-caps are being quickly consolidated,
not leaving much from which to choose. The current median market cap holding in
the fund is slightly above $5 billion.
Graph: INVESCO VIF - Dynamics Fund
Total Return from Inception (8/97) through 12/31/99 vs.
S&P MidCap 400 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Dynamics Fund to the value of a $10,000 investment in the S&P MidCap
400 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (8/97) through
12/31/99.
FUND MANAGEMENT
VIF-Dynamics Fund is managed by INVESCO Senior Vice President Timothy J. Miller
and Thomas R. Wald. Tim received his MBA from the University of Missouri, and a
BSBA from St. Louis University. A 19-year veteran of the investment business, he
is a Chartered Financial Analyst. Before joining INVESCO in 1992, Tim was an
analyst and portfolio manager with Mississippi Valley Advisors. Tom assumed
responsibilities of co-manager in October 1997. He received his MBA from The
Wharton School, University of Pennsylvania, and a BA from Tulane University.
Before joining INVESCO, Tom was the senior health care analyst at Munder Capital
Management.
VIF-FINANCIAL SERVICES FUND
VIF-FINANCIAL SERVICES FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
Since inception (9/99) 11.00%
----------------------------------------------------------
For the three months ended 12/31/99, VIF-Financial Services Fund had a
total return of 11.56%. This lagged the S&P 500, which over the same period had
a total return of 14.87. (Of course, past performance is not a guarantee of
future results.)(1),(2)
At the end of a difficult year for financial stocks, the fund enjoyed a
strong fourth quarter, handily outperforming the sector. The strongest
performers for the fund included brokerage stocks Morgan Stanley Dean Witter &
Co. and Goldman Sachs Group, which benefited from robust investment banking and
capital markets. Janus-driven Kansas City Southern Industries had an impressive
quarter as well. Financial services powerhouse Citigroup Inc. also advanced, as
did American Express and Marsh & McLennan, helped along by strength in its money
manager Alliance Capital and perceived firming of insurance pricing. Not
surprisingly, the best-performing subsector for the year was the investment
banking and brokerage group.
<PAGE>
Graph: INVESCO VIF -Financial Services Fund
Total Return from Inception (9/99) through 12/31/99 vs. S&P 500 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Financial Services Fund to the value of a $10,000 investment in the S&P
500 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (9/99) through
12/31/99.
Associates First Capital, hurt by deteriorating credit quality and fear of
increased competition in its business lines, performed poorly for the fund this
year. Firstar Corp declined because of integration concerns surrounding its two
mergers. The worst-performing subsector in 1999 was the savings and loans group,
which was pulled down mostly by weak results from Washington Mutual.
In general, we will continue to look for companies with above-average and
sustainable earnings growth, strong fundamentals, and attractive valuations in
relation to other firms in their respective sectors. We will continue to
maintain more substantial weighting in the large- to middle-capitalization
names. However, we are not without exposure to middle- to small-cap companies
that we believe will benefit from a rally in this sector when it does come.
Banks and thrifts will likely remain the largest weighting of the fund over the
near-term, as credit quality remains excellent and international exposure is
limited in these industries.
In addition to the qualities mentioned above, we look for banks with
attractive business mixes and favor those banks that have exhibited economically
intelligent deployment of capital. Stocks of insurance companies with
growth-oriented products will also be an area of focus.
FUND MANAGEMENT
The fund is managed by Jeff Morris. Prior to joining INVESCO, Jeff worked at
Norwest Mortgage. He received his BS degree in Business Administration, with
concentrations in finance and real estate, from Colorado State University and
his MS in Finance from the University of Colorado-Denver. Jeff is a Chartered
Financial Analyst.
VIF-HEALTH SCIENCES FUND
VIF-HEALTH SCIENCES FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 4.86%
----------------------------------------------------------
Since inception (5/97) 21.22%
----------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Health Sciences Fund gained
4.86%. This return lagged its benchmark, the S&P 500 Index, which over the same
period returned 21.03%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
<PAGE>
In a year that was difficult for many health care firms, biotechnology
companies were the market leaders in the health sciences sector in 1999. The
genomics revolution and promise of monoclonal antibodies has driven the
performance of these stocks. The genomics field holds the potential to identify
more specific drug targets in a shorter time frame. Monoclonal antibodies have
been recognized as a new way to treat cancers, arthritis and asthma, and will
better serve these relatively unmet medical needs. Performance at the end of the
quarter was aided by the fund's biotech weighting. Biotechnology benefited from
interest in genomics companies, such as Human Genome Sciences, Affymetrix,
Abgenix Inc., and Millennium Pharmaceuticals. These companies will participate
in the enormous potential associated with the unraveling of the human genome,
which has sparked the interest of the investment community.
Graph: INVESCO VIF-Health Sciences Fund
Total Return from Inception (5/97) through 12/31/99 vs. S&P 500 Index
This line graph compares the value of a $10,000 investment in INVESCO
VIF-Health Sciences Fund to the value of a $10,000 investment in the S&P
500 Index, assuming in each case reinvestment of all dividends and capital
gain distributions, for the period from inception (5/97) through 12/31/99.
Because of our focus on drug companies, however, the fund underperformed
the S&P 500 Index for the year. Nevertheless, we continue to expect the
pharmaceutical industry to be the largest weighting of the portfolio over the
near-term. The biotechnology weighting was increased during the fourth quarter,
and it also will remain a significant portion of the fund. We're encouraged by
the subsector's new product cycle, consolidation, and lack of Medicare reform
exposure. We will continue to underweight the medical devices industry, which is
exhibiting poor fundamentals. And we will continue to underweight the health
care services industry in light of recent litigation activity and Medicare
reform.
FUND MANAGEMENT
VIF-Health Sciences Portfolio is managed by INVESCO Senior Vice President John
R. Schroer, a Chartered Financial Analyst. He launched his investment career in
1989, after earning an MBA and BA from the University of Wisconsin.
<PAGE>
VIF-TECHNOLOGY FUND
VIF-TECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
1 year 158.93%
----------------------------------------------------------
Since inception (5/97) 65.49%
----------------------------------------------------------
For the one-year period ended 12/31/99, VIF-Technology Fund gained
158.93%, greatly outperforming its benchmark, the S&P 500 Index, which over the
same period returned 21.03%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Technology stocks wrapped up a tremendous year of outperformance with an
even stronger fourth quarter. The markets not merely climbed, but sprinted over
the Y2K "wall of worry." The breadth within the technology sector was also
strong, and most technology companies and sectors participated in the strong
upswing of prices. Within the technology sector, there were, as usual, many
crosscurrents. Semiconductor stocks were among the weaker sectors, as investors
became concerned about potential Y2K inventory stocking leading to a correction
in the first quarter. Software stocks, especially e-commerce and middleware
companies, continued to be among the market leaders. Service companies also
maintained their strong performance, and numerous laggards began to improve.
Graph: INVESCO VIF - Technology Fund
Total Return from Inception (5/97) through 12/31/99 vs. S&P 500 Index
This line graph compares the value of a $10,000 investment in
INVESCO VIF-Technology Fund to the value of a $10,000 investment in the
S&P 500 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (5/97) through
12/31/99.
In the short-term, we believe the first quarter of the new year could
continue to show high volatility among technology stocks. At year-end there was
a significant amount of cash on the sidelines in case of a Y2K debacle, and that
cash will have to be invested. Technology stocks should garner their fair share
of this reinvested money. Fundamentals appear to be sound, and earnings reports
in January should be quite strong.
We would note that tech stocks underperformed during the earnings
reporting seasons in 1999 and could do so again. While sounding like a broken
record, we point out the very high valuations in the sector. Valuations have not
been an impediment to performance, but in an environment of rising interest
rates, this is clearly a risk.
FUND MANAGEMENT
In January 1999, William R. Keithler, a Chartered Financial Analyst with 15
years experience in the investment industry, rejoined INVESCO and assumed the
responsibilities of portfolio manager for VIF-Technology Fund. Bill has an MS
from the University of Wisconsin-Madison, and BS from Webster College. An
INVESCO senior vice president and portfolio manager from 1986 to 1993, most
recently he served as vice president and portfolio manager with Berger
Associates.
<PAGE>
VIF-TELECOMMUNICATIONS FUND
VIF-TELECOMMUNICATIONS FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/99(1)
Since inception (9/99) 64.50%
----------------------------------------------------------
For the three months ended 12/31/99, VIF-Telecommunications Fund gained
59.40%. This return greatly exceeded both the S&P 500, which over the same
period returned 14.87%, and the Morgan Stanley-European/Australia/Far East
Index, which rose 17.05%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
The fund's performance was driven by shares of Internet, component, and
telecommunication equipment companies. Internet companies Yahoo! Inc. and CMGI
Inc, enjoyed returns in excess of 80% in December 1999 alone. Yahoo! Inc
advanced on the news of its inclusion into the S&P 500 index, and CMGI Inc
announced stronger-than-expected earnings which boosted its performance.
Component stocks also drove the fund's performance, including Broadcom Corp, JDS
Uniphase, Qualcomm Inc, and SDL Inc. Qualcomm Inc benefited from the sale of its
handset division, while JDS Uniphase, SDL Inc., and Broadcom Corp advanced as
investors discounted strong growth prospects for 2000.
Graph: INVESCO VIF - Telecommunications Fund
Total Return from inception (9/99) through 12/31/99 vs. S&P 500 Index
and MSCIC-EAFE
This line graph compares the value of a $10,000 investment in
INVESCO VIF-Telecommunications Fund to the value of a $10,000 investment in
the S&P 500 Index and the MSCI-EAFE Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the
period from inception (9/99) through 12/31/99.
We remain bullish on the outlook for the telecommunications sector,
particularly equipment. Optical networking equipment sales are expected to
accelerate during the year. We will focus on equipment companies with broad
product lines and global exposure. To a lesser extent, the fund will invest in
smaller, faster-growing communication equipment stocks. It is anticipated that
the fund could become more heavily weighted in telecommunication equipment
stocks, given the superior growth prospects we see in that sector. We will also
focus on the migration of voice traffic from wireline networks to wireless, as
cellular rates decline and new service providers ramp up service. Wireless data
services will become an increasingly important investment theme in 2000 and
beyond. Overall, we will continue to exercise diligence in selecting the
companies we believe will offer the best potential for performance. We expect to
see volatility within the telecom sector following the strong performance of
1999, but we believe our strategy of buying and holding industry leaders will
continue to serve us well regardless of market fluctuations.
FUND MANAGEMENT
The fund is managed by Brian B. Hayward. Previously, he was a senior equity
analyst for Mississippi Valley Advisors in St. Louis, Missouri and began his
investment career in 1985. Brian earned a BA in Mathematics and a MA in
Economics from the University of Missouri. He is a Chartered Financial
Analyst.
(1) 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.
(2) THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED REPRESENTATIVE OF THE
PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE S&P MIDCAP 400 IS AN UNMANAGED
INDEX INDICATIVE OF DOMESTIC MID-CAPITALIZATION STOCKS. THE MORGAN STANLEY--EAFE
IS AN UNMANAGED INDEX THAT REFLECTS PERFORMANCE OF THE EUROPEAN/AUSTRALIAN/FAR
EASTERN STOCK MARKETS. THE NASDAQ IS AN UNMANAGED INDEX REFLECTING STOCKS TRADED
OVER THE COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
DYNAMICS FUND
86.01 COMMON STOCKS
0.29 AEROSPACE & DEFENSE
General Dynamics 1,640 $ 86,510
================================================================================
1.61 BANKS
First Security 1,700 43,403
Marshall & Ilsley 1,300 81,656
Northern Trust 2,780 147,340
UnionBanCal Corp 1,360 53,635
Zions Bancorp 2,570 152,112
================================================================================
478,146
2.42 BIOTECHNOLOGY
Affymetrix Inc(a) 400 67,875
Biogen Inc(a) 1,800 152,100
Chiron Corp(a) 3,400 144,075
IDEC Pharmaceuticals(a) 1,000 98,250
Immunex Corp(a) 1,780 194,576
Millennium Pharmaceuticals(a) 500 61,000
================================================================================
717,876
4.73 BROADCASTING
AMFM Inc(a) 4,550 356,037
Citadel Communications(a) 2,400 155,700
EchoStar Communications Class A Shrs(a) 5,690 554,775
Hispanic Broadcasting(a) 2,020 186,282
Westwood One(a) 1,950 148,200
================================================================================
1,400,994
2.45 CABLE
Cablevision Systems Class A Shrs(a) 1,920 144,960
Jones Intercable Class A Shrs(a) 2,530 175,361
NTL Inc(a) 1,590 198,353
USA Networks(a) 3,760 207,740
================================================================================
726,414
3.21 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 1,965 112,987
Comverse Technology(a) 1,950 282,262
JDS Uniphase(a) 3,440 554,915
================================================================================
950,164
16.52 COMPUTER RELATED
Apple Computer(a) 1,010 103,841
Art Technology Group(a) 1,600 208,000
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
BroadVision Inc(a) 2,440 $ 414,952
Brocade Communications Systems(a) 540 95,580
Citrix Systems(a) 1,740 214,020
Electronic Arts(a) 2,125 178,500
Exodus Communications(a) 4,700 417,419
Extreme Networks(a) 1,030 86,005
Inktomi Corp(a) 1,080 95,850
Internap Network Services(a) 970 167,810
Intuit Inc(a) 3,570 213,977
Legato Systems(a) 3,770 259,423
Mercury Interactive(a) 2,560 276,320
Metromedia Fiber Network
Class A Shrs(a) 2,530 121,282
Network Appliance(a) 4,520 375,443
Peregrine Systems(a) 700 58,931
PSINet Inc(a) 2,300 142,025
Red Hat(a) 480 101,400
Redback Networks(a) 1,080 191,700
Siebel Systems(a) 4,470 375,480
Symantec Corp(a) 1,250 73,281
Synopsys Inc(a) 2,960 197,580
Verio Inc(a) 1,620 74,824
Vignette Corp(a) 600 97,800
Visual Networks(a) 1,600 126,800
Whittman-Hart Inc(a) 4,280 229,515
================================================================================
4,897,758
0.26 CONSUMER FINANCE
SLM Holding 1,800 76,050
================================================================================
2.37 ELECTRICAL EQUIPMENT
Flextronics International Ltd(a) 4,440 204,240
Jabil Circuit(a) 620 45,260
Molex Inc 4,230 239,788
Sanmina Corp(a) 2,130 212,734
================================================================================
702,022
8.49 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 3,290 163,061
Applied Micro Circuits(a) 1,200 152,700
Conexant Systems(a) 3,060 203,107
Linear Technology 2,040 145,988
LSI Logic(a) 1,750 118,125
Maxim Integrated Products(a) 5,360 252,925
Microchip Technology(a) 1,280 87,600
MIPS Technologies Class A Shrs(a) 2,150 111,800
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
PMC-Sierra Inc(a) 1,970 $ 315,816
RF Micro Devices(a) 3,290 225,159
SDL Inc(a) 1,430 311,740
Vitesse Semiconductor(a) 3,720 195,068
Xilinx Inc(a) 5,140 233,709
================================================================================
2,516,798
1.87 ENTERTAINMENT
Gemstar International Group Ltd(a) 5,540 394,725
International Speedway Class A Shrs(a) 3,200 161,200
================================================================================
555,925
0.95 EQUIPMENT -- SEMICONDUCTOR
KLA-Tencor Corp(a) 1,190 132,536
Teradyne Inc(a) 2,270 149,820
================================================================================
282,356
2.58 GAMING
Harrah's Entertainment(a) 15,040 397,620
Mandalay Resort Group(a) 7,980 160,598
MGM Grand(a) 4,110 206,784
================================================================================
765,002
1.83 HEALTH CARE DRUGS -- PHARMACEUTICALS
Allergan Inc 2,900 144,275
Forest Laboratories(a) 4,500 276,469
Teva Pharmaceutical Industries
Sponsored ADR Representing Ord Shrs 1,700 121,869
================================================================================
542,613
1.87 HEALTH CARE RELATED
Bausch & Lomb 4,300 294,281
Genzyme Corp-General Division(a) 2,600 117,000
Stryker Corp 2,050 142,731
================================================================================
554,012
0.61 INSURANCE
AFLAC Inc 3,850 181,672
================================================================================
0.77 INVESTMENT BANK/BROKER FIRM
E*TRADE Group(a) 2,955 77,199
Waddell & Reed Financial
Class A Shrs 1,710 46,384
Class B Shrs 4,220 106,028
================================================================================
229,611
0.24 LEISURE TIME
Royal Caribbean Cruises Ltd 1,470 72,489
================================================================================
0.53 LODGING -- HOTELS
Marriott International Class A Shrs 4,950 156,234
================================================================================
0.51 MANUFACTURING
Parker-Hannifin Corp 2,960 151,885
================================================================================
7.18 OIL & GAS RELATED
Anadarko Petroleum 2,520 85,995
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Apache Corp 4,965 $ 183,395
BJ Services(a) 5,650 236,241
Burlington Resources 1,720 56,867
Coflexip SA Sponsored ADR
Representing 1/2 Ord Shr 2,000 76,000
Cooper Cameron(a) 4,825 236,123
EOG Resources 2,210 38,813
Global Industries Ltd(a) 4,260 36,743
Nabors Industries(a) 5,975 184,852
Noble Drilling(a) 6,540 214,185
Santa Fe International 5,780 149,558
Smith International(a) 3,950 196,266
Talisman Energy(a) 4,870 125,403
Transocean Sedco Forex 1,900 64,006
Weatherford International(a) 6,140 245,216
================================================================================
2,129,663
0.31 PERSONAL CARE
Estee Lauder Class A Shrs 1,820 91,796
================================================================================
1.90 PUBLISHING
Meredith Corp 2,680 111,723
New York Times Class A Shrs 4,530 222,536
Valassis Communications(a) 5,440 229,840
================================================================================
564,099
2.05 RETAIL
AnnTaylor Stores(a) 3,040 104,690
Circuit City Stores-Circuit City Group 4,070 183,404
eToys Inc(a) 1,490 39,112
Stamps.com Inc(a) 1,000 41,625
Tandy Corp 4,840 238,068
================================================================================
606,899
10.47 SERVICES
BISYS Group(a) 1,900 123,975
Concord EFS(a) 3,930 101,197
DoubleClick Inc(a) 250 63,266
Fiserv Inc(a) 3,800 145,587
Getty Images(a) 450 21,994
Go2Net Inc(a) 1,780 154,860
Harte-Hanks Inc 2,240 48,720
HotJobs.com Ltd(a) 480 20,970
Lamar Advertising Class A Shrs(a) 2,550 154,434
Omnicom Group 1,930 193,000
Paychex Inc 5,250 210,000
Sapient Corp(a) 680 95,838
SEI Investments(a) 2,400 285,637
TMP Worldwide(a) 1,100 156,200
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
VeriSign Inc(a) 2,360 $ 450,170
VERITAS Software(a) 3,105 444,403
Viant Corp(a) 400 39,600
WPP Group PLC(a) 11,340 179,572
Young & Rubicam 3,020 213,665
================================================================================
3,103,088
3.52 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Crown Castle International(a) 5,920 190,180
Telecorp PCS Class A Shrs(a) 1,000 38,000
VoiceStream Wireless(a) 2,410 342,973
Western Wireless Class A Shrs(a) 3,280 218,940
WinStar Communications(a) 3,400 254,575
================================================================================
1,044,668
1.27 TELECOMMUNICATIONS -- LONG DISTANCE
Allegiance Telecom(a) 2,300 212,175
ITC DeltaCom(a) 2,650 73,206
Viatel Inc(a) 1,700 91,163
================================================================================
376,544
4.83 TELEPHONE
Amdocs Ltd(a) 6,100 210,450
AT&T Canada Class B Depository Receipts(a) 3,730 150,133
CenturyTel Inc 2,105 99,724
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) 1,720 350,880
Covad Communications Group(a) 2,440 136,487
McLeodUSA Inc(a) 4,160 244,920
RCN Corp(a) 2,700 130,950
Rhythms NetConnections(a) 3,500 108,500
================================================================================
1,432,044
0.37 TEXTILE -- APPAREL MANUFACTURING
Jones Apparel Group(a) 4,060 110,128
================================================================================
TOTAL COMMON STOCKS (Cost $20,611,951) 25,503,460
================================================================================
13.99 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $4,147,968
(Collaterized by US Treasury
Inflationary Index Notes,
due 1/15/2007 at 3.375%,
value $4,213,443)
(Cost $4,147,000) $ 4,147,000 4,147,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $24,758,951)
(Cost for Income Tax
Purposes $24,760,800) $29,650,460
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
90.59 COMMON STOCKS
36.56 BANKS
Bank of New York 10,975 $ 439,000
Chase Manhattan 5,400 419,512
City National 2,800 92,225
Comerica Inc 2,350 109,716
Fifth Third Bancorp 5,250 385,219
First Security 12,170 310,716
Firstar Corp 21,240 448,695
Huntington Bancshares 5,700 136,088
North Fork Bancorp 9,920 173,600
Northern Trust 7,100 376,300
Toronto-Dominion Bank 4,700 126,900
UnionBanCal Corp 2,700 106,481
Wells Fargo 10,850 438,747
================================================================================
3,563,199
4.52 CONSUMER FINANCE
American Express 2,650 440,562
================================================================================
18.52 FINANCIAL
Associates First Capital Class A Shrs 11,900 326,506
Capital One Financial 8,300 399,956
Citigroup Inc 7,880 437,832
Freddie Mac 7,350 345,909
Providian Financial 3,240 295,043
================================================================================
1,805,246
13.33 INSURANCE
AFLAC Inc 5,600 264,250
American International Group 1,300 140,562
AXA Financial 6,500 220,187
Hartford Life Class A Shrs 5,700 250,800
Nationwide Financial Services Class A Shrs 6,100 170,419
Radian Group 3,300 157,575
Travelers Property Casualty Class A Shrs 2,800 95,900
================================================================================
1,299,693
4.48 INSURANCE BROKERS
Marsh & McLennan 4,560 436,335
================================================================================
8.02 INVESTMENT BANK/BROKER FIRM
Donaldson, Lufkin & Jenrette 1,000 48,375
Goldman Sachs Group 1,400 131,863
Morgan Stanley Dean Witter & Co 3,300 471,075
Schwab (Charles) Corp 3,400 130,475
================================================================================
781,788
0.69 RAILROADS
Kansas City Southern Industries 900 67,163
================================================================================
1.80 SAVINGS & LOAN
Charter One Financial 9,200 175,950
================================================================================
2.67 SERVICES
Official Payments(a) 5,000 260,000
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $8,783,954) $ 8,829,936
================================================================================
9.41 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $917,214
(Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007
at 3.375%, value $934,695)
(Cost $917,000) $ 917,000 917,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $9,700,954)
(Cost for Income Tax Purposes $9,718,441) $ 9,746,936
================================================================================
HEALTH SCIENCES FUND
100.00 COMMON STOCKS
36.97 BIOTECHNOLOGY
Abgenix Inc(a) 1,380 $ 182,850
Alexion Pharmaceuticals(a) 4,010 120,801
Amgen Inc(a) 11,600 696,725
Biogen Inc(a) 6,270 529,815
Chiron Corp(a) 7,500 317,812
Collateral Therapeutics(a) 300 5,737
Enzon Inc(a) 600 26,025
Genentech Inc(a) 4,510 606,595
Gilead Sciences(a) 690 37,346
Human Genome Sciences(a) 1,040 158,730
ICOS Corp(a) 1,570 45,922
IDEC Pharmaceuticals(a) 3,570 350,752
ILEX Oncology(a) 3,040 73,340
Immunex Corp(a) 2,570 280,933
Medarex Inc(a) 4,050 150,863
MedImmune Inc(a) 2,220 368,243
Millennium Pharmaceuticals(a) 910 111,020
Protein Design Labs(a) 510 35,700
Titan Pharmaceuticals(a) 4,080 77,520
Transkaryotic Therapies(a) 3,790 145,915
================================================================================
4,322,644
0.13 COMPUTER RELATED
SciQuest.com Inc(a) 200 15,900
================================================================================
0.19 CONGLOMERATES
Monsanto Co 640 22,800
================================================================================
4.02 ELECTRONICS -- INSTRUMENTS
PE Corp-PE Biosystems Group 2,600 312,813
Waters Corp 2,970 157,410
================================================================================
470,223
45.91 HEALTH CARE DRUGS -- PHARMACEUTICALS
Alkermes Inc(a) 1,790 87,934
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Allergan Inc 3,190 $ 158,702
American Home Products 3,275 129,158
AstraZeneca Group PLC Sponsored ADR
Representing Ord Shrs 10,940 456,745
Bristol-Myers Squibb 1,810 116,179
Forest Laboratories(a) 4,370 268,482
Glaxo Wellcome PLC Sponsored ADR
Representing 2 Ord Shrs 5,020 280,493
Inhale Therapeutic Systems(a) 1,490 63,418
Johnson & Johnson 6,585 613,228
Lilly (Eli) & Co 7,330 487,445
Merck & Co 9,010 604,233
Pfizer Inc 7,860 254,959
Pharmacia & Upjohn 1,930 86,850
QLT PhotoTherapeutics(a) 1,130 66,388
Schering-Plough Corp 13,475 568,477
Shire Pharmaceuticals Group PLC(a) 1,465 14,780
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 6,045 389,525
Takeda Chemical Industries Ltd 1,190 58,807
Warner-Lambert Co 7,385 605,108
Yamanouchi Pharmaceutical Ltd 1,630 56,944
================================================================================
5,367,855
2.97 HEALTH CARE -- SERVICES
Columbia/HCA Healthcare 7,870 230,689
Healtheon/WebMD Corp(a) 3,100 116,250
================================================================================
346,939
9.81 MEDICAL EQUIPMENT & DEVICES
Bard (CR) Inc 2,750 145,750
Bausch & Lomb 2,720 186,150
Baxter International 6,370 400,116
Guidant Corp 1,680 78,960
Medtronic Inc 8,064 293,832
VISX Inc(a) 810 41,918
================================================================================
1,146,726
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $10,784,087)
(Cost for Income Tax Purposes $10,947,440) $11,693,087
================================================================================
TECHNOLOGY FUND
91.45 COMMON STOCKS
0.78 BROADCASTING
EchoStar Communications Class A Shrs(a) 7,400 $ 721,500
================================================================================
11.33 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 12,600 724,500
Finisar Corp(a) 1,200 107,850
General Instrument(a) 7,700 654,500
Harmonic Inc(a) 4,500 427,219
JDS Uniphase(a) 8,800 1,419,550
Lucent Technologies 8,000 598,500
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Nokia Corp Sponsored ADR
Representing Ord Shrs 9,600 $ 1,824,000
Nortel Networks 8,100 818,100
PairGain Technologies(a) 19,500 276,656
Polycom Inc(a) 11,300 719,669
Powerwave Technologies(a) 8,000 467,000
QUALCOMM Inc(a) 6,400 1,128,000
Scientific-Atlanta Inc 12,100 673,062
Tellabs Inc(a) 10,000 641,875
================================================================================
10,480,481
25.04 COMPUTER SOFTWARE & SERVICE
Active Software(a) 5,100 469,200
Art Technology Group(a) 6,000 780,000
Aspect Development(a) 7,200 493,200
BEA Systems(a) 21,100 1,475,681
BMC Software(a) 10,300 823,356
BroadVision Inc(a) 7,300 1,241,456
CBT Group Public Ltd Sponsored ADR
Representing Ord Shrs(a) 28,100 941,350
Check Point Software Technologies(a) 2,100 417,375
Citrix Systems(a) 8,100 996,300
Inktomi Corp(a) 4,200 372,750
Internet HOLDRs Trust
Depositary Receipts(a) 4,400 743,875
Intuit Inc(a) 14,800 887,075
IONA Technologies PLC Sponsored ADR
Representing Ord Shrs(a) 1,800 98,100
i2 Technologies(a) 3,900 760,500
Keane Inc(a) 3,800 120,650
Legato Systems(a) 13,400 922,087
Mercury Interactive(a) 7,200 777,150
Microsoft Corp(a) 16,000 1,868,000
National Information Consortium(a) 20,100 643,200
NetIQ Corp(a) 4,900 255,106
Networks Associates(a) 22,300 595,131
New Era of Networks(a) 11,800 561,975
Oracle Corp(a) 9,100 1,019,769
Parametric Technology(a) 25,400 687,387
Peregrine Systems(a) 14,000 1,178,625
SAP AG Sponsored ADR
Representing 1/12 Ord Shr 13,200 687,225
Siebel Systems(a) 7,100 596,400
SOFTBANK Corp 700 669,929
Software.com Inc(a) 7,900 758,400
Symantec Corp(a) 6,500 381,063
Technology Solutions(a) 5,400 176,850
Verio Inc(a) 8,500 392,594
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Verity Inc(a) 5,600 $ 238,350
Vignette Corp(a) 800 130,400
================================================================================
3,160,509
1.21 COMPUTER SYSTEMS
Apple Computer(a) 10,900 1,120,656
================================================================================
2.18 COMPUTERS -- HARDWARE
E-Tek Dynamics(a) 6,500 875,062
Sun Microsystems(a) 14,700 1,138,331
================================================================================
2,013,393
7.28 COMPUTERS -- NETWORKING
Cisco Systems(a) 15,700 1,681,862
Extreme Networks(a) 2,500 208,750
InfoSpace.com Inc(a) 2,300 492,200
Internet Capital Group(a) 5,000 850,000
Juniper Networks(a) 1,600 544,000
Network Appliance(a) 13,900 1,154,569
Redback Networks(a) 2,800 497,000
3Com Corp(a) 8,600 404,200
Whittman-Hart Inc(a) 16,900 906,262
================================================================================
6,738,843
2.09 COMPUTERS -- PERIPHERALS
Advanced Digital Information(a) 13,300 646,713
EMC Corp(a) 9,800 1,070,650
SanDisk Corp(a) 2,200 211,750
================================================================================
1,929,113
4.38 ELECTRICAL EQUIPMENT
Celestica Inc(a) 19,400 1,076,700
Flextronics International Ltd(a) 15,400 708,400
Furukawa Electric Ltd 27,000 409,531
Jabil Circuit(a) 7,500 547,500
Sanmina Corp(a) 4,300 429,463
Solectron Corp(a) 9,300 884,663
================================================================================
4,056,257
0.66 ELECTRONICS -- INSTRUMENTS
SCI Systems(a) 7,400 608,188
================================================================================
14.66 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 12,900 639,356
Analog Devices(a) 8,100 753,300
Applied Micro Circuits(a) 9,000 1,145,250
Atmel Corp(a) 22,500 665,156
Conexant Systems(a) 19,700 1,307,587
Cypress Semiconductor(a) 15,500 501,813
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
LSI Logic(a) 10,100 $ 681,750
Maxim Integrated Products(a) 14,000 660,625
Microchip Technology(a) 7,600 520,125
National Semiconductor(a) 6,900 295,406
PMC-Sierra Inc(a) 6,000 961,875
QLogic Corp(a) 4,900 783,388
RF Micro Devices(a) 13,100 896,531
SDL Inc(a) 6,500 1,417,000
Texas Instruments 11,200 1,085,000
Vitesse Semiconductor(a) 13,400 702,662
Xilinx Inc(a) 12,000 545,625
================================================================================
13,562,449
1.84 ENTERTAINMENT
Gemstar International Group Ltd(a) 23,900 1,702,875
================================================================================
6.00 EQUIPMENT -- SEMICONDUCTOR
Applied Materials(a) 6,900 874,144
ASM Lithography Holding NV New York
Registered Shrs(a) 8,200 932,750
Credence Systems(a) 9,700 839,050
KLA-Tencor Corp(a) 4,600 512,325
Lam Research(a) 9,900 1,104,469
Novellus Systems(a) 2,400 294,075
Taiwan Semiconductor Manufacturing
Ltd Sponsored ADR Representing
5 Ord Shrs(a) 13,399 602,955
Teradyne Inc(a) 5,900 389,400
================================================================================
5,549,168
0.99 MANUFACTURING
Corning Inc 7,100 915,456
================================================================================
9.09 SERVICES
America Online(a) 17,700 1,335,244
Ariba Inc(a) 600 106,425
CMGI Inc(a) 3,400 941,375
Concord EFS(a) 18,100 466,075
Critical Path(a) 2,700 254,813
Diamond Technology Partners(a) 6,150 528,516
Fiserv Inc(a) 17,100 655,144
Proxicom Inc(a) 1,100 136,744
Safeguard Scientifics(a) 4,900 794,106
Sapient Corp(a) 6,400 902,000
TSI International Software Ltd(a) 8,300 469,988
VeriSign Inc(a) 4,600 877,450
VERITAS Software(a) 6,600 944,625
================================================================================
8,412,505
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
2.59 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 8,800 $ 907,500
Proxim Inc(a) 6,700 737,000
Vodafone AirTouch PLC Sponsored
ADR Representing 10 Ord Shrs 4,900 242,550
WinStar Communications(a) 6,800 509,150
================================================================================
2,396,200
0.78 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 14,200 720,650
================================================================================
0.55 TELEPHONE
Amdocs Ltd(a) 14,780 509,910
================================================================================
TOTAL COMMON STOCKS (Cost $62,936,412) 84,598,153
================================================================================
8.55 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $7,915,847
(Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007
at 3.375%, value $8,061,741)
(Cost $7,914,000) $ 7,914,000 7,914,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $70,850,412)
(Cost for Income Tax Purposes $71,172,320) $92,512,153
================================================================================
TELECOMMUNICATIONS FUND
84.23 COMMON STOCKS
2.96 BROADCASTING
EchoStar Communications Class A Shrs(a) 21,410 $ 2,087,475
================================================================================
1.15 CABLE
NTL Inc(a) 6,470 807,132
================================================================================
16.35 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 4,900 281,750
Comverse Technology(a) 8,000 1,158,000
Copper Mountain Networks(a) 5,700 277,875
General Instrument(a) 10,500 892,500
JDS Uniphase(a) 13,600 2,193,850
Lucent Technologies 11,960 894,758
Metasolv Software(a) 1,700 138,975
Motorola Inc 1,120 164,920
Nokia Corp Sponsored ADR
Representing Ord Shrs FI 10,680 2,029,200
Nortel Networks CA 12,720 1,284,720
QUALCOMM Inc(a) 7,840 1,381,800
Scientific-Atlanta Inc 4,580 254,763
Tellabs Inc(a) 9,080 582,823
================================================================================
11,535,934
14.02 COMPUTER RELATED
Cisco Systems(a) 15,640 1,675,435
EMC Corp(a) 14,070 1,537,147
Exodus Communications(a) 10,300 914,769
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Inktomi Corp(a) 6,480 $ 575,100
Internap Network Services(a) 3,400 588,200
Juniper Networks(a) 800 272,000
Metromedia Fiber Network
Class A Shrs(a) 14,940 716,186
Microsoft Corp(a) 4,640 541,720
PSINet Inc(a) 12,060 744,705
Redback Networks(a) 3,580 635,450
Sycamore Networks(a) 600 184,800
Verio Inc(a) 6,860 316,846
Yahoo! Inc(a) 2,750 1,189,891
================================================================================
9,892,249
9.06 ELECTRONICS -- SEMICONDUCTOR
Applied Micro Circuits(a) 7,740 984,915
Broadcom Corp Class A Shrs(a) 2,760 751,755
Conexant Systems(a) 10,360 687,645
PMC-Sierra Inc(a) CA 6,320 1,013,175
RF Micro Devices(a) 8,990 615,253
SDL Inc(a) 6,080 1,325,440
Texas Instruments 3,000 290,625
Vitesse Semiconductor(a) 13,780 722,589
================================================================================
6,391,397
2.66 ENTERTAINMENT
Gemstar International Group Ltd(a) 26,320 1,875,300
================================================================================
2.15 MACHINERY
Mannesmann AG Registered Shrs GM 6,210 1,513,490
================================================================================
0.49 MANUFACTURING
Corning Inc 2,700 348,131
================================================================================
0.73 RETAIL
Tandy Corp 10,440 513,518
================================================================================
4.06 SERVICES
America Online(a) 13,060 985,214
CMGI Inc(a) 4,350 1,204,406
CSG Systems International(a) 16,930 675,084
================================================================================
2,864,704
7.65 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
China Telecom Ltd(a) HK 42,000 262,601
Crown Castle International(a) 11,720 376,505
Nextel Communications
Class A Shrs(a) 4,400 453,750
NTT Mobile Communications
Network JA 25 961,444
Partner Communications Ltd ADR
Representing Ord Shrs(a) IS 14,800 382,950
Telecom Italia Mobile SpA IT 24,810 277,096
Teligent Inc Class A Shrs(a) 4,130 255,028
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
Tritel Inc(a) 8,400 $ 266,175
Vodafone AirTouch PLC
Sponsored ADR Representing
10 Ord Shrs UK 8,000 396,000
VoiceStream Wireless(a) 7,700 1,095,806
WinStar Communications(a) 8,960 670,880
================================================================================
5,398,235
12.32 TELECOMMUNICATIONS -- LONG DISTANCE
Allegiance Telecom(a) 5,610 517,522
AT&T Corp 9,940 504,455
Equant NV New York Shrs(a) NL 3,740 418,880
Esat Telecom Group PLC Sponsored
ADR Representing 2 Ord Shrs(a) IE 9,390 859,185
Global Crossing Ltd(a) BD 22,435 1,121,750
Global TeleSystems Group(a) 24,360 843,465
Infonet Services Class B Shrs(a) 16,900 443,625
ITC DeltaCom(a) 10,500 290,062
KPNQwest NV Class C Shrs(a) NL 9,500 605,625
MCI WorldCom(a) 7,760 411,765
Nippon Telegraph & Telephone JA 45 770,623
Qwest Communications
International(a) 14,230 611,890
Sprint Corp 11,830 796,307
Viatel Inc(a) 9,260 496,568
================================================================================
8,691,722
10.63 TELEPHONE
Amdocs Ltd(a) 29,770 1,027,065
AT&T Canada Class B
Depository Receipts(a) CA 16,820 677,005
BellSouth Corp 9,960 466,253
Cable & Wireless PLC UK 6,300 106,678
COLT Telecom Group
PLC Sponsored ADR
Representing 4 Ord Shrs(a) UK 6,820 1,391,280
Covad Communications Group(a) 6,640 371,425
GTE Corp 3,200 225,800
Illuminet Holdings(a) 5,200 286,000
McLeodUSA Inc(a) 10,550 621,131
NEXTLINK Communications
Class A Shrs(a) 7,100 589,744
RCN Corp(a) 7,260 352,110
Rhythms NetConnections(a) 7,150 221,650
SBC Communications 14,840 723,450
Time Warner Telecom
Class A Shrs(a) 2,800 139,825
US WEST 4,200 302,400
================================================================================
7,501,816
TOTAL COMMON STOCKS (Cost $46,645,395) 59,421,103
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- --------------------------------------------------------------------------------
15.77 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 12/31/1999 due 1/3/2000 at
2.800%, repurchased at $11,131,597
(Collateralized by US Treasury
Inflationary Index Notes, due 1/15/2007
at 3.375%, value $11,338,252)
(Cost $11,129,000) $11,129,000 $11,129,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $57,774,395)
(Cost for Income Tax Purposes $57,865,680) $70,550,103
================================================================================
(a) Security is non-income producing.
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
Bermuda BD 1.59% $ 1,121,750
Canada CA 4.22 2,974,900
Finland FI 2.88 2,029,200
Germany GM 2.15 1,513,490
Hong Kong HK 0.37 262,601
Ireland IE 1.22 859,185
Israel IS 0.54 382,950
Italy IT 0.39 277,096
Japan JA 2.46 1,732,067
Netherlands NL 1.45 1,024,505
United Kingdom UK 2.68 1,893,958
United States US 80.05 56,478,401
================================================================================
100.00% $70,550,103
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
FINANCIAL HEALTH
DYMANICS SERVICES SCIENCES
FUND FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $24,758,951 $ 9,700,954 $10,784,087
================================================================================
At Value(a) $29,650,460 $ 9,746,936 $11,693,087
Cash 2,984 1,256 0
Receivables:
Investment Securities Sold 12,572 0 12,199
Fund Shares Sold 197,037 44,879 312,778
Dividends and Interest 3,655 9,200 2,519
Prepaid Expenses and Other Assets 55 39 83
================================================================================
TOTAL ASSETS 29,866,763 9,802,310 12,020,666
================================================================================
LIABILITIES
Payables:
Custodian 0 0 92
Investment Securities Purchased 198,115 618,673 0
Fund Shares Repurchased 0 0 47
Borrowings on Line of Credit 0 0 367,000
Accrued Expenses and
Other Payables 1,641 4,704 2,004
================================================================================
TOTAL LIABILITIES 199,756 623,377 369,143
================================================================================
NET ASSETS AT VALUE $29,667,007 $ 9,178,933 $11,651,523
================================================================================
NET ASSETS
Paid-in Capital(b) $24,850,051 $ 8,989,549 $10,576,023
Accumulated Undistributed
(Distributions in Excess of)
Net Investment Income (Loss) (16) 8,846 11,775
Accumulated Undistributed Net
Realized Gain (Loss) on
Investment Securities and
Foreign Currency Transactions (74,537) 134,556 154,738
Net Appreciation of Investment
Securities and Foreign
Currency Transactions 4,891,509 45,982 908,987
================================================================================
NET ASSETS AT VALUE $29,667,007 $ 9,178,933 $11,651,523
================================================================================
Shares Outstanding 1,570,044 826,911 727,350
NET ASSET VALUE,
Offering and Redemption
Price per Share $ 18.90 $ 11.10 $ 16.02
================================================================================
(a) Investment securities at cost and value at December 31, 1999 include
repurchase agreements of $4,147,000 and $917,000 for Dynamics and Financial
Services Funds, respectively.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value $0.01 per share. Of such shares, 100 million have been allocated to
Dynamics Fund, 100 million have been allocated to Financial Services Fund
and 100 million have been allocated to Health Sciences Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 31, 1999
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $70,850,412 $57,774,395
================================================================================
At Value(a) $92,512,153 $70,550,103
Cash 0 2,290
Receivables:
Fund Shares Sold 1,622,444 794,158
Dividends and Interest 4,274 5,656
Prepaid Expenses and Other Assets 125 0
================================================================================
TOTAL ASSETS 94,138,996 71,352,207
================================================================================
LIABILITIES
Payables:
Custodian 1,107 0
Investment Securities Purchased 109,248 3,699,672
Fund Shares Repurchased 37,063 0
Accrued Expenses and Other Payables 21 2,753
================================================================================
TOTAL LIABILITIES 147,439 3,702,425
================================================================================
NET ASSETS AT VALUE $93,991,557 $67,649,782
================================================================================
NET ASSETS
Paid-in Capital(b) $71,614,849 $54,356,847
Accumulated Undistributed
(Distributions in Excess of)
Net Investment Income (Loss) (74) 8,131
Accumulated Undistributed Net
Realized Gain on Investment Securities
and Foreign Currency Transactions 715,041 509,096
Net Appreciation of Investment Securities
and Foreign Currency Transactions 21,661,741 12,775,708
================================================================================
NET ASSETS AT VALUE $93,991,557 $67,649,782
================================================================================
Shares Outstanding 2,531,485 4,113,118
NET ASSET VALUE,
Offering and Redemption
Price per Share $ 37.13 $ 16.45
================================================================================
(a) Investment securities at cost and value at December 31, 1999 include
repurchase agreements of $7,914,000 and $11,129,000 for Technology and
Telecommunications Funds, respectively.
(b) The Fund has one billion 500 million authorized shares of common stock, par
value $0.01 per share. Of such shares, 100 million have been allocated to
Technology Fund and 100 million have been allocated to Telecommunications
Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
PERIOD ENDED DECEMBER 31, 1999 (NOTE 1)
FINANCIAL HEALTH
DYMANICS SERVICES SCIENCES
FUND FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 8,102 $ 13,769 $ 21,853
Interest 39,213 11,112 30,876
Foreign Taxes Withheld 0 0 (288)
================================================================================
TOTAL INCOME 47,315 24,881 52,441
================================================================================
EXPENSES
Investment Advisory Fees 29,422 9,483 24,354
Transfer Agent Fees 5,000 1,389 5,000
Administrative Fees 19,574 6,128 18,605
Custodian Fees and Expenses 8,826 3,361 12,094
Directors' Fees and Expenses 8,023 0 8,115
Interest Expenses 0 0 66
Professional Fees and Expenses 15,674 12,324 16,856
Registration Fees and Expenses 38 0 39
Reports to Shareholders 6,091 0 8,562
Other Expenses 449 83 513
===============================================================================
TOTAL EXPENSES 93,097 32,768 94,204
Fees and Expenses Absorbed by
Investment Adviser (41,017) (14,434) (45,308)
Fees and Expenses Paid Indirectly (6,497) (2,299) (8,242)
================================================================================
NET EXPENSES 45,583 16,035 40,654
================================================================================
NET INVESTMENT INCOME 1,732 8,846 11,787
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (66,357) 134,556 168,854
Foreign Currency Transactions 0 0 418
================================================================================
Total Net Realized Gain (Loss) (66,357) 134,556 169,272
================================================================================
Change in Net Appreciation
(Depreciation) of:
Investment Securities 4,832,731 45,982 498,282
Foreign Currency Transactions (1,214) 0 6,964
================================================================================
Total Net Appreciation 4,831,517 45,982 505,246
================================================================================
NET GAIN ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY
TRANSACTIONS 4,765,160 180,538 674,518
================================================================================
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 4,766,892 $ 189,384 $ 686,305
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
PERIOD ENDED DECEMBER 31, 1999 (NOTE 1)
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 5,989 $ 6,205
Interest 96,198 88,757
Foreign Taxes Withheld (241) (144)
================================================================================
TOTAL INCOME 101,946 94,818
================================================================================
EXPENSES
Investment Advisory Fees 92,023 50,901
Transfer Agent Fees 5,000 1,389
Administrative Fees 42,515 20,763
Custodian Fees and Expenses 20,207 6,253
Directors' Fees and Expenses 8,161 40
Professional Fees and Expenses 17,061 12,421
Registration Fees and Expenses 39 0
Reports to Shareholders 8,567 0
Other Expenses 576 106
================================================================================
TOTAL EXPENSES 194,149 91,873
Fees and Expenses Absorbed
by Investment Adviser (26,323) (1,193)
Fees and Expenses Paid Indirectly (14,184) (3,993)
================================================================================
NET EXPENSES 153,642 86,687
================================================================================
NET INVESTMENT INCOME (51,696) 8,131
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 857,384 510,579
Foreign Currency Transactions 307 (1,483)
================================================================================
Total Net Realized Gain 857,691 509,096
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 21,371,751 12,785,701
Foreign Currency Transactions 15,726 (9,993)
================================================================================
Total Net Appreciation 21,387,477 12,775,708
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 22,245,168 13,284,804
================================================================================
NET INCREASE IN NET ASSETS
FROM OPERATIONS $22,193,472 $13,292,935
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
FINANCIAL SERVICES
DYNAMICS FUND FUND
PERIOD ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1999
(Note 1)
OPERATIONS
Net Investment Income (Loss) $ 1,732 $ (1,758) $ 8,846
Net Realized Gain (Loss)
on Investment Securities
and Foreign Currency
Transactions (66,357) (4,118) 134,556
Change in Net Appreciation
of Investment Securities
and Foreign Currency
Transactions 4,831,517 55,876 45,982
================================================================================
NET INCREASE IN NET ASSETS
FROM OPERATIONS 4,766,892 50,000 189,384
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (1,730) (587) 0
In Excess of Net Investment Income (4,078) 0 0
Net Realized Gain on
Investment Securities
and Foreign Currency Transactions 0 (3,715) 0
================================================================================
TOTAL DISTRIBUTIONS (5,808) (4,302) 0
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 34,477,477 799 14,141,157
Reinvestment of Distributions 5,808 4,302 0
================================================================================
34,483,285 5,101 14,141,157
Amounts Paid for
Repurchases of Shares (9,885,578) 0 (5,399,608)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 24,597,707 5,101 8,741,549
================================================================================
TOTAL INCREASE IN NET ASSETS 29,358,791 50,799 8,930,933
NET ASSETS
Initial Subscription 0 0 248,000
Beginning of Period 308,216 257,417 0
================================================================================
End of Period $29,667,007 $ 308,216 $ 9,178,933
================================================================================
Accumulated Undistributed
(Distributions in Excess of)
Net Investment Income (Loss)
Included in Net Assets at
End of Period $ (16) $ (2) $ 8,846
---------------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription 0 0 24,800
Shares Sold 2,115,404 74 1,317,359
Shares Issued from
Reinvestment of Distributions 350 393 0
================================================================================
2,115,754 467 1,342,159
Shares Repurchased (571,073) 0 (515,248)
================================================================================
NET INCREASE IN FUND SHARES 1,544,681 467 826,911
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
HEALTH SCIENCES FUND TECHNOLOGY FUND
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1999 1998
OPERATIONS
Net Investment
Income (Loss) $ 11,787 $ 4,656 $ (51,696) $ (1,065)
Net Realized Gain (Loss)
on Investment Securities
and Foreign Currency
Transactions 169,272 63,995 857,691 (90,677)
Change in Net Appreciation
of Investment Securities
and Foreign Currency
Transactions 505,246 369,979 21,387,477 291,455
================================================================================
NET INCREASE IN NET ASSETS
FROM OPERATIONS 686,305 438,630 22,193,472 199,713
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (5,893) (4,154) 0 (621)
In Excess of Net Investment
Income 0 0 0 (1,061)
Net Realized Gain on Investment
Securities and Foreign
Currency Transactions 0 (47,939) 0 (6,100)
In Excess of Net Realized Gain
on Investment Securities and
Foreign Curency Transactions 0 (13,061) 0 0
================================================================================
TOTAL DISTRIBUTIONS (5,893) (65,154) 0 (7,782)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales
of Shares 19,779,104 5,323,628 103,325,672 4,805,752
Reinvestment
of Distributions 5,893 65,154 0 7,782
================================================================================
19,784,997 5,388,782 103,325,672 4,813,534
Amounts Paid for
Repurchases of Shares (11,191,495) (3,807,607) (33,104,826) (3,842,652)
================================================================================
NET INCREASE IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS 8,593,502 1,581,175 70,220,846 970,882
================================================================================
TOTAL INCREASE IN
NET ASSETS 9,273,914 1,954,651 92,414,318 1,162,813
NET ASSETS
Beginning of Period 2,377,609 422,958 1,577,239 414,426
================================================================================
End of Period $ 11,651,523 $ 2,377,609 $ 93,991,557 $ 1,577,239
================================================================================
Accumulated Undistributed
(Distributions in Excess of)
Net Investment Income (Loss)
Included in Net Assets at
End of Period $ 11,775 $ 277 $ (74) $ (3)
---------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 1,318,340 403,110 3,731,704 383,014
Shares Issued from
Reinvestment of
Distributions 392 4,472 0 607
================================================================================
1,318,732 407,583 3,731,704 383,621
Shares Repurchased (746,864) (290,418) (1,310,179) (309,738)
================================================================================
NET INCREASE IN
FUND SHARES 571,868 117,164 2,421,525 73,883
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
TELECOMMUNICATIONS FUND
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999
(Note 1)
OPERATIONS
Net Investment Income $ 8,131
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 509,096
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 12,775,708
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 13,292,935
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 70,669,026
Amounts Paid for Repurchases of Shares (16,560,179)
================================================================================
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 54,108,847
================================================================================
TOTAL INCREASE IN NET ASSETS 67,401,782
NET ASSETS
Initial Subscription (Note 1) 248,000
Beginning of Period 0
================================================================================
End of Period $ 67,649,782
================================================================================
Accumulated Undistributed Net Investment Income
Included in Net Assets at End of Period $ 8,131
---------------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 24,800
Shares Sold 5,225,874
Shares Repurchased (1,137,556)
================================================================================
NET INCREASE IN FUND SHARES 4,113,118
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO VARIABLE INVESTMENT FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. is incorporated in Maryland and presently consists of
thirteen separate Funds: Dynamics Fund, Financial Services Fund, Health Sciences
Fund, Technology Fund and Telecommunications Fund (individually the "Fund" and
collectively, the "Funds", presented herein), Blue Chip Growth Fund (formerly
Growth Fund), Equity Income Fund (formerly Industrial Income Fund), High Yield
Fund, Market Neutral Fund, Realty Fund, Small Company Growth Fund, Total Return
Fund and Utilities Fund. The investment objectives of the Funds are: To seek
appreciation of capital for Dynamics Fund; to seek capital appreciation through
investments in specific business sectors for Financial Services, Health Sciences
and Technology Funds; and to seek capital appreciation and income on securities
principally engaged in a specific business sector for Telecommunications Fund.
Financial Services and Telecommunications Funds commenced investment operations
on September 21, 1999. The Fund is registered under the Investment Company Act
of 1940 (the "Act") as a diversified, open-end management investment company.
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 accounting principles
generally accepted in the United States 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 income 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
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and 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.
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.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under 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.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
<PAGE>
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. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
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, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S dollars at rates of exchange prevailing when
accrued. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or 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 investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
A Fund's use of short-term forward foreign currency contracts may subject it to
certain risks as a result of unanticipated movements in foreign exchange rates.
The Fund does not hold short-term forward foreign currency contracts for trading
purposes. The Fund may hold foreign currency in anticipation of settling foreign
security transactions and not for investment purposes.
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.
Net capital loss carryovers utilized in 1999 by Dynamics and Technology Funds
amounted to $1,818 aand $85,392, respectively.
Dynamics Fund incurred and elected to defer post-October 31 net capital losses
of $250,619 to the year ended December 31, 2000. To the extent future capital
gains are offset by capital loss carryovers, such gains will not be distributed
to shareholders.
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, 1999, 100.00% and 47.40% for Dynamics
and Health Sciences Funds, respectively, qualified for the dividends received
deduction available to the Fund's corporate shareholders.
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.
<PAGE>
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 accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards.
For the year/period ended December 31, 1999, the effects of such differences
were as follows:
ACCUMULATED
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED NET REALIZED
NET GAIN ON
INVESTMENT INVESTMENT
FUND INCOME SECURITIES
- --------------------------------------------------------------------------------
Dynamics Fund $ 4,062 $ (4,062)
Health Sciences Fund 5,604 (5,604)
Technology Fund 51,625 (51,625)
Net investment income (loss), net realized gains (losses), paid-in capital and
net assets were not affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- Each Fund bears expenses incurred specifically on its behalf and,
in addition, each Fund bears a portion of general expenses, based on the
relative net assets of each Fund.
Under an agreement between each Fund 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. INVESCO Funds Group, Inc.
("IFG") serves as the Funds' investment adviser. As compensation for its
services to the Funds, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee for Dynamics Fund is
based on the annual rate of 0.75% on the first $1 billion of average net assets;
reduced to 0.60% on the next $1 billion of average net assets; reduced to 0.45%
of average net assets in excess of $2 billion; reduced to 0.40% of average net
assets in excess of $4 billion; reduced to 0.375% of average net assets in
excess of $6 billion and 0.35% of average net assets in excess of $8 billion.
The fee for Financial Services and Telecommunications Funds are based on the
annual rate of 0.75% of average net assets. The fee for Health Sciences and
Technology Funds are based on the annual rate of 0.75% on the first $350 million
of average net assets; reduced to 0.65% on the next $350 million of average net
assets; reduced to 0.55% of average net assets in excess of $700 million;
reduced to 0.45% of average net assets in excess of $2 billion; reduced to 0.40%
of average net assets in excess of $4 billion; reduced to 0.375% of average net
assets in excess of $6 billion and 0.35% of average net assets over $8 billion.
<PAGE>
IFG receives a transfer agent fee of $5,000 per Fund per year. The fee is paid
monthly at one-twelfth of the annual fee.
In accordance with an Administrative Services Agreement, each Fund pays IFG an
annual fee of $10,000 (the "Base Fee"), plus an additional amount computed at an
annual rate of 0.265% of average net assets (the "Incremental Fee") to provide
administrative, accounting and clerical services. The fee is accrued daily and
paid monthly. IFG may pay all or a portion of the Base Fee and the Incremental
Fee to other companies that assist in providing the services.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by each
Fund for the year ended December 31, 1999.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year/period
ended December 31, 1999, 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:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Dynamics Fund $23,175,622 $ 2,714,854
Financial Services Fund 10,306,934 1,657,537
Health Sciences Fund 14,334,316 5,502,219
Technology Fund 73,755,132 12,734,572
Telecommunications Fund 49,924,138 3,787,839
There were no purchases and proceeds from sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At December 31, 1999, 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 Fund were as follows:
GROSS GROSS NET
FUND APPRECIATION DEPRECIATION APPRECIATION
- --------------------------------------------------------------------------------
Dynamics Fund $ 5,304,886 $ 415,226 $ 4,889,660
Financial Services Fund 537,987 509,492 28,495
Health Sciences Fund 1,121,736 376,089 745,647
Technology Fund 21,552,218 212,385 21,339,833
Telecommunications Fund 12,956,404 271,981 12,684,423
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG.
Each Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the year/period ended December 31, 1999 for the Funds.
<PAGE>
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
NOTE 6 -- LINE OF CREDIT. Each 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 fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. At
December 31, 1999, there were no such borrowings for Dynamics, Financial
Services, Technology and Telecommunications Funds. At December 31, 1999, Health
Sciences Fund had an outstanding loan under the line of credit at an interest
rate of 6.500%. The amount of the borrowing and the related accrued interest are
presented in the Statement of Assets and Liabilities. On January 3, 2000, Health
Sciences Fund paid the loan in full, including interest.
---------------------------------------------------------------
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 statements 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 INVESCO Variable
Dynamics Fund, INVESCO Variable Financial Services Fund, INVESO Variable Health
Sciences Fund, INVESCO Variable Technology Fund and INVESCO Variable
Telecommunications Fund (five of the portfolios constituting INVESCO Variable
Investment Funds, Inc., hereafter referred to as the "Fund") at December 31,
1999, the results of each of their operations for each of the periods indicated,
the changes in each of their net assets for each of the periods indicated and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States. 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 auditing
standards generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 3, 2000
OTHER INFORMATION
UNAUDITED
DYNAMICS FUND
On August 30, 1999, a special meeting of the shareholders of the Fund was held
at which the approval to increase of the investment advisory fee schedule was
ratified. There was a total of 25,287 votes cast of which, 25,287 voted for, 0
voted against, and 0 withheld/abstained from voting.
<PAGE>
FINANCIAL HIGHLIGHTS
DYNAMICS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997(a)
PER SHARE DATA
Net Asset Value--
Beginning of Period $ 12.15 $ 10.34 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) 0.00 (0.00) 0.02
Net Gains on Securities
(Both Realized and Unrealized) 6.75 1.98 0.32
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 6.75 1.98 0.34
================================================================================
LESS DISTRIBUTIONS
Dividends from Net
Investment Income(c) 0.00 0.02 0.00
In Excess of Net
Investment Income(c) 0.00 0.00 0.00
Distributions from Capital Gains 0.00 0.15 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.00 0.17 0.00
================================================================================
Net Asset Value--End of Period $ 18.90 $ 12.15 $ 10.34
================================================================================
TOTAL RETURN(d) 55.60% 19.35% 3.40%(e)
RATIOS
Net Assets--
End of Period ($000 Omitted) $ 29,667 $ 308 $ 257
Ratio of Expenses to
Average Net Assets(f)(g) 1.26% 1.45% 0.52%(h)
Ratio of Net Investment
Income (Loss) to
Average Net Assets(f) 0.04% (0.64%) 0.63%(h)
Portfolio Turnover Rate 70% 55% 28%(e)
(a) From August 25, 1997, commencement of investment operations, through
December, 31 1997.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis
for the years ended December 31, 1999 and 1998.
(c) Distributions from net investment income and in excess of net investment
income for the year ended December 31, 1999, aggregated less than $0.01 on a
per share basis.
(d) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(e) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(f) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 2.25%, 14.76% and 34.18% (annualized), respectively,
and ratio of net investment loss to average net assets would have been
(0.95%), (13.95%) and (33.03%) (annualized), respectively.
(g) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(h) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01
Net Gains on Securities (Both Realized and Unrealized) 1.09
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.10
================================================================================
Net Asset Value -- End of Period $ 11.10
================================================================================
TOTAL RETURN(b) 11.00%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 9,179
Ratio of Expenses to Average Net Assets(d)(e) 1.39%(f)
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.67%(f)
Portfolio Turnover Rate 37%(c)
(a) From September 21, 1999, commencement of investment operations, through
December, 31 1999.
(b) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the period
ended December 31, 1999. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.48% (annualized),
and ratio of net investment loss to average net assets would have been
(0.42%) (annualized).
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(f) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998(a) 1997(a)
PER SHARE DATA
Net Asset Value--
Beginning of Period $ 15.29 $ 11.04 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.05 0.10
Net Gains on Securities
(Both Realized and Unrealized) 0.72 4.66 0.94
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.74 4.71 1.04
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.01 0.03 0.00
Distributions from Capital Gains 0.00 0.34 0.00
In Excess of Net Realized Gains 0.00 0.09 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.01 0.46 0.00
================================================================================
Net Asset Value--End of Period $ 16.02 $ 15.29 $ 11.04
================================================================================
TOTAL RETURN(c) 4.86 42.85% 10.40%(d)
RATIOS
Net Assets --
End of Period ($000 Omitted) $ 11,652 $ 2,378 $ 423
Ratio of Expenses to
Average Net Assets(e)(f) 1.48% 1.27% 0.60%(g)
Ratio of Net Investment
Income to Average Net Assets(e) 0.36% 0.35% 2.34%(g)
Portfolio Turnover Rate 173% 107% 112%(d)
(a) The per share information was computed based on average shares.
(b) From May 22, 1997, commencement of investment operations, through December,
31 1997.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 2.85%, 4.20% and 21.45% (annualized), respectively,
and ratio of net investment loss to average net assets would have been
(1.01%), (2.58%) and (18.51%) (annualized), respectively.
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31
- --------------------------------------------------------------------------------
1999 1998 1997(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 14.34 $ 11.49 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.00) (0.03) 0.05
Net Gains on Securities (Both Realized
and Unrealized) 22.79 2.96 1.44
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 22.79 2.93 1.49
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.01 0.00
In Excess of Net Investment Income 0.00 0.01 0.00
Distributions from Capital Gains 0.00 0.06 0.00
================================================================================
TOTAL DISTRIBUTIONS 0.00 0.08 0.00
================================================================================
Net Asset Value--End of Period $ 37.13 $ 14.34 $ 11.49
================================================================================
TOTAL RETURN(c) 158.93% 25.69% 14.80%(d)
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 93,992 $ 1,577 $ 414
Ratio of Expenses to Average Net
Assets(e)(f) 1.31% 1.40% 0.48%(g)
Ratio of Net Investment Income (Loss)
to Average Net Assets(e) (0.40%) (0.14%) 0.95%(g)
Portfolio Turnover Rate 95% 239% 102%(d)
(a) From May 21, 1997, commencement of investment operations, through December,
31 1997.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis
for the year ended December 31, 1999.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended December 31, 1999 and 1998, and all of expenses of the Fund were
voluntarily absorbed by IFG for the period ended December 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 1.52%, 6.47% and 19.25% (annualized), respectively,
and ratio of net investment loss to average net assets would have been
(0.61%), (5.21%) and (17.82%) (annualized), respectively.
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
DECEMBER 31
- --------------------------------------------------------------------------------
1999(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income(b) 0.00
Net Gains on Securities (Both Realized and Unrealized) 6.45
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 6.45
================================================================================
Net Asset Value -- End of Period $ 16.45
================================================================================
TOTAL RETURN(c) 64.50%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 67,650
Ratio of Expenses to Average Net Assets(e)(f) 1.27%(g)
Ratio of Net Investment Income to Average Net Assets(e) 0.11%(g)
Portfolio Turnover Rate 15%(d)
(a) From September 21, 1999, commencement of investment operations, through
December, 31 1999.
(b) Net Investment Income aggregated less than $0.01 on a per share basis for
the period ended December 31, 1999.
(c) Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return
figures for the period shown.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the period
ended December 31, 1999. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.28% (annualized),
and ratio of net investment loss to average net assets would have been 0.10%
(annualized).
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(g) Annualized
<PAGE>
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INVESCO KNOWS (TM)
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WE'RE EASY TO STAY IN TOUCH WITH:
Advisor Sales: 1-800-884-8229
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
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ASKV 9032 2/00
