KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 33.61%
------------------------------------------
Since inception (8/97) 30.67%
------------------------------------------
<PAGE>
Graph: VIF-Blue Chip Growth Fund
Total Return Since Inception vs S&P 500 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 June 30, 2000.
VIF-BLUE CHIP GROWTH FUND
For the six-month period ended June 30, 2000, the value of your shares rose
11.65%. This is comparable to the return of the S&P 500 Index, which fell 0.43%
during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
In June, the markets recovered from an earlier wave of inflation anxiety to
end a very difficult quarter. These concerns had been spawned by a series of
higher reported inflation figures as well as the central bank's negative
statements at its May meeting. The June producer and consumer inflation figures
showed moderating inflation following the earlier oil price surge, followed by
June's purchasing managers' prices paid index, which was down for the third
month in a row. As a result, equity markets recovered somewhat, with the Nasdaq
Composite up strongly after a dramatic pullback that reached bottom in late May.
The fund's overall results were very strong for the first half of the year,
as solid returns to start the year and a strong comeback in June more than
compensated for losses suffered in April and May. Our strategy of focusing on
high-growth companies and running a concentrated portfolio played well as
investors returned to leading companies in technology, communications, and
health care.
In April, in a continuation of March's subdued environment, the fund's
holdings in technology and communication services -- the sectors having the
strongest growth prospects -- substantially lagged the rest of the market.
Several of the fund's large-cap tech leaders, including Cisco Systems and Nortel
Networks, lost substantial ground, and smaller tech stocks, such as VERITAS
Software, were down even more. Communications services stocks, such as Nextel
Communications, were also down sharply. Health care, on the other hand,
performed well, resisting a difficult market. Meanwhile, Pfizer Inc, one of the
fund's largest holdings, outperformed strongly.
As would be expected, the poor performance of the Nasdaq Composite in May
continued to encumber the portfolio's technology and telecommunications
holdings. However, several companies in these sectors were able to swim against
the tide and turned in strong performance. Winners included SDL Inc, VERITAS
Software and VeriSign Inc. These were partially offset by the poor performance
of DoubleClick Inc. Outside of technology, Genentech Inc and Amazon.com Inc lost
ground during the month. On the other hand, Hughes Electronics posted healthy
gains after the General Motors exchange offer. Finally, the fund's health care
stocks, led by Pfizer Inc, and its financial shares, led by Citigroup Inc,
buoyed performance.
Many of the fund's technology stocks returned to favor in June. Networking
stock Redback Networks was one of the top performers, with investors
enthusiastic about its enrollment of new customers and alliances. Internet
holdings were mixed, as Ariba Inc came back strongly while Amazon, DoubleClick,
and America Online moved lower or sideways. Several of the fund's health care
holdings were also strong performers, as biotechnology regained market interest,
and investors sought havens from an apparent economic slowdown.
We would not be surprised if the technology pullback that began in March --
although more dramatic than seen in recent years -- once again proves to have
been seasonal in nature. In the meantime, however, we will continue to focus on
true growth sectors that prove relatively immune to economic slowdown.
<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 Funds Group 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 Funds Group in 1999,
he 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 COMPOSITE IS AN UNMANAGED
INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND
45.31 COMMON STOCKS
2.31 BIOTECHNOLOGY-- HEALTH CARE
Affymetrix Inc(a) 100 $ 16,512
Celgene Corp(a) 400 23,550
Genentech Inc(a) 300 51,600
MedImmune Inc(a) 300 22,200
================================================================================
113,862
0.88 BROADCASTING
Clear Channel Communications(a) 110 8,250
General Motors Class H Shrs(a) 400 35,100
================================================================================
43,350
2.24 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 200 33,337
JDS Uniphase(a) 300 35,962
Nortel Networks 600 40,950
================================================================================
110,249
12.11 COMPUTER RELATED
Brocade Communications Systems(a) 200 36,697
Cisco Systems(a) 900 57,206
Dell Computer(a) 600 29,587
EMC Corp(a) 300 23,081
InfoSpace Inc(a) 900 49,725
Intuit Inc(a) 900 37,237
i2 Technologies(a) 365 38,057
Juniper Networks(a) 100 14,556
Microsoft Corp(a) 1,730 138,400
Oracle Corp(a) 300 25,219
Redback Networks(a) 300 53,400
Sun Microsystems(a) 400 36,375
Sycamore Networks(a) 200 22,075
3Com Corp(a) 600 34,575
================================================================================
596,190
3.70 ELECTRONICS-- SEMICONDUCTOR
Intel Corp 150 20,053
Maxim Integrated Products(a) 690 46,877
SDL Inc(a) 100 28,519
Texas Instruments 900 61,819
Xilinx Inc(a) 300 24,769
================================================================================
182,037
0.72 FINANCIAL
Citigroup Inc 590 35,548
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
2.41 HEALTH CARE DRUGS-- PHARMACEUTICALS
Forest Laboratories(a) 300 $ 30,300
Millennium Pharmaceuticals(a) 200 22,375
Pfizer Inc 1,375 66,000
================================================================================
118,675
0.03 HEALTH CARE RELATED
Healtheon/WebMD Corp(a) 100 1,481
================================================================================
1.23 INVESTMENT BANK/BROKER FIRM
Schwab (Charles) Corp 1,800 60,525
================================================================================
1.10 MANUFACTURING
Corning Inc 200 53,975
================================================================================
2.87 RETAIL
Amazon.com Inc(a) 2,000 72,625
eBay Inc(a) 900 48,881
Home Depot 397 19,825
================================================================================
141,331
12.43 SERVICES
America Online(a) 4,940 260,585
Ariba Inc(a) 200 19,609
DoubleClick Inc(a) 800 30,500
Palm Inc(a) 1,700 56,738
VeriSign Inc(a) 907 160,086
VERITAS Software(a) 200 22,603
Yahoo! Inc(a) 500 61,938
================================================================================
612,059
0.75 TELECOMMUNICATIONS-- CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 600 36,713
================================================================================
1.31 TELECOMMUNICATIONS-- LONG DISTANCE
Qwest Communications International(a) 1,300 64,594
================================================================================
1.22 TELEPHONE
McLeodUSA Inc Class A Shrs(a) 2,900 59,994
================================================================================
TOTAL COMMON STOCKS (Cost $1,900,752) 2,230,583
================================================================================
54.69 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $2,693,436 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028 at 3.625%, value $2,913,732)
(Cost $2,692,000) $2,692,000 2,692,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $4,592,752)
(Cost for Income Tax Purposes $4,612,318) $4,922,583
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
BLUE CHIP
GROWTH
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 4,592,752
================================================================================
At Value(a) $ 4,922,583
Cash 523
Receivables:
Investment Securities Sold 96
Dividends and Interest 488
Prepaid Expenses and Other Assets 19,879
================================================================================
TOTAL ASSETS 4,943,569
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 374,296
Fund Shares Repurchased 17
Accrued Expenses and Other Payables 3,799
================================================================================
TOTAL LIABILITIES 378,112
================================================================================
NET ASSETS AT VALUE $ 4,565,457
================================================================================
NET ASSETS
Paid-in Capital(b) $ 4,099,612
Accumulated Undistributed Net Investment Loss (1,539)
Accumulated Undistributed Net Realized Gain
on Investment Securities 137,553
Net Appreciation of Investment Securities 329,831
================================================================================
NET ASSETS AT VALUE $ 4,565,457
================================================================================
Shares Outstanding 221,618
NET ASSET VALUE, Offering and Redemption Price per Share $ 20.60
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $2,692,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
BLUE CHIP
GROWTH
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,162
Interest 8,007
================================================================================
TOTAL INCOME 9,169
================================================================================
EXPENSES
Investment Advisory Fees 6,047
Transfer Agent Fees 2,500
Administrative Services Fees 6,233
Custodian Fees and Expenses 4,174
Directors' Fees and Expenses 4,517
Professional Fees and Expenses 7,926
Registration Fees and Expenses 13
Reports to Shareholders 2,957
Other Expenses 235
================================================================================
TOTAL EXPENSES 34,602
Fees and Expenses Absorbed by Investment Adviser (19,740)
Fees and Expenses Paid Indirectly (4,163)
================================================================================
NET EXPENSES 10,699
================================================================================
NET INVESTMENT LOSS (1,530)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 64,152
Change in Net Appreciation of Investment Securities 92,269
================================================================================
NET GAIN ON INVESTMENT SECURITIES 156,421
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 154,891
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
BLUE CHIP GROWTH FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Loss $ (1,530) $ (2,269)
Net Realized Gain on Investment Securities 64,152 76,229
Change in Net Appreciation of Investment Securities 92,269 138,346
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 154,891 212,306
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain on Investment Securities 0 (13,856)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 3,397,378 464,451
Reinvestment of Distributions 0 13,856
================================================================================
3,397,378 478,307
Amounts Paid for Repurchases of Shares (18,821) (15,632)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 3,378,557 462,675
================================================================================
TOTAL INCREASE IN NET ASSETS 3,533,448 661,125
NET ASSETS
Beginning of Period 1,032,009 370,884
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss of ($1,539)
and ($9), respectively) $ 4,565,457 $ 1,032,009
================================================================================
----------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 166,698 30,520
Shares Issued from Reinvestment of Distributions 0 798
================================================================================
166,698 31,318
Shares Repurchased (1,008) (990)
================================================================================
NET INCREASE IN FUND SHARES 165,690 30,328
================================================================================
See Notes to Financial Statement
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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 (the "Fund", presented herein),
Dynamics Fund, Equity Income Fund, Financial Services Fund, Health Sciences
Fund, High Yield Fund, Market Neutral Fund, Real Estate Opportunity Fund, Small
Company Growth Fund, Technology Fund, Telecommunications Fund, Total Return Fund
and Utilities Fund. The investment objective of the Fund is to seek long-term
capital growth. INVESCO Variable Investment Funds, Inc. 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,
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Cost is determined on the specific identification basis.
<PAGE>
The Fund may invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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.
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.
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 six months ended June 30, 2000.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $2,260,277 and $1,063,904, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $392,039 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $81,774 resulting in net
appreciation of $310,265.
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 six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $7. Unfunded accrued
pension costs of $0 and pension liability of $16 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
BLUE CHIP GROWTH FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 18.45 $ 14.49 $ 10.69 $ 10.00
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.01) (0.00) 0.00 0.05
Net Gains on Securities (Both Realized and Unrealized) 2.16 4.21 4.14 0.64
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 2.15 4.21 4.14 0.69
===========================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.04 0.00
Distributions from Capital Gains 0.00 0.25 0.01 0.00
In Excess of Capital Gains 0.00 0.00 0.29 0.00
===========================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.25 0.34 0.00
===========================================================================================================================
Net Asset Value-- End of Period $ 20.60 $ 18.45 $ 14.49 $ 10.69
===========================================================================================================================
TOTAL RETURN(c) 11.65%(d) 29.17% 38.99% 6.90%(d)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 4,565 $ 1,032 $ 371 $ 266
Ratio of Expenses to Average Net Assets(e)(f) 1.04%(d) 1.87% 1.57% 0.29%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets(e) (0.11%)(d) (0.38%) (0.07%) 1.45%(g)
Portfolio Turnover Rate 83%(d) 114% 78% 12%(d)
</TABLE>
(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 periods shown.
(d) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
<PAGE>
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the
six months ended June 30, 2000 and for the years ended December 31, 1999
and 1998, and the period ended December 31, 1997. If such expenses had
not been voluntarily absorbed, ratio of expenses to average net assets
would have been 2.42%, 8.99%, 12.04% and 28.76% (annualized),
respectively, and ratio of net investment loss to average net assets would
have been (1.49%), (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 (which
may include custodian fees).
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S16 9190 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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 6/30/00 (1)
1 year 46.96%
-------------------------------------
Since inception (8/97) 31.51%
-------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares rose
13.65%. This is comparable to the return of the S&P Midcap 400 Index, which rose
9.06% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Graph: VIF-Dynamics Fund
Total Return Since Inception 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 June 30, 2000.
After two months of downward pressure, the markets recovered in June,
gaining back some ground lost earlier in the quarter. Inflation concerns led to
the period's volatility, spawned by a series of higher reported inflation
figures as well as the central bank's negative statements at its May meeting,
when it raised short-term interest rates 50 basis points. The June producer and
consumer inflation figures showed moderating inflation following the earlier oil
price surge, followed by June's purchasing managers' prices paid index, which
declined for the third month in a row. As a result, equity markets recovered
somewhat, with the Nasdaq Composite up strongly after a dramatic pullback that
reached bottom in late May.
The fund's investments in three of the economy's fastest-growing segments
-- biotechnology, technology and communications -- hurt our performance in April
and May, but provided a positive tailwind as the market appeared to right itself
in June. Inflation scares, a federal ruling against Microsoft Corp, and other
factors caused investors to flee many higher-priced companies. Still, business
fundamentals remained quite strong for many of these leading firms.
The fund's investments in smaller technology stocks were hit particularly
hard in the market downdraft. Peregrine Systems, which markets infrastructure
management software, confused Wall Street by merging with Harbinger Corp, a
marketer of business-to-business e-commerce software. Redback Networks, a maker
of networking systems, and Gemstar International Group Ltd, a developer of
electronic program guides, also gave ground as investors became more focused on
current earnings rather than future growth.
But many of these same technology and biotechnology stocks proved
particularly strong in June. Two of our top-performing networking stocks
included Extreme Networks and Redback Networks. Software firms Vignette Corp and
Art Technology Group also performed well, based on evidence that large
enterprises are stepping up investment in Web-based software. These mid-cap
companies have been more aggressive than larger rivals in serving the needs of
companies adapting to the Internet. Our biotechnology holdings also gained
ground in June, with Human Genome Sciences, Celgene Corp, and Abgenix Inc all
moving higher.
On the other hand, our energy holdings, which provided some welcome returns
to the fund during the technology sector retreat, lost ground at the end of the
period. Still, we remain enthusiastic about the prospects for service firms, in
particular, which should enjoy real growth prospects as oil and gas producers
scramble to add reserves in response to tight supply and demand conditions.
Going forward, we intend to maintain our focus on companies that should
prosper even as the economy slows, particularly on firms that are closely
involved in the digital communications "buildout." We have reduced our exposure
to the retail sector, however, with our recent sale of Circuit City
Stores-Circuit City Group.
<PAGE>
FUND MANAGEMENT
VIF-Dynamics Fund is managed by INVESCO Chief Investment Officer Timothy J.
Miller and Vice President 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.
Thomas R. Wald assumed responsibilities of co-manager in 1997. He received
his MBA from The Wharton School, University of Pennsylvania, and a BA from
Tulane University. Before joining INVESCO in 1997, 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.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
DYNAMICS FUND
90.53 COMMON STOCKS
0.38 BANKS
Northern Trust 8,280 $ 538,717
================================================================================
7.92 BIOTECHNOLOGY-- HEALTH CARE
Abgenix Inc(a) 11,800 1,414,341
Affymetrix Inc(a) 7,850 1,296,231
Celgene Corp(a) 26,150 1,539,581
COR Therapeutics(a) 17,400 1,484,437
ImClone Systems(a) 11,925 911,517
Medarex Inc(a) 5,600 473,200
MedImmune Inc(a) 18,100 1,339,400
Protein Design Labs(a) 9,400 1,550,559
Sepracor Inc(a) 10,100 1,218,313
================================================================================
11,227,579
3.35 BROADCASTING
AMFM Inc(a) 14,150 976,350
Citadel Communications(a) 9,550 333,653
EchoStar Communications Class A Shrs(a) 34,380 1,138,300
Entercom Communications(a) 17,000 828,750
General Motors Class H Shrs(a) 7,300 640,575
Hispanic Broadcasting(a) 12,440 412,075
Westwood One(a) 12,300 419,738
================================================================================
4,749,441
1.53 CABLE
CableVision Systems Class A Shrs(a) 13,970 948,214
NTL Inc(a) 6,987 418,347
USA Networks(a) 36,820 796,233
================================================================================
2,162,794
3.07 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
CIENA Corp(a) 8,865 1,477,685
Comverse Technology(a) 12,900 1,199,700
Copper Mountain Networks(a) 5,300 467,062
E-Tek Dynamics(a) 3,800 1,002,488
Metasolv Software(a) 4,700 206,800
================================================================================
4,353,735
18.01 COMPUTER RELATED
Adobe Systems 7,700 1,001,000
Art Technology Group(a) 17,100 1,726,031
BEA Systems(a) 19,600 968,975
BroadVision Inc(a) 20,620 1,047,754
Brocade Communications Systems(a) 10,280 1,886,219
Entrust Technologies(a) 7,400 612,350
Exodus Communications(a) 28,160 1,297,120
Extreme Networks(a) 8,180 862,990
InfoSpace Inc(a) 12,600 696,150
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
Inktomi Corp(a) 9,350 $1,105,637
Internap Network Services(a) 13,790 572,500
Intuit Inc(a) 12,120 501,465
i2 Technologies(a) 11,745 1,224,600
Macromedia Inc(a) 6,400 618,800
Mercury Interactive(a) 14,520 1,404,810
Network Appliance(a) 15,380 1,238,090
Peregrine Systems(a) 24,800 860,250
Portal Software(a) 12,300 785,663
RealNetworks Inc(a) 11,000 556,188
Redback Networks(a) 11,460 2,039,880
Siebel Systems(a) 14,070 2,301,324
Software.com Inc(a) 900 116,888
Symantec Corp(a) 11,050 596,009
TIBCO Software(a) 3,000 321,703
Vignette Corp(a) 14,600 759,428
Vitria Technology(a) 7,100 433,988
================================================================================
25,535,812
2.72 ELECTRICAL EQUIPMENT
Flextronics International Ltd(a) 17,240 1,184,173
Jabil Circuit(a) 8,540 423,797
Molex Inc 20,037 964,281
Sanmina Corp(a) 15,060 1,287,630
================================================================================
3,859,881
11.05 ELECTRONICS-- SEMICONDUCTOR
Altera Corp(a) 11,390 1,161,068
Applied Micro Circuits(a) 10,900 1,076,375
Conexant Systems(a) 8,660 421,092
Linear Technology 15,480 989,752
LSI Logic(a) 21,180 1,146,367
Maxim Integrated Products(a) 19,860 1,349,239
Microchip Technology(a) 13,570 790,665
PMC-Sierra Inc(a) 10,440 1,855,058
RF Micro Devices(a) 10,190 892,899
SDL Inc(a) 8,460 2,412,686
TranSwitch Corp(a) 15,200 1,173,250
Vitesse Semiconductor(a) 10,820 795,946
Xilinx Inc(a) 19,490 1,609,143
================================================================================
15,673,540
0.71 ENTERTAINMENT
Gemstar International Group Ltd(a) 16,440 1,010,289
================================================================================
0.90 EQUIPMENT-- SEMICONDUCTOR
KLA-Tencor Corp(a) 10,230 599,094
Novellus Systems(a) 3,600 203,625
Teradyne Inc(a) 6,510 478,485
================================================================================
1,281,204
1.33 FINANCIAL
Ambac Financial Group 13,000 712,562
Edwards (A G) Inc 14,400 561,600
Providian Financial 6,800 612,000
================================================================================
1,886,162
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
1.66 GAMING
Harrah's Entertainment(a) 57,940 $1,213,119
MGM Grand 35,420 1,137,867
================================================================================
2,350,986
7.57 HEALTH CARE DRUGS-- PHARMACEUTICALS
Allergan Inc 18,400 1,370,800
ALZA Corp(a) 25,100 1,484,037
Forest Laboratories(a) 25,950 2,620,950
Human Genome Sciences(a) 9,200 1,227,050
ICN Pharmaceuticals 16,400 456,125
Inhale Therapeutic Systems(a) 12,700 1,288,653
IVAX Corp 18,400 763,600
Millennium Pharmaceuticals(a) 13,640 1,525,975
================================================================================
10,737,190
0.50 HEALTH CARE RELATED
PE Corp-PE Biosystems Group 10,800 711,450
================================================================================
1.74 INVESTMENT BANK/BROKER FIRM
Paine Webber Group 8,900 404,950
Price (T Rowe) Associates 14,200 603,500
Waddell & Reed Financial
Class A Shrs 23,513 771,520
Class B Shrs 23,429 680,905
================================================================================
2,460,875
10.22 OIL & GAS RELATED
Anadarko Petroleum 13,120 646,980
Apache Corp 23,765 1,397,679
BJ Services(a) 19,250 1,203,125
Canadian Natural Resources(a) 9,700 281,501
Coflexip SA Sponsored ADR
Representing 1/2 Ord Shr 5,700 344,850
Cooper Cameron(a) 19,575 1,291,950
Diamond Offshore Drilling 7,900 277,487
ENSCO International 13,900 497,794
EOG Resources 3,000 100,500
Global Industries Ltd(a) 12,760 240,845
Global Marine(a) 19,850 559,522
Grant Prideco(a) 22,090 552,250
Kerr-McGee Corp 5,350 315,316
Nabors Industries(a) 25,025 1,040,102
Noble Drilling(a) 28,490 1,173,432
Santa Fe International 35,880 1,253,558
Smith International(a) 19,150 1,394,359
Transocean Sedco Forex 7,700 411,469
Varco International(a) 12,286 285,650
Vastar Resources 2,650 217,631
Weatherford International(a) 25,290 1,006,858
================================================================================
14,492,858
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.21 PERSONAL CARE
Estee Lauder Class A Shrs 6,020 $ 297,614
================================================================================
0.81 PUBLISHING
New York Times Class A Shrs 11,730 463,335
Valassis Communications(a) 17,640 672,525
================================================================================
1,135,860
0.75 RAILROADS
Kansas City Southern Industries 11,900 1,055,381
================================================================================
1.38 RETAIL
Best Buy(a) 6,250 395,312
Kohl's Corp(a) 19,100 1,062,437
RadioShack Corp 10,390 492,226
================================================================================
1,949,975
8.96 SERVICES
Ariba Inc(a) 11,000 1,078,516
Computer Sciences(a) 3,750 280,078
CSG Systems International(a) 15,300 857,756
DoubleClick Inc(a) 12,650 482,281
Go2Net Inc(a) 9,580 481,994
Lamar Advertising Class A Shrs(a) 6,300 272,869
Omnicom Group 9,930 884,391
Palm Inc(a) 3,900 130,163
Paychex Inc 33,075 1,389,150
Proxicom Inc(a) 13,900 665,463
Robert Half International(a) 19,200 547,200
Safeguard Scientifics(a) 7,500 240,469
Sapient Corp(a) 6,580 703,649
SEI Investments 8,560 340,795
SunGard Data Systems(a) 11,300 350,300
TMP Worldwide(a) 16,700 1,232,669
VeriSign Inc(a) 9,360 1,652,040
WPP Group PLC 34,340 501,678
Young & Rubicam 10,820 618,769
================================================================================
12,710,230
1.25 TELECOMMUNICATIONS-- CELLULAR & WIRELESS
Crown Castle International(a) 15,220 555,530
VoiceStream Wireless(a) 5,610 652,425
Western Wireless Class A Shrs(a) 10,380 565,710
================================================================================
1,773,665
1.21 TELECOMMUNICATIONS-- LONG DISTANCE
Allegiance Telecom(a) 12,150 777,600
ITC DeltaCom(a) 7,450 166,228
Nextel Partners Class A Shrs(a) 21,100 687,069
Viatel Inc(a) 3,100 88,544
================================================================================
1,719,441
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
3.30 TELEPHONE
Amdocs Ltd(a) 19,250 $1,477,438
AT&T Canada Class B Depository Receipts(a) 14,430 478,896
Citizens Communications Class B Shrs(a) 24,900 429,525
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) 5,320 721,525
McLeodUSA Inc Class A Shrs(a) 40,780 843,636
RCN Corp(a) 7,100 180,163
Time Warner Telecom Class A Shrs(a) 8,600 553,625
================================================================================
4,684,808
TOTAL COMMON STOCKS (Cost $112,312,460) 128,359,487
================================================================================
9.47 SHORT-TERM INVESTMENTS
4.73 COMMERCIAL PAPER
4.73 CONSUMER FINANCE
Ford Motor Credit, 6.720%, 7/3/2000
(Cost $6,700,000) $6,700,000 6,700,000
================================================================================
4.74 REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 6/30/2000 due 7/3/2000
at 6.400%, repurchased at $6,730,588
(Collateralized by US Treasury
Inflationary Index Bonds, due
2/15/2026 at 6.000%, value $6,848,542)
(Cost $6,727,000) $6,727,000 6,727,000
===============================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $13,427,000) 13,427,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $125,739,460)
(Cost for Income Tax Purposes $126,162,434) $141,786,487
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
DYNAMICS
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $125,739,460
================================================================================
At Value(a) $141,786,487
Cash 200
Receivables:
Investment Securities Sold 335,075
Fund Shares Sold 2,173,777
Dividends and Interest 16,409
Appreciation on Forward Foreign Currency Contracts 983
Prepaid Expenses and Other Assets 8,292
================================================================================
TOTAL ASSETS 144,321,223
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 1,164,890
Fund Shares Repurchased 1,603,194
Accrued Expenses and Other Payables 3,836
================================================================================
TOTAL LIABILITIES 2,771,920
================================================================================
NET ASSETS AT VALUE $141,549,303
================================================================================
NET ASSETS
Paid-in Capital(b) $129,994,240
Accumulated Undistributed Net Investment Loss (5,942)
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (4,486,024)
Net Appreciation of Investment Securities and
Foreign Currency Transactions 16,047,029
================================================================================
NET ASSETS AT VALUE $141,549,303
================================================================================
Shares Outstanding 6,590,711
NET ASSET VALUE, Offering and Redemption Price per Share $ 21.48
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $6,727,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
DYNAMICS
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 35,701
Dividends from Affiliated Investment Companies 48,731
Interest 276,337
Foreign Taxes Withheld (708)
================================================================================
TOTAL INCOME 360,061
================================================================================
EXPENSES
Investment Advisory Fees 246,350
Transfer Agent Fees 2,500
Administrative Services Fees 92,044
Custodian Fees and Expenses 17,835
Directors' Fees and Expenses 4,920
Professional Fees and Expenses 8,836
Registration Fees and Expenses 119
Reports to Shareholders 11,649
Other Expenses 493
================================================================================
TOTAL EXPENSES 384,746
Fees and Expenses Absorbed by Investment Adviser (1,028)
Fees and Expenses Paid Indirectly (17,731)
================================================================================
NET EXPENSES 365,987
================================================================================
NET INVESTMENT LOSS (5,926)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on Investment Securities
and Foreign Currency Transactions (4,411,487)
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 11,162,211
Foreign Currency Transactions (6,691)
================================================================================
Total Net Appreciation 11,155,520
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 6,744,033
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,738,107
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
DYNAMICS FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income (Loss) $ (5,926) $ 1,732
Net Realized Loss on Investment Securities
and Foreign Currency Transactions (4,411,487) (66,357)
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions 11,155,520 4,831,517
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 6,738,107 4,766,892
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (1,730)
In Excess of Net Investment Income 0 (4,078)
================================================================================
TOTAL DISTRIBUTIONS 0 (5,808)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 164,851,301 34,477,477
Reinvestment of Distributions 0 5,808
================================================================================
164,851,301 34,483,285
Amounts Paid for Repurchases of Shares (59,707,112) (9,885,578)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 105,144,189 24,597,707
================================================================================
TOTAL INCREASE IN NET ASSETS 111,882,296 29,358,791
NET ASSETS
Beginning of Period 29,667,007 308,216
================================================================================
End of Period (Including Accumulated Undistributed
(Distributions in Excess of) Net Investment
Loss of ($5,942) and ($16), respectively) $ 141,549,303 $ 29,667,007
================================================================================
-----------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 7,970,318 2,115,404
Shares Issued from Reinvestment of Distributions 0 350
================================================================================
7,970,318 2,115,754
Shares Repurchased (2,949,651) (571,073)
================================================================================
NET INCREASE IN FUND SHARES 5,020,667 1,544,681
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund (the "Fund",
presented herein), Equity Income Fund, Financial Services Fund, Health Sciences
Fund, High Yield Fund, Market Neutral Fund, Real Estate Opportunity 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 INVESCO Variable Investment Funds, Inc. 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.
Investments in shares of investment companies are valued at the net asset value
of the respective mutual fund as calculated each day.
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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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
and income are offset by capital loss carryovers and deferred post-October 31
losses, 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
<PAGE>
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.
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 net 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% 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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $113,210,064 and $17,098,067, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $18,407,815 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $2,783,762, resulting in net
appreciation of $15,624,053.
<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 for the six months ended June 30, 2000 included in Directors'
Fees and Expenses in the Statement of Operations were $25. Unfunded accrued
pension costs of $0 and pension liability of $40 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
DYNAMICS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 18.90 $ 12.15 $ 10.34 $ 10.00
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.00) 0.00 (0.00) 0.02
Net Gains on Securities (Both Realized and Unrealized) 2.58 6.75 1.98 0.32
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 2.58 6.75 1.98 0.34
===========================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income(c) 0.00 0.00 0.02 0.00
In Excess of Net Investment Income(c) 0.00 0.00 0.00 0.00
Distributions from Capital Gains 0.00 0.00 0.15 0.00
===========================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.00 0.17 0.00
===========================================================================================================================
Net Asset Value-- End of Period $ 21.48 $ 18.90 $ 12.15 $ 10.34
===========================================================================================================================
TOTAL RETURN(d) 13.65%(e) 55.60% 19.35% 3.40%(e)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 141,549 $ 29,667 $ 308 $ 257
Ratio of Expenses to Average Net Assets(f)(g) 0.56%(e) 1.26% 1.45% 0.52%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(f) (0.01%)(e) 0.04% (0.64%) 0.63%(h)
Portfolio Turnover Rate 28%(e) 70% 55% 28%(e)
</TABLE>
(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 six months ended June 30, 2000 and 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 periods 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 six
months ended June 30, 2000, 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 0.58%,
2.25%, 14.76% and 34.18% (annualized), respectively, and ratio of net
investment loss to average net assets would have been (0.03%), (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 (which
may include custodian fees).
(h) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S11 9183 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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-EQUITY INCOME FUND
--------------------------------------------
VIF-EQUITY INCOME FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 2.64%
--------------------------------------------
5 years 19.12%
--------------------------------------------
Since inception (8/94) 18.81%
--------------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares
rose 1.67%. This is comparable to the return of both the S&P 500 Index, which
fell 0.43% during the same period, and the Lehman Government/Corporate Bond
Index, which rose 4.18%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Graph: VIF-Equity Income Fund
Total Return Since Inception vs S&P 500 Index and
Lehman Government/Corporate 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 the value of 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 (8/94) through June 30, 2000.
Equity markets were volatile throughout the first half of the year.
Beginning in March, the threat of higher interest rates weighed on growth stocks
and widened bond yields. By late May, however, markets rallied on preliminary
signs of an economic slowdown and expectations that the Federal Reserve would
leave rates unchanged in June. Treasury and corporate bonds rallied, while the
high-yield market stabilized after several challenging months. Nonetheless,
policymakers warned that it was premature to declare inflation firmly under
control. We expect the 10-year Treasury bond to trade in the 5.75% to 6.75%
range through 2000.
The fund performed according to design in the past six months -- providing
investors with steady, consistent returns insulated from dramatic market swings.
As a result, while the fund lost some ground, it outperformed the S&P 500 Index.
We have reduced our exposure to basic material and capital goods
companies, which may be vulnerable to rising energy costs. At the same time, we
added selectively to our energy and financial services exposure. Energy shares
are benefiting from strong demand and firming prices, while financial services
stocks could rebound once the Fed decisively ends its tightening.
The performance of the fixed-income portion of the fund can be attributed
to our credit risk approach and the further development of the "stranded cost"
theme. More than 40% of the fund's bond holdings are allocated to electric
utilities -- a sizable weighting we believe is justified by the de-leveraging
and credit upgrades achieved by many of our utilities. Valuations also improved
on many of our high-yield bond holdings, especially in the telecommunications
sector.
We are confident that our focus on bottom-up stock investing will enable
us to identify well-managed companies that can perform strongly in any market
environment. In selecting fixed-income holdings, we will remain focused on
credit risk analysis and our themes of energy, gaming, broadcasting,
communications, cyclically vulnerable companies emerging from financial
distress, electric utilities deregulation and special situations.
FUND MANAGEMENT
Senior Vice President and Director of Income Equity Investments Charles P.
Mayer is responsible for the equity side of VIF-Equity Income Fund. An industry
veteran with more than 30 years of professional experience, he earned an MBA
from St. John's University and a BA from St. Peter's College. Previously,
Charlie was with Westinghouse Pension Investment Corp.
<PAGE>
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.
(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
IS AN UNMANAGED INDEX INDICATIVE OF THE BROAD FIXED-INCOME MARKET. THE NASDAQ
COMPOSITE IS AN UNMANAGED INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
EQUITY INCOME FUND
87.03 COMMON STOCKS
2.02 AEROSPACE & DEFENSE
Boeing Co 28,400 $1,187,475
Honeywell International 16,500 555,844
Northrop Grumman 8,300 549,875
================================================================================
2,293,194
0.66 AUTOMOBILES
Ford Motor 17,300 743,900
================================================================================
7.00 BANKS
Bank of America 19,700 847,100
Bank of New York 35,600 1,655,400
Chase Manhattan 29,700 1,368,056
Morgan (J P) & Co 15,600 1,717,950
Summit Bancorp 35,600 876,650
Wells Fargo & Co 37,900 1,468,625
================================================================================
7,933,781
1.71 BEVERAGES
Anheuser-Busch Cos 25,900 1,934,406
================================================================================
3.61 BROADCASTING
Clear Channel Communications(a) 11,900 892,500
EchoStar Communications Class A Shrs(a) 20,000 662,188
General Motors Class H Shrs(a) 25,900 2,272,725
Univision Communications Class A Shrs(a) 2,600 269,100
================================================================================
4,096,513
1.87 CABLE
AT&T Corp-Liberty Media Group Class A Shrs(a) 61,600 1,493,800
Cox Communications Class A Shrs(a) 13,700 624,206
================================================================================
2,118,006
0.38 CHEMICALS
Lyondell Chemical 25,700 430,475
================================================================================
3.92 COMPUTER RELATED
Cisco Systems(a) 42,100 2,675,981
Nortel Networks 26,000 1,774,500
================================================================================
4,450,481
0.44 CONTAINERS
Temple-Inland Inc 11,900 499,800
================================================================================
1.01 ELECTRIC UTILITIES
Duke Energy 10,000 563,750
ScottishPower PLC Sponsored ADR
Representing 4 Ord Shrs 17,330 579,472
================================================================================
1,143,222
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
2.07 ELECTRICAL EQUIPMENT
General Electric 44,400 $2,353,200
================================================================================
4.69 ELECTRONICS -- SEMICONDUCTOR
Intel Corp 14,400 1,925,100
Maxim Integrated Products(a) 27,000 1,834,312
Texas Instruments 22,700 1,559,206
================================================================================
5,318,618
1.57 FINANCIAL
Citigroup Inc 29,600 1,783,400
================================================================================
4.50 FOODS
General Mills 23,700 906,525
Heinz (HJ) Co 20,425 893,594
Kellogg Co 58,100 1,728,475
Quaker Oats 10,000 751,250
Tasty Baking 64,250 823,203
================================================================================
5,103,047
1.33 GAMING
Harrah's Entertainment(a) 29,600 619,750
Park Place Entertainment(a) 72,600 884,813
================================================================================
1,504,563
6.64 HEALTH CARE DRUGS-- PHARMACEUTICALS
American Home Products 30,700 1,803,625
Merck & Co 25,900 1,984,587
Pfizer Inc 38,500 1,848,000
Pharmacia Corp 36,700 1,896,931
================================================================================
7,533,143
1.82 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 34,400 2,059,700
================================================================================
5.74 INSURANCE
Allmerica Financial 60,300 3,158,212
John Hancock Financial Services(a) 65,400 1,549,162
MetLife Inc(a) 77,500 1,632,344
Ohio Casualty 16,000 170,000
================================================================================
6,509,718
1.04 INVESTMENT BANK/BROKER FIRM
Morgan Stanley Dean Witter & Co 14,200 1,182,150
================================================================================
2.66 MANUFACTURING
Illinois Tool Works 21,100 1,202,700
Minnesota Mining & Manufacturing 7,200 594,000
Textron Inc 22,400 1,216,600
================================================================================
3,013,300
1.35 NATURAL GAS
Enron Corp 15,000 967,500
National Fuel Gas 11,600 565,500
================================================================================
1,533,000
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
8.48 OIL & GAS RELATED
Apache Corp 32,000 $1,882,000
BP Amoco PLC Sponsored ADR
Representing 6 Ord Shrs 30,000 1,696,875
Exxon Mobil 23,700 1,860,450
Royal Dutch Petroleum New York
Registry 1.25 Gldr Shrs 20,000 1,231,250
Schlumberger Ltd 23,700 1,768,613
Unocal Corp 35,600 1,179,250
================================================================================
9,618,438
1.66 PAPER & FOREST PRODUCTS
Bowater Inc 16,400 723,650
Weyerhaeuser Co 27,000 1,161,000
================================================================================
1,884,650
1.23 PERSONAL CARE
Gillette Co 40,000 1,397,500
================================================================================
4.02 RAILROADS
Kansas City Southern Industustries 40,000 3,547,500
Norfolk Southern 67,700 1,007,038
================================================================================
4,554,538
4.48 RETAIL
RadioShack Corp 45,000 2,131,875
Target Corp 50,900 2,952,200
================================================================================
5,084,075
1.29 SAVINGS & LOAN
Charter One Financial 63,548 1,461,604
================================================================================
1.61 SERVICES
America Online(a) 20,000 1,055,000
Omnicom Group 8,700 774,844
================================================================================
1,829,844
0.80 TELECOMMUNICATIONS-- CELLULAR & WIRELESS
Crown Castle International(a) 25,000 912,500
================================================================================
1.54 TELECOMMUNICATIONS-- LONG DISTANCE
AT&T Corp 17,800 562,925
Cable & Wireless PLC Sponsored ADR
Representing 3 Ord Shrs 23,700 1,186,481
================================================================================
1,749,406
5.89 TELEPHONE
Bell Atlantic 25,000 1,270,313
BellSouth Corp 30,000 1,278,750
SBC Communications 48,392 2,092,954
US WEST 23,700 2,032,275
================================================================================
6,674,292
TOTAL COMMON STOCKS (Cost $84,199,508) 98,704,464
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.83 PREFERRED STOCKS
0.83 COMPUTER RELATED
SAP AG Sponsored ADR Representing 1/4 Pfd Shr
(Cost $1,141,293) 20,000 $ 938,750
================================================================================
11.84 FIXED INCOME SECURITIES
2.23 US GOVERNMENT OBLIGATIONS
US Treasury Notes
6.625%, 5/31/2002 $1,250,000 1,254,688
6.000%, 8/15/2009 $ 250,000 247,969
5.875%, 11/15/2004 $ 550,000 541,750
5.625%, 5/15/2000 $ 500,000 482,187
================================================================================
TOTAL US GOVERNMENT OBLIGATIONS
(Amortized Cost $2,547,018) 2,526,594
================================================================================
0.12 US GOVERNMENT AGENCY OBLIGATIONS
Resolution Funding, Generic Interest Strip,
Zero Coupon, 4/15/2009
(Amortized Cost $141,037) $ 250,000 140,990
================================================================================
9.49 CORPORATE BONDS
0.31 BROADCASTING
Chancellor Media of Los Angeles,
Sr Sub Notes, Series B, 8.125%, 12/15/2007 $ 350,000 352,187
================================================================================
0.45 BUILDING MATERIALS
USG Corp, Sr Notes, 8.500%, 8/1/2005 $ 500,000 514,880
================================================================================
0.31 CABLE
Comcast Cable Partners Ltd, Sr Discount Step-Up
Deb Zero Coupon(b),11/15/2007 $ 300,000 279,750
Renaissance Media Group LLC/Renaissance
Media Captial, Gtd Sr Discount Step-Up
Notes, Zero Coupon(b), 4/15/2008 $ 100,000 68,000
================================================================================
347,750
0.66 COMPUTER RELATED
Juniper Networks, Conv Deb, 4.750%,
3/15/2007 $ 500,000 544,375
PSINet Inc, Sr Discount Step-Up Notes,
Series B, Zero Coupon(b), 2/15/2005 $ 225,000 207,000
================================================================================
751,375
3.89 ELECTRIC UTILITIES
Cleveland Electric Illuminating, 1st
Mortgage, Series E, 9.000%, 7/1/2023 $ 100,000 99,345
Commonwealth Edison, 1st Mortgage
Series 81, 8.625%, 2/1/2022 $ 100,000 98,713
Series 88, 8.375%, 2/15/2023 $ 100,000 98,425
Consumers Energy, 1st & Refunding
Mortgage, 7.375%, 9/15/2023 $ 500,000 446,034
El Paso Electric, 1st Mortgage, Series D,
8.900%, 2/1/2006 $ 350,000 360,991
Gulf States Utilities, 1st Mortgage,
8.700%, 4/1/2024 $ 250,000 248,836
Indiana Michigan Power, 1st Mortgage,
Medium-Term Notes 8.500%, 12/15/2022 $ 100,000 99,531
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
Jersey Central Power & Light, Sr
1st Mortgage Medium-Term Notes
Series C, 7.980%, 2/16/2023 $ 250,000 $ 235,634
New York State Electric & Gas,
1st Mortgage, 8.300%, 12/15/2022 $ 200,000 196,027
Niagara Mohawk Power
1st Mortgage, 8.500%, 7/1/2023 $ 250,000 249,518
Sr Discount Step-Up Notes,
Series H, Zero Coupon(b), 7/1/2010 $ 500,000 383,820
Potomac Edison, 1st Mortgage
8.000%, 6/1/2024 $ 250,000 240,987
7.750%, 5/1/2025 $ 100,000 94,665
Public Service of New Mexico, Sr Notes
Series A, 7.100%, 8/1/2005 $ 250,000 241,405
Series B, 7.500%, 8/1/2018 $ 250,000 231,332
Texas Utilities, 1st Mortgage &
Collateral Trust
8.500%, 8/1/2024 $ 100,000 98,772
7.875%, 4/1/2024 $ 250,000 235,540
TXU Electric Capital, Gtd Capital
Securities, 8.175%, 1/30/2037 $ 250,000 249,658
Union Electric, 1st Mortgage
8.750%, 12/1/2021 $ 250,000 250,673
8.250%, 10/15/2022 $ 250,000 246,620
================================================================================
4,406,526
0.22 GAMING
Park Place Entertainment, Sr Sub
Notes, 9.375%, 2/15/2007 $ 250,000 250,000
================================================================================
0.37 INSURANCE
Equitable Cos, Sr Notes, 9.000%, 12/15/2004 $ 400,000 420,241
================================================================================
0.19 LODGING--HOTELS
Hilton Hotels, Sr Notes, 7.200%, 12/15/2009 $ 250,000 218,969
================================================================================
0.96 OIL & GAS RELATED
Atlantic Richfield, Deb, 10.875%, 7/15/2005 $ 600,000 692,066
Canadian Forest Oil Ltd, Gtd Sr Sub Notes,
8.750%, 9/15/2007 $ 100,000 94,000
Gulf Canada Resources Ltd, Sr Notes,
8.350%, 8/1/2006 $ 250,000 247,500
Snyder Oil, Sr Sub Notes, 8.750%, 6/15/2007 $ 50,000 50,250
================================================================================
1,083,816
0.09 PAPER & FOREST PRODUCTS
Bowater Inc, Deb, 9.000%, 8/1/2009 $ 100,000 104,207
================================================================================
0.06 SERVICES
NationsRent Inc, Gtd Sr Sub Notes,
10.375%, 12/15/2008 $ 100,000 64,000
================================================================================
0.24 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Rogers Cantel, Sr Deb, 9.750%, 6/4/2016 $ 250,000 269,375
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.70 TELECOMMUNICATIONS--LONG DISTANCE
Allegiance Telecom, Sr Discount
Step-Up Notes Series B, Zero Coupon(b),
2/15/2008 $ 100,000 $ 72,500
ESAT Telecommunications Group PLC,
Sr Notes, 11.875%, 2/15/2008 $ 415,000 488,662
Level 3 Communications, Sr Discount
Step-Up Notes Zero Coupon(b), 12/1/2008 $ 250,000 151,875
Qwest Communications International,
Sr Discount Step-Up Notes Series B,
Zero Coupon(b), 2/1/2008 $ 100,000 78,896
================================================================================
791,933
1.04 TELEPHONE
Centel Capital, Deb, 9.000%, 10/15/2019 $ 250,000 274,907
MetroNet Communications, Sr Discount
Step-Up Notes, Zero Coupon(b) 6/15/2008 $ 400,000 325,182
11/1/2007 $ 225,000 197,618
NEXTLINK Communications, Sr Notes,
9.625%, 10/1/2007 $ 200,000 188,500
Time Warner Telecommunications,
Sr Notes, 9.750%, 7/15/2008 $ 200,000 193,500
================================================================================
1,179,707
TOTAL CORPORATE BONDS
(Amortized Cost $11,230,656) 10,754,966
================================================================================
TOTAL FIXED INCOME SECURITIES
(Amortized Cost $13,918,711) 13,422,550
================================================================================
0.30 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
6/30/3000 due 7/3/2000 at 6.400%, repurchased
at $344,183 (Collateralized by US Treasury
Inflationary Index Bonds, due 4/15/2028 at
3.625%, value $376,293) (Cost $344,000) $ 344,000 344,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $99,603,512)
(Cost for Income Tax Purposes $99,641,948) $113,409,764
================================================================================
(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.
JUNE 30, 2000
UNAUDITED EQUITY
INCOME
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 99,603,512
================================================================================
At Value(a) $113,409,764
Cash 256
Receivables:
Investment Securities Sold 2,442,151
Fund Shares Sold 1,595,445
Dividends and Interest 314,090
Prepaid Expenses and Other Assets 476
================================================================================
TOTAL ASSETS 117,762,182
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 413,980
Fund Shares Repurchased 97,579
Accrued Expenses and Other Payables 12,310
================================================================================
TOTAL LIABILITIES 523,869
================================================================================
NET ASSETS AT VALUE $117,238,313
================================================================================
NET ASSETS
Paid-in Capital(b) $ 96,593,443
Accumulated Undistributed Net Investment Income 752,046
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 6,086,572
Net Appreciation of Investment Securities and
Foreign Currency Transactions 13,806,252
================================================================================
NET ASSETS AT VALUE $117,238,313
================================================================================
Shares Outstanding 5,486,522
NET ASSET VALUE, Offering and Redemption Price per Share $ 21.37
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $344,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
EQUITY
INCOME
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 547,558
Dividends from Affiliated Investment Companies 64,713
Interest 529,407
Foreign Taxes Withheld (3,686)
================================================================================
TOTAL INCOME 1,137,992
================================================================================
EXPENSES
Investment Advisory Fees 339,419
Transfer Agent Fees 2,500
Administrative Services Fees 94,613
Custodian Fees and Expenses 9,140
Directors' Fees and Expenses 5,855
Interest Expenses 5,833
Professional Fees and Expenses 9,755
Registration Fees and Expenses 102
Reports to Shareholders 26,528
Other Expenses 4,803
================================================================================
TOTAL EXPENSES 498,548
Fees and Expenses Paid Indirectly (9,117)
================================================================================
NET EXPENSES 489,431
================================================================================
NET INVESTMENT INCOME 648,561
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (930,090)
Change in Net Appreciation of Investment Securities 2,259,168
================================================================================
NET GAIN ON INVESTMENT SECURITIES 1,329,078
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,977,639
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
EQUITY INCOME FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 648,561 $ 974,761
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions (930,090) 7,017,224
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 2,259,168 1,500,412
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 1,977,639 9,492,397
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (921,268)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (412,361)
================================================================================
TOTAL DISTRIBUTIONS 0 (1,333,629)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 46,267,716 32,790,025
Reinvestment of Distributions 0 1,333,629
================================================================================
46,267,716 34,123,654
Amounts Paid for Repurchases of Shares (10,899,654) (22,735,328)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 35,368,062 11,388,326
================================================================================
TOTAL INCREASE IN NET ASSETS 37,345,701 19,547,094
NET ASSETS
Beginning of Period 79,892,612 60,345,518
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $752,046
and $103,485, respectively) $117,238,313 $ 79,892,612
================================================================================
-----------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 2,208,246 1,631,786
Shares Issued from Reinvestment of Distributions 0 63,475
================================================================================
2,208,246 1,695,261
Shares Repurchased (524,168) (1,135,876)
================================================================================
NET INCREASE IN FUND SHARES 1,684,078 559,385
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund (the "Fund", presented herein), Financial Services Fund, Health Sciences
Fund, High Yield Fund, Market Neutral Fund, Real Estate Opportunity 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 INVESCO Variable Investment Funds, Inc. 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.
Investments in shares of investment companies are valued at the net asset value
of the respective mutual fund as calculated each day.
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. 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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
The Fund may have elements of risk due to investments in foreign issuers located
in a specific country. Such investments 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.
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.
<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.
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.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $77,448,843 and $41,962,567, respectively. For the year six
months ended June 30, 2000, the aggregate cost of purchases and proceeds from
sales of U.S. Government securities were $1,922,202 and $0, respectively.
<PAGE>
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $17,654,381 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $3,886,565 resulting in net
appreciation of $13,767,816.
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 six months ended June 30, 2000 included in Directors'
Fees and Expenses in the Statement of Operations were $633. Unfunded accrued
pension costs of $0 and pension liability of $2,989 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
that 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
EQUITY INCOME FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30 YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $ 21.01 $ 18.61 $ 17.04 $ 14.33 $ 12.58 $ 10.09
============================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.26 0.33 0.30 0.28 0.19
Net Gains on Securities
(Both Realized and Unrealized) 0.25 2.50 2.23 3.71 2.52 2.76
============================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.36 2.76 2.56 4.01 2.80 2.95
============================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.25 0.32 0.29 0.28 0.20
Distributions from Capital Gains 0.00 0.11 0.67 1.01 0.77 0.26
============================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.36 0.99 1.30 1.05 0.46
============================================================================================================================
Net Asset Value--End of Period $ 21.37 $ 21.01 $ 18.61 $ 17.04 $ 14.33 $ 12.58
============================================================================================================================
TOTAL RETURN(a) 1.67%(b) 14.84% 15.30% 28.17% 22.28% 29.25%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 117,238 $ 79,893 $ 60,346 $ 40,093 $ 22,342 $ 8,362
Ratio of Expenses to Average
Net Assets(c)(d) 0.55%(b) 1.05% 0.93% 0.91% 0.95% 1.03%
Ratio of Net Investment Income to
Average Net Assets(c) 0.71%(b) 1.38% 1.98% 2.18% 2.87% 3.50%
Portfolio Turnover Rate 48%(b) 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) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) 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.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S90 9188 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the past six months as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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-FINANCIAL SERVICES FUND
--------------------------------------
VIF-FINANCIAL SERVICES FUND
CUMULATIVE TOTAL RETURN
AS OF 6/30/00 (1)
Since inception (9/99) 10.80%
--------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares
fell 0.18%. This is comparable to the return of both the S&P 500 Index, which
fell 0.43% during the same period, and the S&P Financials Index, which fell
0.50%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Graph: VIF-FINANCIAL SERVICES FUND
TOTAL RETURN SINCE INCEPTION VS S&P 500 INDEX AND
S&P FINANCIALS 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 and the value of a $10,000
investment in the S&P Financials Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for
the period from inception (9/99) through June 30, 2000.
Financial services stocks struggled in recent months against lingering
interest rate fears and renewed credit concerns. The threat of higher interest
rates dominated investor attention in the first half of the quarter, but eased
later in the period amid signs of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged in June. By quarter-end, investor
focus shifted from interest rate risk to credit concerns, after several large
banks warned of potential problems. On a positive note, several beaten-down
financial services stocks received renewed attention from investors seeking
attractively priced stocks with solid growth potential.
The fund outperformed both the overall market and the S&P 500 Financials
Index in recent months, supported by our focus on high-growth financial services
companies. One top-performer was Bank of New York, a leading provider of
back-office processing. This business provides the bank with a promising avenue
of growth that is less vulnerable to credit and interest rate concerns. Our
results also benefited for our exposure to multi-line insurance companies, such
as American International Group (AIG), which gained support from firming prices
and easing interest rate concerns. We added to our weighting in this area.
We also benefited from our lack of exposure to e-finance companies, which
declined in tandem with technology stocks and were the weakest performing shares
in recent months.
Going forward, we caution that financial services stocks could remain
volatile as investors wait to see if the economy truly achieves the desired
"soft landing." However, our strategy in this environment remains the same. We
remain diversified across subsectors within the financial services industry,
focusing on the market leaders.
FUND MANAGEMENT
The VIF-Financial Services Fund is managed by Vice President Jeffrey G.
Morris. Prior to joining INVESCO Funds Group, 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. A Chartered Financial Analyst, Jeff
began his investment career in 1991.
(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 FINANCIALS INDEX IS AN
UNMANAGED INDEX OF FINANCIAL SERVICES STOCKS. THE NASDAQ COMPOSITE IS AN
UNMANAGED INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OF
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
99.11 COMMON STOCKS
33.19 BANKS
Banco Bilbao Vizcaya Argentaria
SA Registered Shrs 27,700 $ 415,558
Bank of New York 68,775 3,198,037
Chase Manhattan 44,900 2,068,206
City National 15,600 553,800
Egg PLC(a) 350,000 911,368
Fifth Third Bancorp 37,950 2,400,337
Firstar Corp 70,340 1,481,536
FleetBoston Financial 56,500 1,921,000
Morgan (JP) & Co 5,200 572,650
Northern Trust 26,100 1,698,131
Royal Bank of Canada 13,100 677,106
State Street 20,700 2,195,494
Toronto-Dominion Bank 53,200 1,293,425
Wells Fargo & Co 76,350 2,958,563
===============================================================================
22,345,211
5.30 CONSUMER FINANCE
American Express 55,250 2,879,906
Countrywide Credit Industries 22,700 688,094
===============================================================================
3,568,000
19.63 FINANCIAL
Associates First Capital Class A Shrs 78,700 1,755,994
Capital One Financial 58,900 2,628,412
Citigroup Inc 51,880 3,125,770
Fannie Mae 24,600 1,283,812
Freddie Mac 51,850 2,099,925
John Nuveen Class A Shrs 5,000 209,688
NOVA Corp(a) 22,100 617,419
Providian Financial 16,640 1,497,600
===============================================================================
13,218,620
19.06 INSURANCE
ACE Ltd 35,600 996,800
AFLAC Inc 44,200 2,030,438
American International Group 15,100 1,774,250
AXA Financial 21,900 744,600
Hartford Financial Services Group 37,100 2,075,281
John Hancock Financial Services(a) 72,200 1,710,237
Nationwide Financial Services Class A Shrs 25,900 851,463
Radian Group 31,800 1,645,650
St Paul Cos 29,300 999,863
===============================================================================
12,828,582
<PAGE>
SHARES OF
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
4.63 INSURANCE BROKERS
Marsh & McLennan 29,860 $3,118,504
================================================================================
11.39 INVESTMENT BANK/BROKER FIRM
Federated Investors Class B Shrs 17,600 617,100
Gallagher (Arthur J) & Co 20,000 840,000
Goldman Sachs Group 500 47,438
Lehman Brothers Holdings 2,100 198,581
Morgan Stanley Dean Witter & Co 21,000 1,748,250
Paine Webber Group 41,800 1,901,900
Price (T Rowe) Associates 5,000 212,500
Schwab (Charles) Corp 14,850 499,331
Waddell & Reed Financial
Class A Shrs 14,400 472,500
Class B Shrs 38,900 1,130,531
===============================================================================
7,668,131
3.39 RAILROADS
Kansas City Southern Industries 25,700 2,279,269
===============================================================================
2.52 SAVINGS & LOAN
Charter One Financial 73,800 1,697,400
===============================================================================
TOTAL COMMON STOCKS (Cost $64,234,945) 66,723,717
===============================================================================
0.89 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
6/30/2000 due 7/3/2000 at 6.400%, repurchased
at $602,321 (Collateralized by US Treasury
Inflationary Index Bonds, due 4/15/2028 at
3.625%, value $655,971) (Cost $602,000) $602,000 602,000
===============================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $64,836,945)
(Cost for Income Tax Purposes $66,401,439) $67,325,717
===============================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
FINANCIAL
SERVICES
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 64,836,945
================================================================================
At Value(a) $ 67,325,717
Cash 1,197
Foreign Currency (Cost $1,366) 1,412
Receivables:
Investment Securities Sold 220,780
Fund Shares Sold 493,822
Dividends and Interest 88,807
Prepaid Expenses and Other Assets 238
================================================================================
TOTAL ASSETS 68,131,973
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 860,882
Fund Shares Repurchased 369,594
Accrued Expenses and Other Payables 2,299
================================================================================
TOTAL LIABILITIES 1,232,775
================================================================================
NET ASSETS AT VALUE $ 66,899,198
================================================================================
NET ASSETS
Paid-in Capital(b) $ 66,505,038
Accumulated Undistributed Net Investment Income 196,261
Accumulated Undistributed Net Realized Loss on
Investment Securities and Foreign Currency Transactions (2,290,927)
Net Appreciation of Investment Securities and
Foreign Currency Transactions 2,488,826
================================================================================
NET ASSETS AT VALUE $ 66,899,198
================================================================================
Shares Outstanding 6,038,732
NET ASSET VALUE, Offering and Redemption Price per Share $ 11.08
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $602,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
FINANCIAL
SERVICES
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 272,951
Dividends from Affiliated Investment Companies 25,246
Interest 135,394
Foreign Taxes Withheld (2,161)
================================================================================
TOTAL INCOME 431,430
================================================================================
EXPENSES
Investment Advisory Fees 157,790
Transfer Agent Fees 2,500
Administrative Services Fees 60,753
Custodian Fees and Expenses 7,343
Directors' Fees and Expenses 2,406
Interest Expense 8,073
Professional Fees and Expenses 6,943
Registration Fees and Expenses 44
Reports to Shareholders 5,505
Other Expenses 372
================================================================================
TOTAL EXPENSES 251,729
Fees and Expenses Absorbed by Investment Adviser (430)
Fees and Expenses Paid Indirectly (7,284)
================================================================================
NET EXPENSES 244,015
================================================================================
NET INVESTMENT INCOME 187,415
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (2,413,449)
Foreign Currency Transactions (12,034)
================================================================================
Total Net Realized Loss (2,425,483)
================================================================================
Change in Net Appreciation of:
Investment Securities 2,421,224
Foreign Currency Transactions 21,620
================================================================================
Total Net Appreciation 2,442,844
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 17,361
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 204,776
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FINANCIAL SERVICES FUND
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED (Note 1)
OPERATIONS
Net Investment Income $ 187,415 $ 8,846
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency
Transactions (2,425,483) 134,556
Change in Net Appreciation of Investment
Securities and Foreign Currency
Transactions 2,442,844 45,982
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 204,776 189,384
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 115,604,633 14,141,157
Amounts Paid for Repurchases of Shares (58,089,144) (5,399,608)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 57,515,489 8,741,549
================================================================================
TOTAL INCREASE IN NET ASSETS 57,720,265 8,930,933
NET ASSETS
Initial Subscription -- 248,000
Beginning of Period 9,178,933 --
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
of $196,261 and $8,846, respectively) $66,899,198 $9,178,933
================================================================================
----------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription -- 24,800
Shares Sold 10,608,778 1,317,359
================================================================================
10,608,778 1,342,159
Shares Repurchased (5,396,957) (515,248)
================================================================================
NET INCREASE IN FUND SHARES 5,211,821 826,911
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund (the "Fund", presented herein), Health Sciences
Fund, High Yield Fund, Market Neutral Fund, Real Estate Opportunity 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 INVESCO Variable
Investment Funds, Inc. 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.
Investments in shares of investment companies are valued at the net asset value
of the respective mutual fund as calculated each day.
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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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 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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $89,795,804 and $31,919,382, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $3,418,183 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $2,493,905, resulting in net
appreciation of $924,278.
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.
<PAGE>
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the six months ended June 30, 2000.
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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, Financial Services Fund borrowed cash at a
weighted average rate ranging from 5.82%-6.74%. At June 30, 2000, there were no
such borrowings and/or lendings outstanding.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------------------------
2000 1999(a)
UNAUDITED
<S> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 11.10 $ 10.00
==================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.01
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.04) 1.09
==================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.02) 1.10
==================================================================================================
Net Asset Value--End of Period $ 11.08 $ 11.10
==================================================================================================
TOTAL RETURN(b) (0.18%)(c) 11.00%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 66,899 $ 9,179
Ratio of Expenses to Average Net Assets(d)(e) 0.58%(c) 1.39%(f)
Ratio of Net Investment Income to Average Net Assets(d) 0.44%(c) 0.67%(f)
Portfolio Turnover Rate 87%(c) 37%(c)
</TABLE>
(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 periods 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 six
months ended June 30, 2000 and the period ended December 31, 1999. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 0.59% and 2.48% (annualized), respectively, and
ratio of net investment income (loss) to average net assets would have been
0.43% and (0.42%)(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 (which
may include custodian fees).
(f) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S757 9184 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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 not 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
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 30.15%
--------------------------------------------
Since inception (5/97) 24.30%
--------------------------------------------
<PAGE>
Graph: VIF-HEALTH SCIENCES FUND
TOTAL RETURN SINCE INCEPTION 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 June 30, 2000.
VIF-HEALTH SCIENCES FUND
For the six-month period ended June 30, 2000, the value of your shares
rose 18.91%. This is comparable to the return of the S&P 500 Index, which fell
0.43% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
After a very strong first quarter, performance by health sciences stocks
was mixed in the second quarter. During the first half of the period, heightened
inflation and interest rate fears led investors to favor traditional
pharmaceutical companies for their predictable earnings growth and lower
valuations. Biotechnology shares, on the other hand, fell out of favor as rising
interest rates called into question their high valuations. But easing inflation
fears and new product launches sparked a renewed biotech rally in June that
gained fuel from euphoria over the mapping of the human genome -- an advance
that promises to accelerate discovery of new treatments for a variety of
diseases.
The fund handily outperformed the S&P 500 Index in the second quarter,
supported by sizable gains in many of our biotechnology shares. We took
advantage of the sell-off in high valuation shares early in the quarter to add
to our holdings in promising biotech companies. Our approach paid off, and many
of these companies surged to new highs in June. One standout was Genentech Inc.
The company's new blood thinner, TNKase, was recently approved by the U.S. Food
& Drug Administration, and promises to simplify the treatment of heart attacks.
Genentech Inc represents what we look for in our biotech exposure --
well-managed companies that are already profitable or have drugs in late-stage
trials.
While our traditional pharmaceutical exposure provided a haven from market
volatility early in the period, we took profits on a number of these positions
later in the period, scaling back our traditional drug exposure. This decision
reflects our concerns over regulatory uncertainty, a lack of new products in the
pipeline, and expiring patents on a number of blockbuster drugs. Nonetheless, a
select few pharmaceutical companies offer such strong earnings potential that
they remain cornerstones of the portfolio. For example, one of our largest
positions is Pfizer Inc, which just completed its merger with Warner-Lambert Co.
The combined company should deliver powerful synergies in research and
marketing.
Additionally, we also maintained a light weighting in the medical
equipment and health care services areas, due to our concerns over competitive
pressures and Medicare reform -- a hot issue that should receive even greater
publicity during this election year.
<PAGE>
FUND MANAGEMENT
VIF-Health Sciences Portfolio is managed by INVESCO Funds Group Senior
Vice President and Director of Research, John R. Schroer, a Chartered Financial
Analyst. He started 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 COMPOSITE IS AN UNMANAGED
INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
HEALTH SCIENCES FUND
71.00 COMMON STOCKS
1.09 BIOTECHNOLOGY
Vertex Pharmaceuticals(a) 15,100 $ 1,591,163
================================================================================
28.98 BIOTECHNOLOGY--HEALTH CARE
Abgenix Inc(a) 28,720 3,442,361
Affymetrix Inc(a) 5,500 908,187
Alexion Pharmaceuticals(a) 20,860 1,491,490
Amgen Inc(a) 58,000 4,074,500
Amylin Pharmaceuticals(a) 8,000 121,500
Biogen Inc(a) 34,700 2,238,150
Celgene Corp(a) 8,400 494,550
Cell Therapeutics(a) 20,200 618,625
Celltech Group PLC(a) 8,326 161,341
Collateral Therapeutics(a) 300 7,608
COR Therapeutics(a) 30,260 2,581,556
Creative BioMolecules(a) 32,640 456,960
Cubist Pharmaceuticals(a) 18,840 927,870
Genentech Inc(a) 34,710 5,970,120
Gilead Sciences(a) 15,400 1,095,325
IDEC Pharmaceuticals(a) 33,210 3,895,948
ILEX Oncology(a) 24,010 846,352
ImClone Systems(a) 29,060 2,221,274
Medarex Inc(a) 21,110 1,783,795
MedImmune Inc(a) 63,700 4,713,800
NPS Pharmaceuticals(a) 13,300 355,775
Protein Design Labs(a) 23,020 3,797,221
================================================================================
42,204,308
2.37 ELECTRONICS--INSTRUMENTS
Waters Corp(a) 27,600 3,444,825
================================================================================
34.70 HEALTH CARE DRUGS--PHARMACEUTICALS
Alkermes Inc(a) 27,780 1,309,132
Allergan Inc 34,310 2,556,095
ALZA Corp(a) 26,130 1,544,936
American Home Products 38,385 2,255,119
AmeriSource Health Class A Shrs(a) 33,100 1,026,100
AstraZeneca Group PLC Sponsored
ADR Representing Ord Shrs 140 6,510
Bristol-Myers Squibb 70,500 4,106,625
DUSA Pharmaceuticals(a) 22,000 649,000
Forest Laboratories(a) 37,230 3,760,230
Fujisawa Pharmaceutical Ltd 49,800 2,019,205
Glaxo Wellcome PLC Sponsored ADR
Representing 2 Ord Shrs 480 27,750
Human Genome Sciences(a) 22,780 3,038,283
Inhale Therapeutic Systems(a) 13,980 1,418,533
IVAX Corp 24,700 1,025,050
Johnson & Johnson 24,605 2,506,634
Lilly (Eli) & Co 31,200 3,116,100
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
Merck & Co 23,800 $ 1,823,675
Millennium Pharmaceuticals(a) 23,760 2,658,150
Pfizer Inc 113,876 5,466,048
Pharmacia Corp 24,870 1,285,468
QLT PhotoTherapeutics(a) 19,600 1,515,325
Schering AG 39,600 2,178,936
Schering-Plough Corp 47,000 2,373,500
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 415 27,053
Takeda Chemical Industries Ltd 11,390 749,250
Titan Pharmaceuticals(a) 29,010 1,247,430
Yamanouchi Pharmaceutical Ltd 15,330 838,908
================================================================================
50,529,045
0.77 HEALTH CARE-- SERVICES
Edward Lifesciences(a) 55,800 1,032,300
First Health Group(a) 2,400 78,750
Mediconsult.com Inc(a) 12,000 18,000
================================================================================
1,129,050
3.09 MEDICAL EQUIPMENT & DEVICES
Boston Scientific(a) 15,200 333,450
Guidant Corp(a) 7,400 366,300
Medtronic Inc 26,434 1,316,744
PE Corp-PE Biosystems Group 26,620 1,753,593
Pharmacopeia Inc(a) 8,000 371,000
Targeted Genetics(a) 24,214 360,184
================================================================================
4,501,271
TOTAL COMMON STOCKS (Cost $84,481,139) 103,399,662
================================================================================
29.00 SHORT-TERM INVESTMENTS
21.97 COMMERCIAL PAPER
8.17 CONSUMER FINANCE
American Express Credit, 6.750%, 7/5/2000 $6,900,000 6,900,000
Ford Motor Credit, 6.720%, 7/3/2000 $5,000,000 5,000,000
================================================================================
11,900,000
9.27 FINANCIAL
General Electric Capital Services,
6.750%, 7/7/2000 $6,900,000 6,900,000
Heller Financial, 6.900%, 7/5/2000 $6,600,000 6,600,000
================================================================================
13,500,000
4.53 INSURANCE
Prudential Funding, 6.700%, 7/3/2000 $6,600,000 6,600,000
================================================================================
TOTAL COMMERCIAL PAPER (Cost $32,000,000) 32,000,000
================================================================================
2.45 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund 6.489% (Cost $3,569,793) 3,569,793 3,569,793
================================================================================
4.58 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $6,667,554 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028, at 3.625%, value $7,210,597)
(Cost $6,664,000) $ 6,664,000 6,664,000
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost $42,233,793) $ 42,233,793
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $126,714,932)
(Cost for Income Tax Purposes $131,883,228) $145,633,455
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
HEALTH
SCIENCES
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $126,714,932
================================================================================
At Value(a) $145,633,455
Foreign Currency (Cost $10,140) 10,498
Receivables:
Investment Securities Sold 78,670
Fund Shares Sold 7,879,414
Dividends and Interest 33,682
Prepaid Expenses and Other Assets 8,007
================================================================================
TOTAL ASSETS 153,643,726
================================================================================
LIABILITIES
Payables:
Custodian 645
Investment Securities Purchased 5,140,091
Fund Shares Repurchased 3,316
Accrued Expenses and Other Payables 4,319
================================================================================
TOTAL LIABILITIES 5,148,371
================================================================================
NET ASSETS AT VALUE $148,495,355
================================================================================
NET ASSETS
Paid-in Capital(b) $139,783,233
Accumulated Undistributed Net Investment Income 323,413
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (10,530,052)
Net Appreciation of Investment Securities and Foreign
Currency Transactions 18,918,761
================================================================================
NET ASSETS AT VALUE $148,495,355
================================================================================
Shares Outstanding 7,794,305
NET ASSET VALUE, Offering and Redemption Price per Share $ 19.05
================================================================================
(a)Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $6,664,000.
(b)The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
HEALTH
SCIENCES
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 111,952
Dividends from Affiliated Investment Companies 69,793
Interest 505,101
Foreign Taxes Withheld (1,596)
================================================================================
TOTAL INCOME 685,250
================================================================================
EXPENSES
Investment Advisory Fees 250,672
Transfer Agent Fees 2,500
Administrative Services Fees 93,571
Custodian Fees and Expenses 14,463
Directors' Fees and Expenses 4,865
Interest Expenses 117
Professional Fees and Expenses 9,293
Registration Fees and Expenses 54
Reports to Shareholders 11,976
Other Expenses 517
================================================================================
TOTAL EXPENSES 388,028
Fees and Expenses Absorbed by Investment Adviser (302)
Fees and Expenses Paid Indirectly (14,114)
================================================================================
NET EXPENSES 373,612
================================================================================
NET INVESTMENT INCOME 311,638
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (10,649,317)
Foreign Currency Transactions (35,473)
================================================================================
Total Net Realized Loss (10,684,790)
================================================================================
Change in Net Appreciation of:
Investment Securities 17,882,074
Foreign Currency Transactions 127,700
================================================================================
Total Net Appreciation 18,009,774
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 7,324,984
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 7,636,622
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
HEALTH SCIENCES FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 311,638 $ 11,787
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency
Transactions (10,684,790) 169,272
Change in Net Appreciation of Investment
Securities and Foreign Currency
Transactions 18,009,774 505,246
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 7,636,622 686,305
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (5,893)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 181,790,233 19,779,104
Reinvestment of Distributions 0 5,893
================================================================================
181,790,233 19,784,997
Amounts Paid for Repurchases of Shares (52,583,023) (11,191,495)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 129,207,210 8,593,502
================================================================================
TOTAL INCREASE IN NET ASSETS 136,843,832 9,273,914
NET ASSETS
Beginning of Period 11,651,523 2,377,609
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income of
$323,413 and $11,775, respectively) $148,495,355 $ 11,651,523
================================================================================
----------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 10,202,346 1,318,340
Shares Issued from Reinvestment of Distributions 0 392
================================================================================
10,202,346 1,318,732
Shares Repurchased (3,135,391) (746,864)
================================================================================
NET INCREASE IN FUND SHARES 7,066,955 571,868
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund (the "Fund", presented
herein), High Yield Fund, Market Neutral Fund, Real Estate Opportunity 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. INVESCO
Variable Investment Funds, Inc. 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.
Investment in shares of investment companies are valued at net asset value of
the respective mutual fund as calculated each day.
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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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% 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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $141,338,407 and $56,956,405, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $15,437,179 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $1,686,952, resulting in net
appreciation of $13,750,227.
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.
<PAGE>
Pension expenses for the six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $35. Unfunded accrued
pension costs of $0 and pension liability of $94 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 the 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 --INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 16.02 $ 15.29 $ 11.04 $ 10.00
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income 0.03 0.02 0.05 0.10
Net Gains on Securities (Both Realized and Unrealized) 3.00 0.72 4.66 0.94
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 3.03 0.74 4.71 1.04
===========================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.01 0.03 0.00
Distributions from Capital Gains 0.00 0.00 0.34 0.00
In Excess of Net Realized Gains 0.00 0.00 0.09 0.00
===========================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.01 0.46 0.00
===========================================================================================================================
Net Asset Value-- End of Period $ 19.05 $ 16.02 $ 15.29 $ 11.04
===========================================================================================================================
TOTAL RETURN(c) 18.91%(d) 4.86% 42.85% 10.40%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 148,495 $ 11,652 $ 2,378 $ 423
Ratio of Expenses to Average Net Assets(e)(f) 0.58%(d) 1.48% 1.27% 0.60%(g)
Ratio of Net Investment Income to Average Net Assets(e) 0.46%(d) 0.36% 0.35% 2.34%(g)
Portfolio Turnover Rate 111%(d) 173% 107% 112%(d)
</TABLE>
(a) From May 22, 1997, commencement of investment operations, through December,
31 1997.
(b) The per share information was computed based on average shares for the
period ended 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 periods shown.
(d) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
<PAGE>
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000, 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 0.58%,
2.85%, 4.20% and 21.45% (annualized), respectively, and ratio of net
investment income (loss) to average net assets would have been 0.46%,
(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 (which
may include custodian fees).
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.com
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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 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
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 1.50%
--------------------------------------------
5 years 10.24%
--------------------------------------------
Since inception (5/94) 10.14%
--------------------------------------------
<PAGE>
Graph: VIF-High Yield Fund Total Return Since Inception
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 June 30, 2000.
VIF-HIGH YIELD FUND
For the six-month period ended June 30, 2000, the value of your shares
fell 1.30%. This is comparable to the return of the Merrill High Yield Master
Index, which fell 1.19% during the same period. (Of course, past performance is
not a guarantee of future results.)(1),(2)
During the first half of the second quarter, high-yield funds struggled
against depressed technical conditions and increased credit concerns that
spanned industries. During the final week of May, however, the market bounced
back somewhat in line with Treasury and equity markets. This rally across the
capital markets was sparked by speculation that the Federal Reserve's credit
tightening campaign may be nearing an end. While fund flows improved, issuance
of new bonds also picked up. The risk is that this increased supply could
eventually offset the increased liquidity, short-circuiting the rally.
The fund continued to focus on higher-quality telecommunications and zero
coupon bonds that offer liquidity. While these high-risk issues were vulnerable
to poor market conditions this spring, prices improved in June as the overall
market rallied. The fund remains overweighted in these securities, and
consequently outperformed its competitive universe.
Our issue-specific, credit-intensive approach helped us avoid many of the
credit risk experiences (i.e., defaults and credit quality decline) that have
plagued the high yield market over the past few years. It has also provided us
with the foresight to recognize potential "big bang" positive events that may
lead to significant credit improvement and increased valuations.
Going forward, we will remain focused on credit risk analysis and our
themes of energy, gaming, broadcasting, communications, cyclically vulnerable
companies emerging from financial distress, electric utilities deregulation and
special situations. We remain confident that this approach will drive
performance throughout 2000.
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 Funds Group, 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 MASTER INDEX IS AN UNMANAGED INDEX INDICATIVE
OF THE HIGH-YIELD MARKET. THE NASDAQ COMPOSITE IS AN UNMANAGED INDEX OF STOCKS
TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HIGH YIELD FUND
87.54 FIXED INCOME SECURITIES
10.13 BROADCASTING
Chancellor Media of Los Angeles
Gtd Sr Sub Notes
9.000%, 10/1/2008 $1,200,000 $1,236,000
8.000%, 11/1/2008 $ 529,000 532,306
Sr Sub Notes, Series B, 8.125%, 12/15/2007 $ 750,000 754,687
LIN Holdings, Sr Discount Step-Up Notes
Zero Coupon(a), 3/1/2008 $ 950,000 624,625
LIN Television, Gtd Sr Sub Notes, 8.375%, 3/1/2008 $ 500,000 455,000
Sinclair Broadcast Group, Sr Sub Notes
10.000%, 9/30/2005 $ 500,000 477,500
Spectrasite Holdings, Sr Discount Step-Up Notes
Series B, Zero Coupon(a), 3/15/2010 $ 750,000 408,750
TV Guide, Gtd Sr Sub Notes, 8.125%, 3/1/2009 $1,250,000 1,246,875
Young Broadcasting, Gtd Sr Sub Notes, Series B
9.000%, 1/15/2006 $ 500,000 470,000
===============================================================================================
6,205,743
3.12 CABLE
Charter Communications Holdings LLC/Charter
Communications Holdings Capital, Sr Discount
Step-Up Notes, Zero Coupon(a), 4/1/2011 $1,000,000 567,500
NTL Inc
Conv Sub Notes(b), 5.750%, 12/15/2009 $ 450,000 353,250
Sr Deferred Step-Up Notes, Zero Coupon(a), 4/1/2008 $ 500,000 312,500
Renaissance Media Group LLC/Renaissance Media
Capital, Gtd Sr Discount Step-Up Notes
Zero Coupon(a), 4/15/2008 $1,000,000 680,000
===============================================================================================
1,913,250
1.74 CHEMICALS
Huntsman Corp, Sr Sub Notes(b), 9.500%, 7/1/2007 $ 500,000 455,000
Huntsman Polymers, Sr Notes, 11.750%, 12/1/2004 $ 600,000 609,000
===============================================================================================
1,064,000
4.60 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
Alliant Energy Resources, Sr Step-Up Notes(a),
PAY PHONE(e) 7.250%, 2/15/2030 3,500 240,625
IPC Information Systems, Sr Discount Step-Up Notes
Zero Coupon(a), 5/1/2008 $1,000,000 900,000
Metromedia Fiber Network, Sr Notes, Series B
10.000%, 11/15/2008 $1,250,000 1,231,250
World Access, Sr Notes, Series B, 13.250%, 1/15/2008 $ 500,000 445,625
===============================================================================================
2,817,500
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
2.54 COMPUTER RELATED
PSINet Inc
Sr Notes, 11.000%, 8/1/2009 $ 500,000 $ 462,500
Sr Notes(b), 10.500%, 12/1/2006 $1,000,000 920,000
WAM!NET, Gtd Sr Discount Step-Up Notes, Series B
Zero Coupon(a), 3/1/2005 $ 300,000 168,375
===============================================================================================
1,550,875
5.72 ELECTRIC UTILITIES
El Paso Electric, 1st Mortage, Series D,
8.900%, 2/1/2006 $ 800,000 825,122
Niagara Mohawk Power
1st Mortgage, 8.750%, 4/1/2022 $ 787,000 794,968
Sr Discount Step-Up Notes, Series H,
Zero Coupon(a), 7/1/2010 $ 500,000 383,820
Texas Utilities, 1st Mortgage & Collateral
Trust, 8.750%, 11/1/2023 $ 250,000 249,434
TXU Electric Capital, Gtd Capital
Securities, 8.175%, 1/30/2037 $1,250,000 1,248,291
===============================================================================================
3,501,635
0.33 ELECTRICAL EQUIPMENT
Alpine Group, Gtd Sr Secured Notes,
Series B, 12.250%, 7/15/2003 $ 200,000 204,000
===============================================================================================
0.27 ENGINEERING & CONSTRUCTION
Ryland Group, Sr Sub Notes, 8.250%, 4/1/2008 $ 200,000 165,000
===============================================================================================
1.15 ENTERTAINMENT
SFX Entertainment, Gtd Sr Sub Notes
9.125%, 12/1/2008 $ 250,000 251,250
Series B, 9.125%, 2/1/2008 $ 450,000 452,250
===============================================================================================
703,500
3.26 FINANCIAL
Madison River Capital LLC/Madison River Finance
Sr Notes(b), 13.250%, 3/1/2010 $1,000,000 900,000
Primark Corp, Sr Sub Notes, 9.250%, 12/15/2008 $1,000,000 1,100,000
===============================================================================================
2,000,000
2.62 GAMING
Aztar Corp, Sr Sub Notes, 8.875%, 5/15/2007 $ 650,000 612,625
Isle of Capri Casinos, Gtd Sr Sub Notes,
8.750%, 4/15/2009 $ 750,000 693,750
Station Casinos, Sr Sub Notes,
9.750%, 4/15/2007 $ 300,000 300,000
===============================================================================================
1,606,375
0.90 HEALTH CARE RELATED
PharMerica Inc, Gtd Sr Sub Notes, 8.375%, 4/1/2008 $1,000,000 550,000
===============================================================================================
0.20 HOUSEHOLD PRODUCTS
Home Products International, Gtd Sr Sub Notes,
9.625%, 5/15/2008 $ 150,000 123,000
===============================================================================================
0.71 IRON & STEEL
Inland Steel, 1st Mortgage, Series R,
7.900%, 1/15/2007 $ 488,000 434,320
===============================================================================================
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
0.39 METALS MINING
Bulong Operations Property Ltd, Sr Secured Notes
12.500%, 12/15/2008(c) AS $ 500,000 $ 238,750
===============================================================================================
4.04 OIL & GAS RELATED
Canadian Forest Oil Ltd, Gtd Sr Sub Notes
8.750%, 9/15/2007 CA $ 650,000 611,000
Coda Energy, Gtd Sr Sub Notes, Series B
10.500%, 4/1/2006 $ 200,000 201,250
Gulfmark Offshore, Gtd Sr Notes, 8.750%, 6/1/2008 $ 750,000 695,625
Houston Exploration, Sr Sub Notes, Series B
8.625%, 1/1/2008 $ 500,000 465,000
Snyder Oil, Sr Sub Notes, 8.750%, 6/15/2007 $ 500,000 502,500
===============================================================================================
2,475,375
1.79 PAPER & FOREST PRODUCTS
Bear Island Paper LLC/Bear Island Finance II, Sr Secured
Notes, Series B, 10.000%, 12/1/2007 $ 750,000 656,250
Riverwood International, Gtd Sr Sub Notes
10.875%, 4/1/2008 $ 500,000 440,000
===============================================================================================
1,096,250
0.40 PERSONAL CARE
Revlon Consumer Products, Sr Notes, 8.125%, 2/1/2006 $ 350,000 248,500
===============================================================================================
3.61 SERVICES
Heritage Media, Sr Sub Notes, 8.750%, 2/15/2006 $ 500,000 490,000
NationsRent Inc, Gtd Sr Sub Notes, 10.375%, 12/15/2008 $ 625,000 400,000
United Rentals, Gtd Sr Sub Notes, Series B
9.000%, 4/1/2009 $ 750,000 663,750
8.800%, 8/15/2008 $ 750,000 660,000
===============================================================================================
2,213,750
0.11 SHIPPING
TBS Shipping International Ltd, 1st Pfd Shipping
Mortgage Notes(c), 10.000%, 5/1/2005 BD $ 250,000 67,813
===============================================================================================
1.09 SPECIALTY PRINTING
MDC Communications, Sr Sub Notes, 10.500%, 12/1/2006 CA $ 500,000 480,000
World Color Press, Sr Sub Notes, 7.750%, 2/15/2009 $ 200,000 185,164
===============================================================================================
665,164
4.18 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Esat Holdings Ltd, Sr Deferred Step-Up Notes,
Series B Zero Coupon(a), 2/1/2007 IE $2,150,000 2,031,750
Rogers Cantel, Sr Deb
9.750%, 6/1/2016 CA $ 250,000 269,375
9.375%, 6/1/2008 CA $ 250,000 257,500
===============================================================================================
2,558,625
12.97 TELECOMMUNICATIONS--LONG DISTANCE
Allegiance Telecom, Sr Discount Step-Up Notes
Series B, Zero Coupon(a), 2/15/2008 $ 850,000 616,250
Call-Net Enterprises, Sr Discount Step-Up Notes
Zero Coupon(a), 5/15/2009 CA $1,000,000 360,000
ESAT Telecom Group PLC, Sr Notes, Series B
11.875%, 12/1/2008 IE $ 500,000 588,750
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
Esprit Telecom Group PLC, Sr Notes,
11.500%, 12/15/2007 UK $ 750,000 $ 532,500
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 BD $ 200,000 $ 194,000
Level 3 Communications
Sr Discount Step-Up Notes, Zero
Coupon(a), 12/1/2008 $4,800,000 2,916,000
Sr Notes, 9.125%, 5/1/2008 $ 500,000 448,750
Primus Telecommunications Group, Sr Notes
Series B, 9.875%, 5/15/2008 $ 500,000 375,000
Qwest Communications International
Sr Discount Step-Up Notes, Series B, Zero Coupon(a)
10/15/2007 $ 900,000 756,011
2/1/2008 $ 250,000 197,240
Statec Global Communications, Sr Notes
12.000%, 5/15/2008 $ 150,000 120,000
Viatel Inc, Sr Dollar Notes, 11.500%, 3/15/2009 $ 500,000 380,000
===============================================================================================
7,944,851
20.31 TELEPHONE
Covad Communications Group, Sr Notes(b), Series B
12.000%, 2/15/2010 $ 500,000 390,000
Diamond Cable Communications PLC, Sr Discount
Step-Up Notes, Zero Coupon(a)
12/15/2005 UK $ 500,000 474,375
2/15/2007 UK $ 900,000 686,250
Focal Communications, Sr Discount Step-Up Notes
Zero Coupon(a), 2/15/2008 $ 500,000 337,500
Intermedia Communications, Sr Discount Step-Up Notes
Series B, Zero Coupon(a), 3/1/2009 $1,250,000 753,125
McLeodUSA Inc
Sr Discount Step-Up Notes, Zero Coupon(a), 3/1/2007 $ 500,000 410,000
Sr Notes, 8.125%, 2/15/2009 $ 500,000 451,250
MetroNet Communications
Sr Discount Step-Up Notes, Zero Coupon(a)
11/1/2007 CA $ 250,000 219,576
6/15/2008 CA $2,900,000 2,357,572
Netia Holdings BV, Gtd Sr Discount Step-Up Notes
Series B, Zero Coupon(a), 11/1/2007 NL $ 525,000 349,125
NEXTLINK Communications
Sr Discount Step-Up Notes, Zero Coupon(a), 4/15/2008 $1,000,000 610,000
Sr Notes
10.750%, 11/15/2008 $ 500,000 492,500
9.625%, 10/1/2007 $ 250,000 235,625
NEXTLINK Communications LLC/NEXTLINK Capital
Sr Notes, 12.500%, 4/15/2006 $1,000,000 1,045,000
NorthPoint Communications Group, Sr Notes(b)
12.875%, 2/15/2010 $ 500,000 360,000
RCN Corp
Sr Discount Step-Up Notes, Series B
Zero Coupon(a), 2/15/2008 $1,000,000 570,000
Sr Notes, 10.125%, 1/15/2010 $ 500,000 416,250
Time Warner Telecommunications, Sr Notes,
9.750%, 7/15/2008 $1,000,000 967,500
United Pan-Europe Communinations NV
Sr Discount Step-Up Notes, Zero Coupon(a),
8/1/2009 NL $1,250,000 628,125
Sr Discount Step-Up Notes(b), Zero Coupon(a),
2/1/2010 NL $ 500,000 235,000
Sr Notes(b), 10.875%, 11/1/2007 NL $ 500,000 450,000
===============================================================================================
12,438,773
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
1.36 TEXTILE--APPAREL MANUFACTURING
WestPoint Stevens, Sr Notes, 7.875%, 6/15/2005 $1,000,000 $ 835,000
===============================================================================================
TOTAL FIXED INCOME SECURITIES (Cost $58,534,900) 53,622,049
===============================================================================================
10.64 PREFERRED STOCKS & WARRANTS
0.60 BROADCASTING
Granite Broadcasting, Exchangeable Pfd(d), 12.750% 425 365,500
===============================================================================================
0.02 COMPUTER RELATED
PSINet Inc, Conv Pfd, 7.000%(b) 5,000 169,375
Wam!Net Warrants (Exp 2005) 900 9,900
===============================================================================================
179,275
0.49 PUBLISHING
PRIMEDIA Inc, Exchangeable Pfd, Series H Shrs, 8.625% 3,500 301,000
===============================================================================================
2.07 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Nextel Communications, Exchangeable Pfd(d)
Series E Shrs, 11.125% 1,307 1,267,790
===============================================================================================
6.54 TELECOMMUNICATIONS--LONG DISTANCE
Global Crossing Holdings Ltd, Sr Exchangeable
Pfd(d), 10.500% BD 16,500 1,592,250
Global Crossing Ltd, Conv Pfd, 6.750% BD 1,000 222,375
IXC Communications, Jr Exchangeable Pfd(d),
Series B Shrs, 12.500% 2,000 2,020,000
Startec Global Communications Warrants(b) (Exp2005) 150 525
===============================================================================================
3,835,150
0.93 TELEPHONE
Intermedia Communications, Pfd(d),
Series B Shrs, 13.500% 591 570,315
===============================================================================================
TOTAL PREFERRED STOCKS & WARRANTS (COST $6,979,348) 6,519,030
===============================================================================================
0.36 OTHER SECURITIES
0.36 BROADCASTING
XMSatellite Radio, Units(b)(Each unit consists of one
$1,000,000 Face Amount Secured Note, Zero Coupon,
3/15/2010 and one wrnt to purchase 8.0248 shrs
of cmn stk) (Cost $250,000) 250,000 220,000
===============================================================================================
1.46 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
6/30/2000 due 7/3/2000 at 6.400%, repurchased
at $896,478 (Collateralized by US Treasury
Inflationary Index Bonds due 4/15/2028 at
3.625%, value $1,093,285) (Cost $896,000) $ 896,000 896,000
===============================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $66,660,248)
(Cost for Income Tax Purposes $66,664,024) $61,257,079
===============================================================================================
</TABLE>
(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.
<PAGE>
(b) Securities are aquired 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 cummulative interest
payments of $31,250 and $12,500 at June 30, 2000.
(d) Security is a payment-in-kind (PIK). PIK securities make interest payments
in additional securities.
(e) PAY PHONES-- Premium Accelerated Yield Participating Hybrid Option Note
Exchangeable Securities.
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
--------------------------------------------------------------------------------
Australia AS 0.39% $ 238,750
Bermuda BD 3.39 2,076,438
Canada CA 7.44 4,555,023
Ireland IE 4.28 2,620,500
Netherlands NL 2.71 1,662,250
United Kingdom UK 2.76 1,693,125
United States US 79.03 48,410,993
================================================================================
100.00% $61,257,079
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
HIGH
YIELD
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 66,660,248
================================================================================
At Value(a) $ 61,257,079
Cash 266
Receivables:
Investment Securities Sold 504,425
Fund Shares Sold 118,263
Dividends and Interest 960,658
Prepaid Expenses and Other Assets 3,548
================================================================================
TOTAL ASSETS 62,844,239
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 405,305
Fund Shares Repurchased 170,772
Accrued Expenses and Other Payables 10,411
================================================================================
TOTAL LIABILITIES 586,488
================================================================================
NET ASSETS AT VALUE $ 62,257,751
================================================================================
NET ASSETS
Paid-in Capital(b) $ 66,179,135
Accumulated Undistributed Net Investment Income 3,249,304
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (1,767,519)
Net Depreciation of Investment Securities and Foreign
Currency Transactions (5,403,169)
================================================================================
NET ASSETS AT VALUE $ 62,257,751
================================================================================
Shares Outstanding 5,482,892
NET ASSET VALUE, Offering and Redemption Price per Share $ 11.35
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $896,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
HIGH
YIELD
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 324,846
Interest 2,745,390
================================================================================
TOTAL INCOME 3,070,236
================================================================================
EXPENSES
Investment Advisory Fees 171,606
Transfer Agent Fees 2,500
Administrative Services Fees 80,796
Custodian Fees and Expenses 6,274
Directors' Fees and Expenses 5,415
Interest Expense 558
Professional Fees and Expenses 9,279
Registration Fees and Expenses 107
Reports to Shareholders 21,082
Other Expenses 7,702
================================================================================
TOTAL EXPENSES 305,319
Fees and Expenses Paid Indirectly (6,224)
================================================================================
NET EXPENSES 299,095
================================================================================
NET INVESTMENT INCOME 2,771,141
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (463,595)
Foreign Currency Transactions (4,544)
================================================================================
Total Net Realized Loss (468,139)
================================================================================
Change in Net Depreciation of Investment Securities
and Foreign Currency Transactions (2,999,061)
================================================================================
NET LOSS ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS (3,467,200)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (696,059)
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
HIGH YIELD FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 2,771,141 $ 4,321,956
Net Realized Loss on Investment Securities
and Foreign Currency Transactions (468,139) (925,346)
Change in Net Appreciation (Depreciation)
of Investment Securities and
Foreign Currency Transactions (2,999,061) 716,141
================================================================================
NET INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS (696,059) 4,112,751
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (3,850,861)
In Excess of Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (4,126)
================================================================================
TOTAL DISTRIBUTIONS 0 (3,854,987)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 18,973,024 42,185,089
Reinvestment of Distributions 0 3,854,987
================================================================================
18,973,024 46,040,076
Amounts Paid for Repurchases of Shares (14,397,819) (29,944,825)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 4,575,205 16,095,251
================================================================================
TOTAL INCREASE IN NET ASSETS 3,879,146 16,353,015
NET ASSETS
Beginning of Period 58,378,605 42,025,590
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $3,249,304 and
$478,163, respectively) $62,257,751 $ 58,378,605
================================================================================
--------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 1,680,129 3,541,193
Shares Issued from Reinvestment of Distributions 0 339,049
================================================================================
1,680,129 3,880,242
Shares Repurchased (1,270,455) (2,522,474)
================================================================================
NET INCREASE IN FUND SHARES 409,674 1,357,768
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund (the
"Fund", presented herein), Market Neutral Fund, Real Estate Opportunity 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. INVESCO Variable Investment Funds,
Inc. 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.
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.
Investments in shares of investment companies are valued at net asset value of
the respective mutual fund as calculated each day.
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. 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 cost of foreign securities is translated into U.S.
dollars at the rates of exchange prevailing when such securities are acquired.
The Fund may invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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 and deferred post-October 31 losses, 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. Dividends 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.
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 0.60% 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.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $43,864,925 and $35,063,675 respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $276,161 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $5,653,106 resulting in net
depreciation of $5,376,945.
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 six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $436. Unfunded accrued
pension costs of $0 and pension liability of $2,044 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30 YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $11.51 $11.31 $12.46 $11.78 $11.04 $10.01
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50 0.93 0.97 0.78 0.72 0.55
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.66) 0.11 (0.80) 1.26 1.11 1.43
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.16) 1.04 0.17 2.04 1.83 1.98
===========================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.84 0.98 0.78 0.71 0.55
Distributions from Capital Gains(a) 0.00 0.00 0.23 0.58 0.38 0.40
In Excess of Capital Gains 0.00 0.00 0.11 0.00 0.00 0.00
===========================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.84 1.32 1.36 1.09 0.95
===========================================================================================================================
Net Asset Value--End of Period $11.35 $11.51 $11.31 $12.46 $11.78 $11.04
===========================================================================================================================
TOTAL RETURN(b) (1.30%)(c) 9.20% 1.42% 17.33% 16.59% 19.76%
RATIOS
Net Assets--End of Period ($000 Omitted) $62,258 $58,379 $42,026 $30,881 $14,033 $5,233
Ratio of Expenses to Average Net Assets(d)(e) 0.53%(c) 1.05% 0.85% 0.83% 0.87% 0.97%
Ratio of Net Investment Income
to Average Net Assets(d) 4.82%(c) 8.81% 8.99% 8.67% 9.19% 8.79%
Portfolio Turnover Rate 64%(c) 143% 245% 344% 380% 310%
</TABLE>
(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 periods 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 years
ended December 31, 1997, 1996 and 1995. If such expenses had not been
voluntarily absorbed, 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 assets would have been 8.56%, 8.74% and 7.05%,
respectively.
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S93 9192 8/00
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.
S12 9185 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph above right illustrates, for the period from inception
through 6/30/00, 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
CUMULATIVE TOTAL RETURN
AS OF 6/30/00 (1)
Since inception (11/99) 2.10%
--------------------------------------
<PAGE>
Graph: VIF-MARKET NEUTRAL FUND
TOTAL RETURN SINCE INCEPTION VS 90-DAY TREASURY BILL
AND S&P 500 INDEX
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 90-Day Treasury Bill and 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 (11/99) through June 30, 2000.
VIF-MARKET NEUTRAL FUND
For the six-month period ended June 30, 2000, the value of your shares
fell 0.78%. This is comparable to the return of the 90-day Treasury bill, which
rose 2.84% during 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 fund seeks to meet its
objective through its return spread between the long and the short portfolios
and 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%
annually before fees, while maintaining a tracking error of less than 5%.
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 COMPOSITE IS AN UNMANAGED
INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
MARKET NEUTRAL FUND
98.12 LONG POSITIONS
75.45 COMMON STOCKS(a)
1.82 AEROSPACE & DEFENSE
Boeing Co 900 $ 37,631
Northrop Grumman 900 59,625
United Technologies 1,500 88,313
================================================================================
185,569
0.79 AIRLINES
Delta Air Lines 1,600 80,900
================================================================================
0.75 AUTO PARTS
Cummins Engine 1,500 40,875
Johnson Controls 700 35,919
================================================================================
76,794
1.87 AUTOMOBILES
Ford Motor 2,000 86,000
General Motors 1,800 104,512
================================================================================
190,512
7.27 BANKS
BB&T Corp 1,300 31,037
Fifth Third Bancorp 1,000 63,250
FleetBoston Financial 4,000 136,000
Mellon Financial 3,500 127,531
Morgan (JP) & Co 1,200 132,150
PNC Financial Services Group 2,200 103,125
SouthTrust Corp 1,400 31,675
State Street 1,100 116,669
================================================================================
741,437
0.44 BEVERAGES
Anheuser-Busch Cos 600 44,812
================================================================================
0.35 BUILDING MATERIALS
Sherwin-Williams Co 1,700 36,019
================================================================================
0.87 CABLE
Comcast Corp Class A Shrs(b) 2,200 89,100
================================================================================
1.15 CHEMICALS
Dow Chemical 2,700 81,506
PPG Industries 800 35,450
================================================================================
116,956
1.90 COMMUNICATIONS--EQUIPMENT & MANUFACTURING
ADC Telecommunications(b) 1,000 83,875
Comverse Technology(b) 700 65,100
Scientific-Atlanta Inc 600 44,700
================================================================================
193,675
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
5.94 COMPUTER RELATED
Adobe Systems 400 $ 52,000
Apple Computer(b) 400 20,950
Cisco Systems(b) 1,900 120,769
EMC Corp(b) 1,100 84,631
Hewlett-Packard Co 500 62,437
Microsoft Corp(b) 600 48,000
Oracle Corp(b) 700 58,844
Rational Software(b) 400 37,175
Siebel Systems(b) 300 49,069
Sun Microsystems(b) 800 72,750
================================================================================
606,625
0.25 CONGLOMERATES
Fortune Brands 1,100 25,369
================================================================================
0.46 CONSUMER FINANCE
American Express 900 46,912
================================================================================
0.37 CONTAINERS
Temple-Inland Inc 900 37,800
================================================================================
2.45 ELECTRICAL EQUIPMENT
General Electric 2,900 153,700
Rockwell International 1,700 53,550
Sanmina Corp(b) 500 42,750
================================================================================
250,000
4.13 ELECTRONICS--SEMICONDUCTOR
Altera Corp(b) 800 81,550
Analog Devices(b) 900 68,400
Linear Technology 1,300 83,119
LSI Logic(b) 1,100 59,538
Maxim Integrated Products(b) 800 54,350
Xilinx Inc(b) 900 74,306
================================================================================
421,263
1.76 EQUIPMENT--SEMICONDUCTOR
Applied Materials(b) 1,100 99,688
KLA-Tencor Corp(b) 600 35,137
Novellus Systems(b) 800 45,250
================================================================================
180,075
2.59 FINANCIAL
Ambac Financial Group 1,100 60,294
Fannie Mae 1,300 67,844
Freddie Mac 1,500 60,750
MBNA Corp 2,800 75,950
================================================================================
264,838
0.61 FOODS
Sara Lee 1,900 36,694
SYSCO Corp 600 25,275
================================================================================
61,969
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.86 HEALTH CARE DRUGS--PHARMACEUTICALS
Allergan Inc 300 $ 22,350
Forest Laboratories(b) 400 40,400
Schering-Plough Corp 500 25,250
================================================================================
88,000
3.17 HEALTH CARE RELATED
Bard (CR) Inc 700 33,687
Bausch & Lomb 600 46,425
Biomet Inc 800 30,750
HCA-Healthcare Corp 1,600 48,600
UnitedHealth Group 1,400 120,050
Wellpoint Health Networks(b) 600 43,463
================================================================================
322,975
0.50 HOUSEHOLD FURNITURE & APPLIANCES
Whirlpool Corp 1,100 51,288
================================================================================
1.06 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 1,800 107,775
================================================================================
3.77 INSURANCE
AFLAC Inc 900 41,344
American General 1,000 61,000
AXA Financial 2,700 91,800
Jefferson-Pilot Corp 1,500 84,656
Lincoln National 800 28,900
MGIC Investment 1,700 77,350
================================================================================
385,050
0.41 INSURANCE BROKERS
Marsh & McLennan 400 41,775
================================================================================
4.08 INVESTMENT BANK/BROKER FIRM
Donaldson Lufkin & Jenrette 1,500 63,656
Lehman Brothers Holdings 1,300 122,931
Morgan Stanley Dean Witter & Co 1,500 124,875
Paine Webber Group 2,300 104,650
================================================================================
416,112
0.35 IRON & STEEL
USX-US Steel Group 1,900 35,269
================================================================================
0.98 MACHINERY
Cooper Industries 1,100 35,819
Ingersoll-Rand Co 1,600 64,400
================================================================================
100,219
2.27 MANUFACTURING
Corning Inc 200 53,975
Minnesota Mining & Manufacturing 1,200 99,000
Parker-Hannifin Corp 700 23,975
Textron Inc 1,000 54,313
================================================================================
231,263
0.32 METALS MINING
Inco Ltd(b) 2,100 32,288
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.27 OFFICE EQUIPMENT & SUPPLIES
Pitney Bowes 700 $ 28,000
================================================================================
5.93 OIL & GAS RELATED
Amerada Hess 700 43,225
BJ Services(b) 1,300 81,250
Chevron Corp 300 25,444
Cooper Cameron(b) 400 26,400
ENSCO International 2,000 71,625
Exxon Mobil 200 15,700
Kerr-McGee Corp 1,100 64,831
Noble Drilling(b) 1,900 78,256
R&B Falcon(b) 900 21,206
Smith International(b) 1,000 72,812
Tidewater Inc 700 25,200
Tosco Corp 1,100 31,144
USX-Marathon Group 1,900 47,619
================================================================================
604,712
2.42 PAPER & FOREST PRODUCTS
Boise Cascade 1,300 33,637
Georgia-Pacific Group 3,000 78,750
Kimberly-Clark Corp 1,600 91,800
Weyerhaeuser Co 1,000 43,000
================================================================================
247,187
0.58 PHOTOGRAPHY & IMAGING
Eastman Kodak 1,000 59,500
================================================================================
1.46 PUBLISHING
Donnelley (RR) & Sons 1,500 33,844
Gannett Co 1,300 77,756
Knight Ridder 700 37,231
================================================================================
148,831
1.13 RAILROADS
Kansas City Southern Industries 500 44,344
Union Pacific 1,900 70,656
================================================================================
115,000
0.31 RESTAURANTS
Wendy's International 1,800 32,063
================================================================================
4.17 RETAIL
Bed Bath & Beyond(b) 1,000 36,250
Federated Department Stores(b) 1,000 33,750
Gap Inc 1,000 31,250
Home Depot 1,100 54,931
Intimate Brands 1,500 29,625
Limited Inc 1,300 28,112
May Department Stores 500 12,000
Sears Roebuck & Co 1,600 52,200
Target Corp 500 29,000
TJX Cos 1,700 31,875
Wal-Mart Stores 1,500 86,438
================================================================================
425,431
1.48 SAVINGS & LOAN
Golden West Financial 3,700 151,006
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
2.64 SERVICES
First Data 1,000 $ 49,625
Fiserv Inc(b) 1,100 47,575
Interpublic Group 900 38,700
Omnicom Group 600 53,437
Paychex Inc 1,900 79,800
================================================================================
269,137
0.29 TELEPHONE
BellSouth Corp 700 29,837
================================================================================
0.79 TOBACCO
Philip Morris 2,800 74,375
UST Inc 400 5,875
================================================================================
80,250
0.41 TOYS
Hasbro Inc 2,800 42,175
================================================================================
0.03 TRUCKS & PARTS
Visteon Corp 261 3,165
================================================================================
TOTAL COMMON STOCKS (Cost $7,376,561) 7,698,933
================================================================================
22.67 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $2,314,234 (Collateralized
by US Treasury Notes, due 8/31/2001 at
5.500%, value $2,360,904)(Cost $2,313,000) $2,313,000 2,313,000
================================================================================
TOTAL LONG POSITIONS (Cost $9,689,561) 10,011,933
================================================================================
(73.91) COMMON STOCKS--SHORT POSITIONS
(1.05) AEROSPACE & DEFENSE
Honeywell International (1,500) (50,531)
Lockheed Martin (2,300) (57,069)
================================================================================
(107,600)
(0.67) AIR FREIGHT
FedEx Corp(b) (1,800) (68,400)
================================================================================
(0.65) AIRLINES
AMR Corp(b) (1,000) (26,437)
Northwest Airlines(b) (1,300) (39,569)
================================================================================
(66,006)
(0.28) ALUMINUM
Alcoa Inc (1,000) (29,000)
================================================================================
(1.41) AUTO PARTS
AutoZone Inc(b) (1,400) (30,800)
Dana Corp (1,600) (33,900)
Goodyear Tire & Rubber (2,000) (40,000)
TRW Inc (900) (39,038)
================================================================================
(143,738)
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
(0.38) AUTOMOBILES
Harley-Davidson Inc (1,000) $ (38,500)
================================================================================
(7.56) BANKS
AmSouth Bancorp (2,000) (31,500)
Bank of America (1,700) (73,100)
Bank of New York (3,400) (158,100)
Bank One (1,700) (45,156)
First Union (1,100) (27,294)
KeyCorp (3,100) (54,637)
SunTrust Banks (800) (36,550)
Union Planters (1,200) (33,525)
US Bancorp (4,800) (92,400)
Wachovia Corp (1,200) (65,100)
Wells Fargo & Co (2,900) (112,375)
Zions Bancorp (900) (41,302)
================================================================================
(771,039)
(1.10) BEVERAGES
Coca-Cola Co (1,800) (103,387)
PepsiCo Inc (200) (8,888)
================================================================================
(112,275)
(1.13) BROADCASTING
Fox Entertainment Group Class A Shrs(b) (2,100) (63,787)
Univision Communications Class A Shrs(b) (500) (51,750)
================================================================================
(115,537)
(0.76) CABLE
Cox Communications Class A Shrs(b) (1,700) (77,456)
================================================================================
(0.34) CHEMICALS
Rohm & Haas (1,000) (34,500)
================================================================================
(1.72) COMMUNICATIONS--EQUIPMENT & MANUFACTURING
Lucent Technologies (1,800) (106,650)
Tellabs Inc(b) (1,000) (68,438)
================================================================================
(175,088)
(5.11) COMPUTER RELATED
BMC Software(b) (1,700) (62,023)
Compaq Computer (2,700) (69,019)
Dell Computer(b) (1,500) (73,969)
Gateway Inc(b) (1,100) (62,425)
International Business Machines (1,000) (109,562)
Lexmark International Group Class A Shrs(b) (400) (26,900)
NCR Corp(b) (1,400) (54,513)
Sabre Holdings (1,100) (31,350)
Unisys Corp(b) (2,200) (32,038)
================================================================================
(521,799)
(1.70) CONSUMER FINANCE
Countrywide Credit Industries (1,100) (33,344)
Household International (1,300) (54,031)
SLM Holding (2,300) (86,106)
================================================================================
(173,481)
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
(0.56) CONTAINERS
Sealed Air(b) (1,100) $ (57,613)
================================================================================
(0.36) ELECTRIC UTILITIES
AES Corp(b) (800) (36,500)
================================================================================
(2.21) ELECTRICAL EQUIPMENT
Emerson Electric (1,600) (96,600)
Grainger (W W) Inc (1,600) (49,300)
Solectron Corp(b) (1,900) (79,563)
================================================================================
(225,463)
(5.18) ELECTRONICS--SEMICONDUCTOR
Intel Corp (1,200) (160,425)
Micron Technology(b) (1,300) (114,481)
Motorola Inc (2,000) (58,125)
National Semiconductor(b) (1,500) (85,125)
Texas Instruments (1,600) (109,900)
================================================================================
(528,056)
(0.61) ENTERTAINMENT
Disney (Walt) Co (1,600) (62,100)
================================================================================
(2.39) FINANCIAL
Associates First Capital Class A Shrs (1,400) (31,237)
Capital One Financial (1,500) (66,937)
Franklin Resources (3,600) (109,350)
Providian Financial (400) (36,000)
================================================================================
(243,524)
(0.43) FOOTWEAR
NIKE Inc Class B Shrs (1,100) (43,794)
================================================================================
(0.29) GOLD & PRECIOUS METALS MINING
Barrick Gold (1,600) (29,100)
================================================================================
(3.01) HEALTH CARE DRUGS--PHARMACEUTICALS
ALZA Corp(b) (700) (41,387)
American Home Products (1,100) (64,625)
Johnson & Johnson (900) (91,687)
Lilly (Eli) & Co (300) (29,963)
Merck & Co (100) (7,663)
Mylan Laboratories (1,000) (18,250)
Watson Pharmaceuticals(b) (1,000) (53,750)
================================================================================
(307,325)
(2.39) HEALTH CARE RELATED
Baxter International (600) (42,187)
Guidant Corp(b) (700) (34,650)
Health Management Associates Class A Shrs(b) (2,400) (31,350)
Medtronic Inc (1,200) (59,775)
Tenet Healthcare(b) (2,800) (75,600)
================================================================================
(243,562)
(1.50) HOUSEHOLD PRODUCTS
Clorox Co (1,500) (67,219)
Newell Rubbermaid (2,000) (51,500)
Procter & Gamble (600) (34,350)
================================================================================
(153,069)
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
(4.21) INSURANCE
Allstate Corp (1,600) $ (35,600)
American International Group (1,000) (117,500)
Chubb Corp (700) (43,050)
CIGNA Corp (500) (46,750)
Hartford Financial Services Group (500) (27,969)
Progressive Corp (600) (44,400)
SAFECO Corp (2,300) (45,713)
St Paul Cos (2,000) (68,250)
================================================================================
(429,232)
(3.17) INVESTMENT BANK/BROKER FIRM
Bear Stearns (800) (33,300)
Merrill Lynch & Co (1,500) (172,500)
Schwab (Charles) Corp (3,500) (117,688)
================================================================================
(323,488)
(0.31) LEISURE TIME
Carnival Corp (1,600) (31,200)
================================================================================
(0.35) LODGING--HOTELS
Marriott International Class A Shrs (1,000) (36,063)
================================================================================
(1.04) MACHINERY
Caterpillar Inc (1,500) (50,812)
Deere & Co (1,500) (55,500)
================================================================================
(106,312)
(0.56) MANUFACTURING
Illinois Tool Works (1,000) (57,000)
================================================================================
(0.44) METALS MINING
Phelps Dodge (1,200) (44,625)
================================================================================
(0.88) NATURAL GAS
Enron Corp (300) (19,350)
Williams Cos (1,700) (70,869)
================================================================================
(90,219)
(0.28) OFFICE EQUIPMENT & SUPPLIES
Xerox Corp (1,400) (29,050)
================================================================================
(5.13) OIL & GAS RELATED
Baker Hughes (2,600) (83,200)
Burlington Resources (600) (22,950)
Diamond Offshore Drilling (1,000) (35,125)
Halliburton Co (2,800) (132,125)
Schlumberger Ltd (2,000) (149,250)
Transocean Sedco Forex (1,000) (53,438)
Weatherford International(b) (1,200) (47,775)
================================================================================
(523,863)
(2.07) PAPER & FOREST PRODUCTS
Bowater Inc (1,500) (66,187)
Fort James (2,500) (57,812)
Mead Corp (2,500) (63,125)
Willamette Industries (900) (24,525)
================================================================================
(211,649)
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
(0.92) PERSONAL CARE
Gillette Co (2,700) $ (94,331)
================================================================================
(0.54) POLLUTION CONTROL
Waste Management (2,900) (55,100)
================================================================================
(0.46) PUBLISHING
New York Times Class A Shrs (1,200) (47,400)
================================================================================
(0.48) RAILROADS
CSX Corp (2,300) (48,731)
================================================================================
(0.25) REAL ESTATE INVESTMENT TRUST
Starwood Hotels & Resorts
Worldwide SBI Class B Shrs (800) (25,850)
================================================================================
(0.52) RESTAURANTS
McDonald's Corp (1,600) (52,700)
================================================================================
(3.54) RETAIL
CVS Corp (1,200) (48,000)
Dillard's Inc Class A Shrs (2,000) (24,500)
Dollar General (2,400) (46,800)
Kmart Corp(b) (5,300) (36,106)
Kroger Co(b) (1,700) (37,506)
Nordstrom Inc (2,000) (48,250)
Penney (J C) Co (2,300) (42,406)
Saks Inc(b) (3,100) (32,550)
Walgreen Co (1,400) (45,063)
================================================================================
(361,181)
(1.44) SAVINGS & LOAN
Washington Mutual (5,100) (147,263)
================================================================================
(2.86) SERVICES
Automatic Data Processing (900) (48,206)
Ceridian Corp(b) (1,600) (38,500)
Computer Sciences(b) (600) (44,812)
Dun & Bradstreet (800) (22,900)
Electronic Data Systems (800) (33,000)
Equifax Inc (2,900) (76,125)
SunGard Data Systems(b) (900) (27,900)
================================================================================
(291,443)
(0.66) TELECOMMUNICATIONS--LONG DISTANCE
Global Crossing Ltd(b) (900) (23,681)
Level 3 Communications(b) (500) (44,000)
================================================================================
(67,681)
(0.94) TELEPHONE
ALLTEL Corp (1,200) (74,325)
SBC Communications (500) (21,625)
================================================================================
(95,950)
(0.07) TEXTILE--APPAREL MANUFACTURING
VF Corp (300) (7,144)
================================================================================
TOTAL SHORT POSITIONS (Proceeds $7,724,796) (7,542,000)
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
24.21 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $1,964,765)
(Cost for Income Tax Purposes $1,987,136) $ 2,469,933
================================================================================
75.79 OTHER ASSETS IN EXCESS OF LIABILITIES $ 7,734,160
================================================================================
100.00 TOTAL NET ASSETS $10,204,093
================================================================================
(a) Securities are pledged with broker as collateral for short sales.
(b) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
MARKET
NEUTRAL
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 9,689,561
================================================================================
At Value(a) $ 10,011,933
Cash 303
Deposits With Custodian Bank for Securities Sold Short 7,687,054
Receivables for Dividends and Interest 51,027
Prepaid Expenses and Other Assets 10,492
================================================================================
TOTAL ASSETS 17,760,809
================================================================================
LIABILITIES
Securities Sold Short at Value (Proceeds $7,724,796) 7,542,000
Payables for Dividends on Securities Sold Short 7,218
Accrued Expenses and Other Payables 7,498
================================================================================
TOTAL LIABILITIES 7,556,716
================================================================================
NET ASSETS AT VALUE $ 10,204,093
================================================================================
NET ASSETS
Paid-in Capital(b) $ 10,001,000
Accumulated Undistributed Net Investment Income 285,425
Accumulated Undistributed Net Realized Loss on
Investment Securities and Securities Sold Short (587,500)
Net Appreciation of Investment Securities and
Securities Sold Short 505,168
================================================================================
NET ASSETS AT VALUE $ 10,204,093
================================================================================
Shares Outstanding 1,000,100
NET ASSET VALUE, Offering and Redemption Price per Share $ 10.20
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $2,313,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
MARKET
NEUTRAL
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 59,374
Interest 285,781
================================================================================
TOTAL INCOME 345,155
================================================================================
EXPENSES
Dividends on Securities Sold Short 58,433
Investment Advisory Fees 37,077
Transfer Agent Fees 2,500
Administrative Services Fees 18,101
Custodian Fees and Expenses 6,897
Directors' Fees and Expenses 4,583
Professional Fees and Expenses 8,457
Registration Fees and Expenses 44
Reports to Shareholders 1,769
Other Expenses 196
================================================================================
TOTAL EXPENSES 138,057
Fees and Expenses Absorbed by Investment Adviser (10,829)
Fees and Expenses Paid Indirectly (6,859)
================================================================================
NET EXPENSES 120,369
================================================================================
NET INVESTMENT INCOME 224,786
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 108,365
Securities Sold Short (653,346)
================================================================================
Total Net Realized Loss (544,981)
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities (212,883)
Securities Sold Short 443,341
================================================================================
Total Net Appreciation 230,458
================================================================================
NET LOSS ON INVESTMENT SECURITIES AND SECURITIES SOLD SHORT (314,523)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (89,737)
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
MARKET NEUTRAL FUND
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED (Note 1)
OPERATIONS
Net Investment Income $ 224,786 $ 60,639
Net Realized Loss on Investment Securities
and Securities Sold Short (544,981) (42,519)
Change in Net Appreciation of Investment
Securities and Securities Sold Short 230,458 274,710
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (89,737) 292,830
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 0 10,000,000
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (89,737) 10,292,830
NET ASSETS
Initial Subscription (Note 1) -- 1,000
Beginning of Period 10,293,830 --
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $285,425 and $60,639,
respectively.) $10,204,093 $ 10,293,830
================================================================================
---------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) -- 100
Shares Sold 0 1,000,000
================================================================================
NET INCREASE IN FUND SHARES 0 1,000,100
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund (the "Fund", presented herein), Real Estate Opportunity 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. INVESCO Variable Investment Funds, Inc. 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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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 and deferred post-October 31 losses, 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.
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
<PAGE>
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. Dividend expense on short
sales is recorded on the ex-dividend date.
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 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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, 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 $5,922,263 $7,461,021
Short Positions 7,208,235 5,464,704
There were no purchases or sales of U.S. Government securities.
<PAGE>
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, 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 $ 864,664 $ 564,663 $ 300,001
Short Positions 772,128 589,332 182,796
Resulting in net appreciation of $482,797.
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 six months ended June 30, 2000.
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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
<PAGE>
FINANCIAL HIGHLIGHTS
MARKET NEUTRAL FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
----------------------------------------------------------------------------------------
2000 1999(a)
UNAUDITED
<S> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.29 $ 10.00
========================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Inco me 0.22 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.31) 0.23
========================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.09) 0.29
========================================================================================
Net Asset Value--End of Period $ 10.20 $ 10.29
========================================================================================
TOTAL RETURN(b) (0.78%)(c) 2.90%(c)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 10,204 $ 10,294
Ratio of Expenses to Average Net Assets
(including dividends on securities sold short)(d)(f) 1.28%(c) 2.26%(g)
Ratio of expenses to Average Net Assets
(excluding dividends on securities sold short)(e)(f) 0.69%(c) 1.29%(g)
Ratio of Net Investment Income to Average Net Assets(d) 2.26%(c) 4.17%(g)
Portfolio Turnover Rate 78%(c) 72%(c)
</TABLE>
(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 periods shown.
(c) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000 and the period ended December 31, 1999. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets (including dividends on securities sold short) would have been
1.39% and 3.30% (annualized), respectively, and ratio of net investment
income to average net assets (including dividends on securities sold short)
would have been 2.15% and 3.13% (annualized), respectively.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000 and the period ended December 31, 1999. If such
expenses had not been absorbed, ratio of expenses to average net assets
(excluding dividends on securities sold short) would have been 0.80% and
2.33% (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 (which
may include custodian fees).
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S778 9193 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS
A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
VIF-REAL ESTATE OPPORTUNITY FUND
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and Attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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-REAL ESTATE OPPORTUNITY FUND
-------------------------------------
VIF-REAL ESTATE OPPORTUNITY FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 8.80%
-------------------------------------
Since inception (4/98) (1.05%)
-------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares
rose 15.68%. This is comparable to the return of both the S&P 500 Index, which
fell 0.43%, and the NAREIT - Equity REIT Index, which rose 13.19% during the
same period. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Graph: VIF-REAL ESTATE OPPORTUNITY FUND
TOTAL RETURN SINCE INCEPTION VS S&P 500 INDEX AND
NAREIT-EQUITY REIT INDEX
This line graph compares the value of a $10,000 investment in
INVESCO VIF- Real Estate Opportunity Fund to the value of a $10,000
investment in the S&P 500 Index and the value of a $10,000
investment in the NAREIT-Equity REIT Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for
the period from inception (4/98) through June 30, 2000.
The real estate investment trust (REIT) market held up well in the second
quarter, as investors sought out attractively-priced REITs as a haven from
downward pressure in the equity market. Our fund enjoyed a solid return during
the period; however, our allocation to real estate-related stocks hampered the
portfolio's performance, given strength in the REIT market. Nonetheless, our
real estate-related positions again worked in our favor in June, providing
support for our performance as a rebound in the broader market overshadowed the
more modest gains in the REIT sector.
We made few changes to our subsector allocations in recent weeks. We
remained overweighted in industrial, office space and apartment REITS, but
underweighted in health care, specialty and diversified REITs. Among our top
performers were Essex Property Trust, a residential property owner, and
CarrAmerica Realty, an office property developer. Our apartment REITs also
performed well and, at current prices, continue to offer upside potential.
Moreover, they offer us a hedge against rising interest rates, since demand for
apartment space tends to rise when it is harder for people to purchase homes.
Our real estate-related stocks made a strong comeback at the end of the
period. Our top holdings included Spectrasite Holdings and Crown Castle
International, two companies that own and lease space on antennae towers serving
the wireless communications and broadcast industries.
While we have been encouraged by signs that economic growth may be
moderating to a more acceptable rate, we also caution that the Federal Reserve
could raise rates again if the expected slowdown does not occur. On the flip
side, a weaker economy may ease interest rate fears, but could also squeeze
profit margins and hinder the equity market. Given this uncertain outlook, we
remain biased toward maintaining a relatively high REIT exposure. Valuations
remain attractive in the REIT market, and we continue to see signs of strength
across product lines.
<PAGE>
FUND MANAGEMENT
Sean Katof serves as Portfolio Manager of the VIF-Real Estate Opportunity
Fund. Sean earned his BS in Business Administration from the University of
Colorado at Boulder and his MS in Finance from the University of Colorado at
Denver. He joined INVESCO Funds Group in 1994.
(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 NAREIT-EQUITY REIT INDEX IS AN
UNMANAGED INDEX INDICATIVE OF THE U.S. REAL ESTATE INVESTMENT TRUST MARKET. THE
NASDAQ COMPOSITE IS AN UNMANAGED INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OF
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND
100.00 COMMON STOCKS
4.26 BROADCASTING
Spectrasite Holdings(a) 1,300 $ 36,888
================================================================================
1.06 COMPUTER RELATED
Exodus Communications(a) 200 9,213
================================================================================
1.81 GAMING
Harrah's Entertainment(a) 750 15,703
================================================================================
0.83 LODGING--HOTELS
Marriott International Class A Shrs 200 7,213
================================================================================
3.03 PAPER & FOREST PRODUCTS
Bowater Inc 400 17,650
Weyerhaeuser Co 200 8,600
================================================================================
26,250
76.68 REAL ESTATE INVESTMENT TRUST
Apartment Investment & Management Class A Shrs 800 34,600
Archstone Communities Trust 1,000 21,062
Arden Realty 1,250 29,375
Avalonbay Communities 700 29,225
Boston Properties 700 27,037
Brandywine Realty Trust SBI 1,300 24,862
CarrAmerica Realty 1,200 31,800
CBL & Associates Properties 900 22,444
Chateau Communities 600 16,950
Developers Diversified Realty 1,700 25,394
Equity Office Properties Trust SBI 1,000 27,562
Equity Residential Properties Trust SBI 700 32,200
Essex Property Trust 700 29,400
First Industrial Realty Trust 600 17,700
General Growth Properties 500 15,875
Health Care Property Investors 800 21,800
Liberty Property Trust SBI 800 20,750
MeriStar Hospitality 900 18,900
ProLogis Trust SBI 1,100 23,444
Public Storage 1,100 25,781
Simon Property Group 1,400 31,063
SL Green Realty 1,200 32,100
Smith (Charles E) Residential Realty 600 22,800
Spieker Properties 600 28,350
Starwood Hotels & Resorts SBI 300 9,694
United Dominion Realty Trust 1,700 18,700
Washington Real Estate Investment Trust SBI 1,400 25,025
================================================================================
663,893
<PAGE>
SHARES OF
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
4.13 REAL ESTATE RELATED
Trizec Hahn 2,000 $ 35,750
================================================================================
3.44 RETAIL
Home Depot 100 4,994
RadioShack Corp 400 18,950
Target Corp 100 5,800
================================================================================
29,744
4.76 TELECOMMUNICATIONS--CELLULAR & WIRELESS
American Tower Class A Shrs(a) 200 8,337
Crown Castle International(a) 900 32,850
================================================================================
41,187
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $797,523)
(Cost for Income Tax Purposes $833,019) $ 865,841
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
REAL ESTATE
OPPORTUNITY
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost $ 797,523
================================================================================
At Value $ 865,841
Cash 67,011
Receivables:
Investment Securities Sold 5,105
Fund Shares Sold 865
Dividends and Interest 5,583
Prepaid Expenses and Other Assets 22,192
================================================================================
TOTAL ASSETS 966,597
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 38,803
Accrued Expenses and Other Payables 4,597
================================================================================
TOTAL LIABILITIES 43,400
================================================================================
NET ASSETS AT VALUE $ 923,197
================================================================================
NET ASSETS
Paid-in Capital(a) $ 926,513
Accumulated Undistributed Net Investment Income 20,510
Accumulated Undistributed Net Realized Loss
on Investment Securities (92,144)
Net Appreciation of Investment Securities 68,318
================================================================================
NET ASSETS AT VALUE $ 923,197
================================================================================
Shares Outstanding 100,848
NET ASSET VALUE, Offering and Redemption Price per Share $ 9.15
================================================================================
(a) The Fund has 1.5 billion authorized shares of common stock, par value of
$0.01 per share. Of such shares, 100 million have been allocated to Real
Estate Opportunity Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
REAL ESTATE
OPPORTUNITY
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 19,178
Interest 901
================================================================================
TOTAL INCOME 20,079
================================================================================
EXPENSES
Investment Advisory Fees 3,657
Transfer Agent Fees 2,500
Administrative Services Fees 6,077
Custodian Fees and Expenses 2,498
Directors' Fees and Expenses 4,511
Interest Expenses 186
Professional Fees and Expenses 8,415
Registration Fees and Expenses 12
Reports to Shareholders 2,270
Other Expenses 236
================================================================================
TOTAL EXPENSES 30,362
Fees and Expenses Absorbed by Investment Adviser (22,372)
Fees and Expenses Paid Indirectly (2,496)
================================================================================
NET EXPENSES 5,494
================================================================================
NET INVESTMENT INCOME 14,585
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (8,217)
Change in Net Appreciation of Investment Securities 83,584
================================================================================
NET GAIN ON INVESTMENT SECURITIES 75,367
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 89,952
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
REAL ESTATE OPPORTUNITY FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 14,585 $ 24,166
Net Realized Loss on Investment Securities (8,217) (15,584)
Change in Net Appreciation (Depreciation)
of Investment Securities 83,584 (5,585)
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 89,952 2,997
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (24,214)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 961,291 395,598
Reinvestment of Distributions 0 24,214
================================================================================
961,291 419,812
Amounts Paid for Repurchases of Shares (753,524) (274,539)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 207,767 145,273
================================================================================
TOTAL INCREASE IN NET ASSETS 297,719 124,056
NET ASSETS
Beginning of Period 625,478 501,422
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income of
$20,510 and $5,925, respectively) $ 923,197 $ 625,478
================================================================================
---------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 110,289 48,226
Shares Issued from Reinvestment of Distributions 0 3,241
================================================================================
110,289 51,467
Shares Repurchased (88,492) (33,396)
================================================================================
NET INCREASE IN FUND SHARES 21,797 18,071
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund, Real Estate Opportunity Fund formally "Realty Fund", (the "Fund",
presented herein), Small Company Growth Fund, Technology Fund,
Telecommunications Fund, Total Return Fund and Utilities Fund. Effective
February 15, 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 INVESCO Variable Investment Funds, Inc. 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 day or less at the time of purchase, or market value if
maturity is greater than 60 days.
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.
The Fund may invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
<PAGE>
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 June 30, 2000, 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
and income are offset by capital loss carryovers and deferred post-October 31
losses, 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.
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 nontaxable dividends, net operating losses and expired capital loss
carryforwards.
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, provided that investment decisions of the Fund were made by
IRAI. Fees for such sub-advisory services were paid by IFG. Effective January
27, 2000, the sub-advisory agreement with IRAI was terminated and such
responsibilities have been 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 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.
<PAGE>
IFG has voluntarily agreed to absorb certain fees and expenses incurred by the
Fund for the six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $1,540,626 and $1,310,366, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $59,928 and the gross depreciation of securities in which there was
an excess of tax cost over value amounted to $27,106, resulting in net
appreciation of $32,822.
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 for the six months ended June 30, 2000 included in Directors'
Fees and Expenses in the Statement of Operations were $5. Unfunded accrued
pension costs of $0 and pension liability of $7 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, Real Estate Opportunity Fund borrowed cash
at a weighted average rate ranging from 6.60%-6.81%. At June 30, 2000, there
were no such borrowings and/or lendings outstanding.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
JUNE 30 DECEMBER 31 DECEMBER 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998(a)
UNAUDITED
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 7.91 $ 8.22 $ 10.00
=====================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13 0.29 0.29
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 1.11 (0.28) (1.88)
=====================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.24 0.01 (1.59)
=====================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.32 0.19
=====================================================================================================
Net Asset Value-- End of Period $ 9.15 $ 7.91 $ 8.22
=====================================================================================================
TOTAL RETURN(b) 15.68%(c) 0.35% (15.88%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 923 $ 625 $ 501
Ratio of Expenses to Average Net Assets(d)(e) 0.98%(c) 1.92 1.90%(f)
Ratio of Net Investment Income to Average Net Assets(d) 1.79%(c) 4.25% 4.94%(f)
Portfolio Turnover Rate(g)(h) 170%(c) 465% 200%(c)
</TABLE>
(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 periods 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 six
months ended June 30, 2000, 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 3.72%,
9.72% and 8.54% (annualized), respectively, and ratio of net investment
loss to average net assets would have been (0.95%), (3.55%) and (1.70%)
(annualized), respectively.
<PAGE>
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(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 six months ended
June 30, 2000 and the year ended December 31, 1999, respectively, due to
active trading undertaken in response to market conditions.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S17 9194 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 81.90%
--------------------------------------
Since inception (8/97) 35.46%
--------------------------------------
<PAGE>
GRAPH: VIF-SMALL COMPANY GROWTH FUND
TOTAL RETURN SINCE INCEPTION 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 Russell 2000 Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for
the period from inception (8/97) through June 30, 2000.
VIF-SMALL COMPANY GROWTH FUND
For the six-month period ended June 30, 2000, the value of your shares
rose 7.77%. This is comparable to the return of the Russell 2000 Index, which
rose 3.04% during the same period. (Of course, past performance is not a
guarantee of future results.)(1),(2)
After two months of downward volatility, the markets recovered in June,
gaining back some ground they had lost earlier in the quarter. Inflation
concerns led to the period's volatility, spawned by a series of higher reported
inflation figures as well as the central bank's negative statements at its May
meeting, when it raised short-term interest rates 50 basis points. The June
producer and consumer inflation figures showed moderating inflation following
the earlier oil price surge, followed by June's purchasing managers' prices paid
index, which was down for the third month in a row. As a result, equity markets
recovered somewhat, with the Nasdaq Composite up strongly after a dramatic
pullback that reached bottom in late May.
The fund endured a difficult second quarter, although it rebounded
dramatically in June. The steep fall in technology shares adversely affected the
fund in April and May. The Microsoft ruling and the subsequent fallout took a
toll on many small technology stocks -- despite the fact that any breakup of
Microsoft Corp should theoretically be to the benefit of smaller technology
firms. Nevertheless, investors proved indiscriminate in their reaction, and the
retreat across the technology sector was broad-based. Our fund was particularly
hard hit given its tight focus on smaller-cap stocks, which are typically more
volatile. While this can be to our detriment in down markets, we believe a true
small-cap approach offers the potential for better long-term returns.
Earlier this year, we added to several of our largest holdings. We made
additional investments in REMEC Inc, a leading designer and manufacturer of
high-frequency subsystems used in the transmission of voice, video and data
traffic over wireless communications networks. We also increased our exposure to
Digital Microwave and IONA Technologies PLC. On the other hand, we sold some
smaller names, such as National Information Consortium, which are not generating
sufficient cash to fund operations. National Information Consortium, for
example, will need to conduct a secondary offering, which may be difficult in
this type of market.
June confirmed our strategy of waiting out the current technology
correction while concentrating our investments in the highest-quality names.
Many of our largest technology-related holdings, including REMEC Inc, Insight
Enterprises, Tekelec, and Semtech Corp, enjoyed strong results for the month.
The health care sector as a whole also offered substantial returns as excitement
returned to the biotechnology industry. The only disappointment among our larger
holdings came with cellular tower operator Pinnacle Holdings, which drifted
lower.
We expect small, well-financed firms that are leaders in their emerging
industries to continue to flourish even as investors become more careful about
types of companies in which they invest.
<PAGE>
FUND MANAGEMENT
Vice President 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 is a Chartered Financial
Analyst. She began her investment career in 1989. Prior to joining INVESCO Funds
Group, Stacie was a senior equities analyst with Founders Asset Management, and
a capital markets and trading analyst with Chase Manhattan Bank.
(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 INDEX IS AN UNMANAGED INDEX INDICATIVE OF
SMALLER-CAPITALIZATION STOCKS. THE NASDAQ COMPOSITE IS AN UNMANAGED INDEX OF
STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
98.03 COMMON STOCKS
1.13 AEROSPACE & DEFENSE
Titan Corp(a) 6,100 $ 272,975
================================================================================
0.69 AIRLINES
Atlas Air(a) 4,600 165,025
================================================================================
0.94 BANKS
City National 6,390 226,845
================================================================================
4.13 BIOTECHNOLOGY
Celgene Corp(a) 1,800 105,975
Cephalon Inc(a) 3,100 185,612
Emisphere Technologies(a) 2,900 123,567
Medarex Inc(a) 600 50,700
MGI Pharma(a) 5,700 163,964
NPS Pharmaceuticals(a) 1,950 52,163
Protein Design Labs(a) 700 115,467
Trimeris Inc(a) 2,800 195,825
================================================================================
993,273
2.43 BROADCASTING
Citadel Communications(a) 4,750 165,953
Emmis Communications Class A Shrs(a) 5,000 206,875
Pegasus Communications(a) 4,300 210,969
================================================================================
583,797
9.78 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
Accelerated Networks(a) 500 21,094
Com21 Inc(a) 7,600 190,000
Digital Lightwave(a) 2,000 201,000
Digital Microwave(a) 6,450 245,906
Natural MicroSystems(a) 1,700 191,144
NICESystems Ltd Sponsored ADR
Representing Ord Shrs(a) 2,900 223,844
Polycom Inc(a) 2,200 207,006
REMEC Inc(a) 7,950 332,906
Tekelec(a) 7,650 368,634
Tollgrade Communications(a) 800 106,000
ViaSat Inc(a) 4,900 265,825
================================================================================
2,353,359
14.20 COMPUTER RELATED
Accrue Software(a) 1,200 42,600
Agile Software(a) 5,100 360,506
Alteon Websystems(a) 1,500 150,094
AppNet Inc(a) 7,700 277,200
Art Technology Group(a) 900 90,844
Business Objects SA Sponsored ADR
Representing Ord Shrs(a) 2,700 237,938
C-COR.net Corp(a) 5,250 141,750
CacheFlow Inc(a) 3,600 221,625
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
DSET Corp(a) 3,100 $ 94,162
Entrust Technologies(a) 1,700 140,675
IONA Technologies PLC Sponsored ADR
Representing Ord Shrs(a) 4,000 252,000
JDA Software Group(a) 11,900 228,331
Macromedia Inc(a) 600 58,013
Mercury Interactive(a) 1,500 145,125
NetIQ Corp(a) 3,764 224,428
Numerical Technologies(a) 2,950 143,444
OTG Software(a) 2,100 59,981
Packeteer Inc(a) 3,100 90,288
Peregrine Systems(a) 800 27,750
Precise Software Solutions Ltd(a) 2,600 62,400
Selectica Inc(a) 1,500 105,094
SmartForce PLC Sponsored ADR
Representing Ord Shrs(a) 3,800 182,400
Tumbleweed Communications(a) 1,600 81,400
================================================================================
3,418,048
2.58 ELECTRONICS
Alpha Industries(a) 6,900 304,031
Anaren Microwave(a) 1,500 196,852
Manufacturers' Services Ltd(a) 5,800 119,263
================================================================================
620,146
10.27 ELECTRONICS--SEMICONDUCTOR
Aeroflex Inc(a) 11,600 576,375
ANADIGICS Inc(a) 2,150 73,234
Cree Inc(a) 850 113,475
Elantec Semiconductor(a) 2,600 181,025
Exar Corp(a) 1,700 148,219
Oak Technology(a) 11,100 239,344
Plexus Corp(a) 2,100 237,300
Semtech Corp(a) 4,100 313,586
TelCom Semiconductor(a) 2,100 84,788
TranSwitch Corp(a) 2,550 196,828
Virata Corp(a) 2,500 149,063
Zoran Corp(a) 2,400 158,250
================================================================================
2,471,487
5.03 EQUIPMENT--SEMICONDUCTOR
Advanced Energy Industries(a) 1,800 106,087
American Xtal Technology(a) 10,000 432,500
Brooks Automation(a) 1,850 118,284
Cymer Inc(a) 5,700 272,175
Integrated Silicon Solution(a) 4,100 155,800
LTX Corp(a) 3,600 125,775
================================================================================
1,210,621
1.68 GAMING
Harrah's Entertainment(a) 19,300 404,094
================================================================================
3.06 HEALTH CARE DRUGS--PHARMACEUTICALS
Accredo Health(a) 2,500 86,406
Alkermes Inc(a) 6,900 325,162
DUSA Pharmaceuticals(a) 2,200 64,900
Inhale Therapeutic Systems(a) 1,200 121,763
Jones Pharma 3,450 137,784
================================================================================
736,015
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
6.73 HEALTH CARE RELATED
ArthroCare Corp(a) 1,900 $ 101,175
Gene Logic(a) 800 28,550
Invitrogen Corp(a) 1,400 105,284
Molecular Devices(a) 5,300 366,694
Noven Phamaceuticals(a) 7,500 225,469
ORATEC Interventions(a) 3,400 113,475
Professional Detailing(a) 4,000 136,250
Province Healthcare(a) 15,050 543,681
================================================================================
1,620,578
3.24 INVESTMENT BANK/BROKER FIRM
Affiliated Managers Group(a) 3,350 152,425
Dain Rauscher 9,500 627,000
================================================================================
779,425
1.13 LEISURE TIME
Intrawest Corp 6,175 117,325
Steiner Leisure Ltd(a) 6,800 153,850
================================================================================
271,175
7.44 OIL & GAS RELATED
Atwood Oceanics(a) 9,600 427,200
Dril-Quip Inc(a) 3,400 158,950
Evergreen Resources(a) 4,800 142,200
Louis Dreyfus Natural Gas(a) 4,400 137,775
Newfield Exploration(a) 7,000 273,875
Precision Drilling(a) 4,600 177,675
Stolt Offshore SA(a) 26,400 372,900
Unit Corp(a) 7,400 99,900
================================================================================
1,790,475
0.19 PERSONAL CARE
Playtex Products(a) 4,125 46,664
================================================================================
1.98 POLLUTION CONTROL
Tetra Tech(a) 20,800 475,800
================================================================================
2.44 RETAIL
Callaway Golf 10,500 171,281
Cost Plus(a) 6,212 178,207
Insight Enterprises(a) 4,000 237,250
================================================================================
586,738
6.11 SERVICES
Corporate Executive Board(a) 1,800 107,775
Henry (Jack) & Associates 3,790 189,974
IntraNet Solutions(a) 6,730 258,264
ISS Group(a) 1,900 187,595
Mercator Software(a) 3,900 268,125
Proxicom Inc(a) 9,600 459,600
================================================================================
1,471,333
4.16 TELECOMMUNICATIONS--CELLULAR & WIRELESS
BreezeCom Ltd(a) 6,000 261,000
Leap Wireless International(a) 4,400 206,800
Pinnacle Holdings(a) 9,900 534,600
================================================================================
1,002,400
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
3.23 TELECOMMUNICATIONS--LONG DISTANCE
Dycom Industries(a) 9,752 $ 448,592
FirstCom Corp(a) 1,300 19,581
Primus Telecommunications Group(a) 12,400 308,450
================================================================================
776,623
4.76 TELEPHONE
CTC Communications Group(a) 9,500 342,000
Inet Technologies(a) 2,800 151,900
International FiberCom(a) 19,600 499,800
Westell Technologies Class A Shrs(a) 10,100 151,500
================================================================================
1,145,200
0.70 TEXTILE--HOME FURNISHINGS
Linens 'n Things(a) 6,240 169,260
================================================================================
TOTAL COMMON STOCKS (Cost $19,095,648) 23,591,356
================================================================================
1.97 SHORT-TERM INVESTMENTS-- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
6/30/2000 due 7/3/2000 at 6.400%, repurchased
at $474,253 (Collateralized by US Treasury
Inflationary Index Bonds, due 4/15/2028 at
3.625%, value $513,590) (Cost $474,000) $ 474,000 474,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $19,569,648)
(Cost for Income Tax Purposes $19,809,992) $24,065,356
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SMALL
COMPANY
GROWTH
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 19,569,648
================================================================================
At Value(a) $ 24,065,356
Cash 355
Receivables:
Fund Shares Sold 54,177
Dividends and Interest 135
Prepaid Expenses and Other Assets 17,012
================================================================================
TOTAL ASSETS 24,137,035
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 52,059
Accrued Expenses and Other Payables 3,793
================================================================================
TOTAL LIABILITIES 55,852
================================================================================
NET ASSETS AT VALUE $ 24,081,183
================================================================================
NET ASSETS
Paid-in Capital(b) $ 18,473,014
Accumulated Undistributed Net Investment Loss (26,953)
Accumulated Undistributed Net Realized Gain
on Investment Securities 1,139,414
Net Appreciation of Investment Securities 4,495,708
================================================================================
NET ASSETS AT VALUE $ 24,081,183
================================================================================
Shares Outstanding 1,015,083
NET ASSET VALUE, Offering and Redemption Price per Share $ 23.72
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $474,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
SMALL
COMPANY
GROWTH
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,781
Interest 30,729
================================================================================
TOTAL INCOME 32,510
================================================================================
EXPENSES
Investment Advisory Fees 35,730
Transfer Agent Fees 2,500
Administrative Services Fees 16,186
Custodian Fees and Expenses 12,364
Directors' Fees and Expenses 4,580
Interest Expense 1,167
Professional Fees and Expenses 8,522
Registration Fees and Expenses 18
Reports to Shareholders 7,635
Other Expenses 300
================================================================================
TOTAL EXPENSES 89,002
Fees and Expenses Absorbed by Investment Adviser (17,236)
Fees and Expenses Paid Indirectly (12,319)
================================================================================
NET EXPENSES 59,447
================================================================================
NET INVESTMENT LOSS (26,937)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 389,890
Change in Net Appreciation of Investment Securities 3,103,649
================================================================================
NET GAIN ON INVESTMENT SECURITIES 3,493,539
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,466,602
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SMALL COMPANY GROWTH FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Loss $ (26,937) $ (16,146)
Net Realized Gain on Investment Securities 389,890 808,066
Change in Net Appreciation of Investment Securities 3,103,649 1,241,758
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 3,466,602 2,033,678
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 18,134,842 2,769,422
Amounts Paid for Repurchases of Shares (2,470,548) (888,919)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 15,664,294 1,880,503
================================================================================
TOTAL INCREASE IN NET ASSETS 19,130,896 3,914,181
NET ASSETS
Beginning of Period 4,950,287 1,036,106
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss of
$26,953 and $16, respectively) $24,081,183 $ 4,950,287
================================================================================
------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 911,835 197,791
Shares Repurchased (121,699) (62,825)
================================================================================
NET INCREASE IN FUND SHARES 790,136 134,966
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund, Real Estate Opportunity 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. INVESCO Variable Investment Funds, Inc. 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.
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.
<PAGE>
The Fund may invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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.
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 0.265% 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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $28,508,318 and $13,088,872, respectively. There were no
purchases or sales of U.S. Government securities.
<PAGE>
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $4,736,047 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $480,683, resulting in net
appreciation of $4,255,364.
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 six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $22. Unfunded accrued
pension costs of $0 and pension liability of $38 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000 there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
SMALL COMPANY GROWTH FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $ 22.01 $ 11.51 $ 9.91 $ 10.00
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.03) (0.00) (0.01) 0.02
Net Gains or (Losses)on Securities (Both Realized and Unrealized) 1.74 10.50 1.62 (0.11)
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.71 10.50 1.61 (0.09)
===========================================================================================================================
LESS DISTRIBUTIONS
In Excess of Net Investment Income 0.00 0.00 0.01 0.00
===========================================================================================================================
Net Asset Value--End of Period $ 23.72 $ 22.01 $ 11.51 $ 9.91
===========================================================================================================================
TOTAL RETURN(c) 7.77%(d) 91.06% 16.38% (0.90%)(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $24,081 $ 4,950 $ 1,036 $ 247
Ratio of Expenses to Average Net Assets(e)(f) 0.75%(d) 1.70% 1.87% 0.61%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets(e) (0.28%)(d) (0.71%) (0.90%) 0.52%(g)
Portfolio Turnover Rate(h) 131%(d) 201% 92% 25%(d)
</TABLE>
(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 periods 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 six
months ended June 30, 2000, 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 0.93%,
4.05%, 12.46% and 35.99% (annualized), respectively, and ratio of net
investment loss to average net assets would have been (0.46%), (3.06%),
(11.49%) and (34.86%) (annualized), respectively.
<PAGE>
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(g) Annualized
(h) Portfolio turnover was greater than expected during the six months ended
June 30, 2000 and the year ended December 31, 1999, respectively, due to
active trading undertaken in response to market conditions.
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S14 9191 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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 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 6/30/00 (1)
1 year 110.80%
-------------------------------------
Since inception (5/97) 60.03%
-------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares
rose 15.65%. This is comparable to the return of the S&P 500 Index, which fell
0.43% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Graph: VIF-TECHNOLOGY FUND
TOTAL RETURN SINCE INCEPTION 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 June 30, 2000.
Technology stocks suffered a dramatic pullback earlier this year, driven
by worries over higher interest rates and other factors. We believed, however,
that the decline did not derive from a change in fundamentals, but rather was a
valuation-induced phenomenon. Many argued that this valuation adjustment has
been long overdue, given the rise in interest rates over the past year, coupled
with the lofty valuations investors bestowed on technology stocks. Indeed, the
big surprise may be that it took so long for tech stocks to fall to lower
levels.
Many leading stocks staged a dramatic rebound in June, however, after
selling off to relatively bargain levels in April and May. Investors were
cheered that the Federal Reserve remained on the sidelines and left interest
rates unchanged, as more evidence of slower economic growth became apparent.
This improved the valuation underpinning for tech stocks, although many are
still fairly expensive. Despite sharp upward moves in many tech stocks,
investors appear to be more selective in their technology holdings. We believe
that the more speculative technology and Internet stocks are unlikely to recover
to old highs as the market's willingness to extend capital to such ventures has
been reduced dramatically.
The fund picked up where it left off at the end of May and extended gains
as the market for technology stocks continued to improve. The fund rose
dramatically during June as investors returned to the market leaders first --
the lion's share of the assets in the fund. The market has more recently
broadened out, and investors have placed more confidence in the rally.
We remain cautiously optimistic that the market for technology stocks has
seen the worst. While we are confident that our companies will show strong
growth in the soon-to-be-reported second quarter earnings period, the increase
in negative pre-announcements seen thus far suggests a somewhat more difficult
environment. If the economy is indeed slowing, the slowdown will be felt in
demand for some technology products, and may increase the risk of earnings
disappointments. This would suggest a narrowing of the market, and the fund
could become more concentrated as we shift more toward quality/leadership
companies. We expect that recent high levels of volatility will persist, given
the continued high valuations and psychological cross-currents in the
marketplace among technology investors.
<PAGE>
FUND MANAGEMENT
Senior Vice President and Director of Sector Management William R.
Keithler, a Chartered Financial Analyst with 15 years experience in the
investment industry, is portfolio manager for VIF-Technology Fund. Bill has an
MS from the University of Wisconsin-Madison, and BS from Webster College. An
INVESCO portfolio manager from 1986 to 1993, Bill returned to INVESCO Funds
Group in 1998 after serving 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 COMPOSITE IS AN UNMANAGED
INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
TECHNOLOGY FUND
89.29 COMMON STOCKS
0.34 BROADCASTING
EchoStar Communications Class A Shrs(a) 50,200 $1,662,091
================================================================================
11.90 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
ADC Telecommunications(a) 64,500 5,409,937
CIENA Corp(a) 50,800 8,467,725
E-Tek Dynamics(a) 25,100 6,621,694
JDS Uniphase(a) 39,800 4,771,025
Lucent Technologies 52,100 3,086,925
Nokia Corp Sponsored ADR Representing Ord Shrs 146,700 7,325,831
Nortel Networks 92,500 6,313,125
Polycom Inc(a) 38,100 3,584,972
Powerwave Technologies(a) 75,300 3,313,200
Scientific-Atlanta Inc 81,700 6,086,650
Telefonakietbolaget LM Ericsson Sponsored
ADR Representing Series B Shrs 167,100 3,342,000
================================================================================
58,323,084
19.22 COMPUTER SOFTWARE & SERVICE
Art Technology Group(a) 43,300 4,370,594
BEA Systems(a) 99,700 4,928,919
BroadVision Inc(a) 78,100 3,968,456
Check Point Software Technologies Ltd(a) 17,700 3,747,975
InfoSpace Inc(a) 47,200 2,607,800
Inktomi Corp(a) 25,700 3,039,025
Internet HOLDRs Trust Depositary Receipts(a)(b) 8,400 909,300
Intuit Inc(a) 54,400 2,250,800
i2 Technologies(a) 63,330 6,603,142
Mercury Interactive(a) 56,800 5,495,400
Micromuse Inc(a) 18,500 3,061,461
Microsoft Corp(a) 62,700 5,016,000
National Information Consortium(a) 53,800 611,975
Networks Associates(a) 123,800 2,522,425
Oracle Corp(a) 60,500 5,085,781
Peregrine Systems(a) 126,187 4,377,112
Quest Software(a) 65,100 3,604,913
Siebel Systems(a) 45,600 7,458,450
SmartForce PLC Sponsored ADR
Representing Ord Shrs(a) 101,500 4,872,000
SOFTBANK Corp(a) 7,400 1,007,136
Software.com Inc(a) 32,100 4,168,988
Symantec Corp(a) 39,000 2,103,563
TIBCO Software(a) 55,300 5,930,061
Verio Inc(a) 55,200 3,062,738
Vignette Corp(a) 48,350 2,514,955
Xcelera.com Inc(a) 25,700 873,800
================================================================================
94,192,769
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
3.10 COMPUTER SYSTEMS
Apple Computer(a) 60,800 $3,184,400
Brocade Communications Systems(a) 36,600 6,715,528
Dell Computer(a) 107,300 5,291,231
================================================================================
15,191,159
1.08 COMPUTERS-- HARDWARE
Sun Microsystems(a) 58,200 5,292,563
================================================================================
5.36 COMPUTERS-- NETWORKING
Cisco Systems(a) 149,300 9,489,881
Juniper Networks(a) 32,200 4,687,112
MarchFirst Inc(a) 53,800 981,850
Network Appliance(a) 71,600 5,763,800
Redback Networks(a) 18,600 3,310,800
Sycamore Networks(a) 18,300 2,019,863
================================================================================
26,253,306
2.13 COMPUTERS-- PERIPHERALS
Advanced Digital Information(a) 40,600 647,062
EMC Corp(a) 89,700 6,901,294
Entrust Technologies(a) 23,900 1,977,725
SanDisk Corp(a) 14,900 911,694
================================================================================
10,437,775
0.77 DISTRIBUTION
Ingram Micro(a) 94,000 1,639,125
Tech Data(a) 49,300 2,147,631
================================================================================
3,786,756
5.14 ELECTRICAL EQUIPMENT
Celestica Inc(a) 88,900 4,411,663
Flextronics International Ltd(a) 70,200 4,821,863
Furukawa Electric Ltd 42,000 879,259
Jabil Circuit(a) 69,000 3,424,125
Sanmina Corp(a) 69,400 5,933,700
Solectron Corp(a) 104,200 4,363,375
Viasystems Group(a) 82,100 1,328,994
================================================================================
25,162,979
20.36 ELECTRONICS-- SEMICONDUCTOR
Altera Corp(a) 67,100 6,840,006
Analog Devices(a) 60,800 4,620,800
Applied Micro Circuits(a) 41,800 4,127,750
Atmel Corp(a) 76,400 2,817,250
Broadcom Corp Class A Shrs(a) 10,700 2,342,631
Chartered Semiconductor Manufacturing Ltd
ADR Representing 10 Ord Shrs(a) 30,500 2,745,000
Conexant Systems(a) 61,500 2,990,437
Cypress Semiconductor(a) 62,100 2,623,725
Infineon Technologies AG ADR
Representing Ord Shrs(a) 48,100 3,811,925
Integrated Device Technology(a) 81,600 4,885,800
Intel Corp 41,500 5,548,031
Linear Technology 82,700 5,287,631
LSI Logic(a) 68,100 3,685,913
Maxim Integrated Products(a) 88,000 5,978,500
Microchip Technology(a) 61,400 3,577,509
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
National Semiconductor(a) 57,000 $3,234,750
PMC-Sierra Inc(a) 38,900 6,912,044
RF Micro Devices(a) 44,500 3,899,313
SDL Inc(a) 33,000 9,411,188
Texas Instruments 63,600 4,368,525
Vitesse Semiconductor(a) 66,400 4,884,550
Xilinx Inc(a) 62,900 5,193,181
================================================================================
99,786,459
0.92 ENTERTAINMENT
Gemstar International Group Ltd(a) 73,100 4,492,223
================================================================================
5.48 EQUIPMENT-- SEMICONDUCTOR
Applied Materials(a) 61,500 5,573,437
ASM Lithography Holding NV New York
Registered Shrs(a) 101,100 4,461,037
Credence Systems(a) 64,400 3,554,075
KLA-Tencor Corp(a) 46,000 2,693,875
Lam Research(a) 40,700 1,526,250
Novellus Systems(a) 68,500 3,874,531
Taiwan Semiconductor Manufacturing Ltd
Sponsored ADR Representing 5 Ord Shrs(a) 58,466 2,265,557
Teradyne Inc(a) 39,800 2,925,300
================================================================================
26,874,062
0.22 INVESTMENT BANK/BROKER FIRM
B2B Internet HOLDRs Trust(b) 26,100 1,074,994
================================================================================
1.33 MACHINERY
Corning Inc 24,200 6,530,975
================================================================================
0.73 NATURAL GAS
Enron Corp 55,600 3,586,200
================================================================================
6.70 SERVICES
America Online(a) 43,500 2,294,625
Ariba Inc(a) 34,600 3,392,422
Fiserv Inc(a) 81,800 3,537,850
Mercator Software(a) 39,200 2,695,000
Paychex Inc 98,500 4,137,000
Safeguard Scientifics(a) 49,700 1,593,506
Sapient Corp(a) 34,700 3,710,731
VeriSign Inc(a) 34,857 6,152,261
VERITAS Software(a) 47,250 5,339,988
================================================================================
32,853,383
2.34 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 64,700 3,958,831
NTT DoCoMo 40 1,085,015
Proxim Inc(a) 21,300 2,108,035
Telecom Italia Mobile SpA 57,600 590,804
VoiceStream Wireless(a) 21,800 2,535,272
Winstar Communications(a) 34,300 1,161,913
================================================================================
11,439,870
0.24 TELECOMMUNICATIONS--LONG DISTANCE
PSINet Inc(a) 47,000 1,180,875
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
1.93 TELEPHONE
Amdocs Ltd(a) 59,680 $4,580,440
US WEST 57,000 4,887,750
================================================================================
9,468,190
TOTAL COMMON STOCKS (Cost $378,900,154) 437,589,713
================================================================================
10.71 SHORT-TERM INVESTMENTS
6.12 COMMERCIAL PAPER
6.12 CONSUMER FINANCE
American Express Credit
6.780%, 7/3/2000 $ 8,000,000 8,000,000
6.780%, 7/6/2000 $12,000,000 12,000,000
Ford Motor Credit, 6.710%, 7/5/2000 $10,000,000 10,000,000
================================================================================
TOTAL COMMERCIAL PAPER (Cost $30,000,000) 30,000,000
================================================================================
2.68 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund 6.489%, (Cost $13,142,068) 13,142,068 13,142,068
================================================================================
1.91 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $9,346,982 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028 at 3.625%, value
$10,109,074) (Cost $9,342,0000) $9,342,000 9,342,000
================================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $52,484,068) 52,484,068
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $431,384,222)
(Cost for Income Tax Purposes $435,883,533) $490,073,781
================================================================================
(a) Security is non-income producing.
(b) HOLDRs -- Holding Company Depository Receipts
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
TECHNOLOGY
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $431,384,222
================================================================================
At Value(a) $490,073,781
Foreign Currency (Cost $7,626) 8,038
Receivables:
Investment Securities Sold 1,371,176
Fund Shares Sold 8,581,719
Dividends and Interest 19,865
Prepaid Expenses and Other Assets 27,062
================================================================================
TOTAL ASSETS 500,081,641
================================================================================
LIABILITIES
Payables:
Custodian 44,988
Fund Shares Repurchased 4,887,471
Accrued Expenses and Other Payables 7,419
================================================================================
TOTAL LIABILITIES 4,939,878
================================================================================
NET ASSETS AT VALUE $495,141,763
================================================================================
NET ASSETS
Paid-in Capital(b) $468,533,922
Accumulated Undistributed Net Investment Loss (503,954)
Accumulated Undistributed Net Realized Loss
on Investment Securities and Foreign
Currency Transactions (31,578,167)
Net Appreciation of Investment Securities
and Foreign Currency Transactions 58,689,962
================================================================================
NET ASSETS AT VALUE $495,141,763
================================================================================
Shares Outstanding 11,529,937
NET ASSET VALUE, Offering and Redemption Price per Share $ 42.94
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $9,342,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
TECHNOLOGY
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 87,224
Dividends from Affiliated Investment Companies 188,716
Interest 775,174
Foreign Taxes Withheld (8,990)
================================================================================
TOTAL INCOME 1,042,124
================================================================================
EXPENSES
Investment Advisory Fees 1,106,009
Transfer Agent Fees 2,500
Administrative Services Fees 399,367
Custodian Fees and Expenses 28,631
Directors' Fees and Expenses 6,535
Interest Expenses 2,878
Professional Fees and Expenses 12,823
Registration Fees and Expenses 298
Reports to Shareholders 16,229
Other Expenses 1,588
================================================================================
TOTAL EXPENSES 1,576,858
Fees and Expenses Absorbed by Investment Adviser (2,662)
Fees and Expenses Paid Indirectly (28,192)
================================================================================
NET EXPENSES 1,546,004
================================================================================
NET INVESTMENT LOSS (503,880)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (32,337,362)
Foreign Currency Transactions 44,154
================================================================================
Total Net Realized Loss (32,293,208)
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 37,030,424
Foreign Currency Transactions (2,203)
================================================================================
Total Net Appreciation 37,028,221
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY CONTRACTS 4,735,013
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,231,133
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TECHNOLOGY FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Loss $ (503,880) $ (51,696)
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions (32,293,208) 857,691
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 37,028,221 21,387,477
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 4,231,133 22,193,472
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 550,794,642 103,325,672
Amounts Paid for Repurchases of Shares (153,875,569) (33,104,826)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 396,919,073 70,220,846
================================================================================
TOTAL INCREASE IN NET ASSETS 401,150,206 92,414,318
NET ASSETS
Beginning of Period 93,991,557 1,577,239
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Loss of ($503,954) and
($74), respectively) $ 495,141,763 $ 93,991,557
================================================================================
----------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 12,753,554 3,731,704
Shares Repurchased (3,755,102) (1,310,179)
================================================================================
NET INCREASE IN FUND SHARES 8,998,452 2,421,525
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund,
Equity Income Fund, Financial Services Fund, Health Sciences Fund, High Yield
Fund, Market Neutral Fund, Real Estate Opportunity 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.
INVESCO Variable Investment Funds, Inc. 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.
Investments in shares of investment companies are valued at the net asset value
of the respective mutual fund as calculated each day.
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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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.
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.
<PAGE>
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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $438,877,696 and $90,620,915, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $70,709,015 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $16,518,767, resulting in net
appreciation of $54,190,248.
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 six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $166. Unfunded accrued
pension costs of $0 and pension liability of $238 are included in Prepaid
Expenses and Accrued Expenses, respectively, in the Statements 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000 there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 37.13 $ 14.34 $ 11.49 $ 10.00
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.04) (0.00) (0.03) 0.05
Net Gains on Securities (Both Realized and Unrealized) 5.85 22.79 2.96 1.44
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 5.81 22.79 2.93 1.49
===========================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.01 0.00
In Excess of Net Investment Income 0.00 0.00 0.01 0.00
Distributions from Capital Gains 0.00 0.00 0.06 0.00
===========================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.00 0.08 0.00
===========================================================================================================================
Net Asset Value--End of Period $ 42.94 $ 37.13 $ 14.34 $ 11.49
===========================================================================================================================
TOTAL RETURN(c) 15.65%(d) 158.93% 25.69% 14.80%(d)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 495,142 $ 93,992 $ 1,577 $ 414
Ratio of Expenses to Average Net Assets(e)(f) 0.53%(d) 1.31% 1.40% 0.48%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets(e) (0.17%)(d) (0.40%) (0.14%) 0.95%(g)
Portfolio Turnover Rate 34%(d) 95% 239% 102%(d)
</TABLE>
(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 periods 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
six months ended June 30, 2000, 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 0.53%, 1.52%, 6.47% and 19.25% (annualized), respectively,
and ratio of net investment loss to average net assets would have been
(0.17%), (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 (which
may include custodian fees).
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S13 9186 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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
CUMULATIVE TOTAL RETURN
AS OF 6/30/00 (1)
Since inception (9/99) 82.30%
-------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares
rose 10.82%. This is comparable to the return of the S&P 500 Index, which fell
0.43% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Graph: VIF-Telecommunications Fund
Total Return Since Inception vs S&P 500 Index and
MSCI-EAFE Index
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 value of 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 June 30, 2000.
Telecommunications stocks came under heavy pressure beginning in late
March as investors re-examined valuations in light of Federal Reserve tightening
and other factors. But many of these same stocks came charging back in June as
high-growth, higher-risk issues enjoyed a broad recovery.
Among the hardest hit telecommunications stocks were competitive local
exchange carriers (CLECs), telephone service providers that compete with the
regional Bell operating companies. Not only have many of these companies found
it difficult to raise financing in a challenging high-yield market, but the
group received a psychological blow in May when GST Communications, a CLEC in
the western United States, declared bankruptcy. Equipment stocks, mainly by
virtue of their very steep valuations, also fared poorly at the beginning of the
second quarter.
The fund's equipment stocks performed well om recent weeks. Redback
Networks was particularly strong, driven ahead in part by the company's signing
up of an important customer. Juniper Networks and Nortel Networks also moved
higher as the companies announced a partnership to sell Juniper's Internet
routers. The industry conference Supercomm early in the month generated
excitement in the sector generally, helping to lift many leading-edge companies.
For the most part, the fund's service providers also fared well in recent
weeks. With the consummation of the merger of US WEST and Qwest Communications
International in sight, both stocks moved higher as investors became more
enthusiastic about the resulting synergies. The fund's domestic wireless stocks
performed well due to indications of strong subscriber growth, and increased
takeover speculation following the collapse of the Sprint Corp/WorldCom Inc
merger -- and speculation that WorldCom might now look elsewhere. Overall,
however, wireless stocks suffered. Investors worried that subscriber growth
appeared to be plateauing in some of the most developed markets, such as France.
Additionally, the end of the handset subsidy in Korea and the residue of costly
spectrum auctions made the future murkier for wireless firms.
With valuations throughout much of the sector still very high, we would
not be surprised to see volatility continue. Still, fundamentals remain very
positive for most companies, as do the growth opportunities posed by technology,
deregulation, and globalization. Going forward, we plan to maintain our focus on
equipment firms, with a secondary emphasis on carriers leveraging technology to
seize market share. We have recently reduced our weighting in satellite firms,
given signs that subscriber growth is slowing.
<PAGE>
FUND MANAGEMENT
The VIF-Telecommunications Fund is managed by Vice President 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 NASDAQ COMPOSITE IS AN UNMANAGED
INDEX OF STOCKS TRADED OVER-THE-COUNTER.THE MSCI-EAFE INDEX IS AN UNMANAGED
INDEX DESIGNED TO MEASURE THE OVERALL CONDITION OF OVERSEAS MARKETS.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS FUND
85.65 COMMON STOCKS
1.82 BROADCASTING
EchoStar Communications Class A Shrs(a) 110,020 $ 3,642,693
General Motors Class H Shrs(a) 19,500 1,711,125
===============================================================================================
5,353,818
0.41 CABLE
NTL Inc(a) 20,037 1,199,715
===============================================================================================
21.18 COMMUNICATIONS--EQUIPMENT & MANUFACTURING
ADC Telecommunications(a) 34,900 2,927,237
Carrier 1 International SA ADR Representing
1/5 Ord Shr(a) SZ 46,000 534,750
CIENA Corp(a) 34,900 5,817,394
Comverse Technology(a) 72,100 6,705,300
Copper Mountain Networks(a) 45,300 3,992,062
E-Tek Dynamics(a) 10,800 2,849,175
JDS Uniphase(a) 49,000 5,873,875
Lucent Technologies 34,500 2,044,125
Metasolv Software(a) 15,700 690,800
Metromedia Fiber Network Class A Shrs(a) 87,080 3,455,987
Next Level Communications(a) 12,700 1,089,025
Nokia Corp Sponsored ADR Representing Ord Shrs FI 122,620 6,123,336
Nortel Networks CA 115,840 7,906,080
QUALCOMM Inc(a) 17,840 1,070,400
Scientific-Atlanta Inc 57,460 4,280,770
Tekelec(a) 110,100 5,305,444
Telefonaktiebolaget LM Ericsson AB Sponsored ADR
Representing Series B Shrs SW 84,400 1,688,000
===============================================================================================
62,353,760
14.26 COMPUTER RELATED
AsiaInfo Holdings(a) 24,100 1,076,969
Cisco Systems(a) 103,880 6,602,872
EMC Corp(a) 107,840 8,296,940
Equant NV New York Shrs(a) NL 8,640 371,520
Exodus Communications(a) 53,600 2,468,950
Foundry Networks(a) 7,500 828,750
Handspring Inc(a) 20,000 540,000
Inktomi Corp(a) 22,880 2,705,560
Internap Network Services(a) 60,800 2,524,150
Juniper Networks(a) 47,800 6,957,887
ONI Systems(a) 2,200 257,847
Phone.com Inc(a) 10,200 664,275
Psion PLC(a) UK 102,300 989,632
QS Communications AG(a) GM 28,100 279,603
Redback Networks(a) 26,760 4,763,280
Sycamore Networks(a) 12,700 1,401,763
Vitria Technology(a) 20,100 1,228,613
===============================================================================================
41,958,611
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
12.31 ELECTRONICS--SEMICONDUCTOR
Applied Micro Circuits(a) 45,280 $ 4,471,400
Broadcom Corp Class A Shrs(a) 14,420 3,157,079
Conexant Systems(a) 26,260 1,276,892
Motorola Inc 57,171 1,661,532
New Focus(a) 2,900 238,162
PMC-Sierra Inc(a) CA 43,640 7,754,283
RF Micro Devices(a) 29,190 2,557,774
SDL Inc(a) 37,460 10,683,124
Texas Instruments 21,900 1,504,256
Vitesse Semiconductor(a) 39,680 2,918,960
===============================================================================================
36,223,462
1.69 ENTERTAINMENT
Gemstar International Group Ltd(a) 81,020 4,978,932
===============================================================================================
2.12 MANUFACTURING
Corning Inc 23,100 6,234,112
===============================================================================================
0.35 RETAIL
RadioShack Corp 21,740 1,029,933
===============================================================================================
2.12 SERVICES
America Online(a) 20,460 1,079,265
CSG Systems International(a) 61,830 3,466,344
Yahoo! Inc(a) 13,700 1,697,088
===============================================================================================
6,242,697
8.79 TELECOMMUNICATIONS-- CELLULAR & WIRELESS
Aether Systems(a) 10,500 2,152,500
China Mobile Ltd(a) HK 351,100 3,096,497
Crown Castle International(a) 69,020 2,519,230
Dobson Communications(a) 25,000 481,250
Leap Wireless International(a) 19,100 897,700
Nextel Communications Class A Shrs(a) 47,100 2,881,931
NTT DoCoMo JA 131 3,553,424
Partner Communications Ltd ADR Representing
Ord Shrs(a) IS 38,200 362,900
Telecom Italia Mobile SpA IT 183,010 1,877,137
Tritel Inc(a) 8,400 249,375
Vodafone AirTouch PLC Sponsored ADR
Representing 10 Ord Shrs UK 919,026 3,714,807
VoiceStream Wireless(a) 24,900 2,895,792
Winstar Communications(a) 35,240 1,193,755
===============================================================================================
25,876,298
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
7.95 TELECOMMUNICATIONS-- LONG DISTANCE
Allegiance Telecom(a) 51,615 $ 3,303,360
AT&T Corp 31,540 997,452
Completel Europe NV(a) NL 43,100 537,104
Global TeleSystems(a) 59,660 719,649
GT Group Telecom Class B Shrs(a) CA 24,800 392,150
ITC DeltaCom(a) 2,300 51,319
KPNQwest NV Class C Shrs(a) NL 30,200 1,196,675
Nextel Partners Class A Shrs(a) 213,000 6,935,813
Nippon Telegraph & Telephone JA 107 1,425,925
PSINet Inc(a) 53,420 1,342,178
Qwest Communications International(a) 59,530 2,957,897
Sprint Corp 56,300 2,871,300
Viatel Inc(a) 23,460 670,076
===============================================================================================
23,400,898
12.65 TELEPHONE
Amdocs Ltd(a) 89,270 6,851,473
AT&T Canada Class B Depository Receipts(a) CA 56,020 1,859,164
BellSouth Corp 42,460 1,809,857
Cable & Wireless PLC UK 121,900 2,065,052
COLT Telecom Group PLC(a) UK 59,700 1,988,356
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) UK 7,620 1,033,463
Hanaro Telecom Sponsored ADR Representing
Ord Shrs(a) KS 78,100 551,581
Illuminet Holdings(a) 27,300 1,388,887
Koninklijke NV NL 17,800 799,405
McLeodUSA Inc Class A Shrs(a) 163,650 3,385,509
Net2000 Communications(a) 2,000 32,750
NEXTLINK Communications Class A Shrs(a) 39,400 1,494,738
RCN Corp(a) 56,460 1,432,673
SBC Communications 83,940 3,630,405
Tele1 Europe Holding AB(a) SW 45,000 554,099
Time Warner Telecom Class A Shrs(a) 72,600 4,673,625
US WEST 43,000 3,687,250
===============================================================================================
37,238,287
TOTAL COMMON STOCKS (Cost $232,274,570) 252,090,523
===============================================================================================
0.15 PREFERRED STOCKS
0.15 TELECOMMUNICATIONS--LONG DISTANCE
IXC Communications, Jr Exchangeable Pfd
Series B Shrs(b), 12.500% (Cost $498,400) 448 452,480
===============================================================================================
0.08 FIXED INCOME SECURITIES
0.08 CORPORATE BONDS
0.08 TELECOMMUNICATIONS--LONG DISTANCE
ESAT Telecom Group PLC, Sr Step-up Notes,
Zero Coupon(c) 2/1/2007 (Amortized Cost $221,159) IE $ 235,000 222,075
===============================================================================================
14.12 SHORT-TERM INVESTMENTS
8.15 COMMERCIAL PAPER
3.40 CONSUMER FINANCE
Ford Motor Credit
6.730%, 7/3/2000 $5,000,000 5,000,000
6.710%, 7/5/2000 $5,000,000 5,000,000
===============================================================================================
10,000,000
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
4.75 OIL & GAS RELATED
Texaco Inc, 6.770%, 7/5/2000 $14,000,000 $14,000,000
===============================================================================================
TOTAL COMMERCIAL PAPER (Cost $24,000,000) 24,000,000
===============================================================================================
2.93 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market Reserve
Fund 6.489% (Cost $8,614,810) 8,614,810 8,614,810
===============================================================================================
3.04 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
6/30/2000 due 7/3/2000 at 6.400%, repurchased
at $8,934,763 (Collateralized by US Treasury
Inflationary Index Bonds, due 4/15/2028 at
3.625%, value $9,666,675)(Cost $8,930,000) $8,930,000 8,930,000
===============================================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $41,544,810) 41,544,810
===============================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $274,538,939)
(Cost for Income Tax Purposes $276,119,912) $294,309,888
===============================================================================================
</TABLE>
(a) Security is non-income producing.
(b) Security is a payment-in-kind (PIK) security. PIK securities may make
interest payments in additional securities.
(c) 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.
<PAGE>
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
--------------------------------------------------------------------------------
Canada CA 6.09% $ 17,911,677
Finland FI 2.08 6,123,336
Germany GM 0.09 279,603
Hong Kong HK 1.05 3,096,497
Ireland IE 0.08 222,075
Israel IS 0.12 362,900
Italy IT 0.64 1,877,137
Japan JA 1.69 4,979,349
Netherlands NL 0.99 2,904,704
Republic of South Korea KS 0.19 551,581
Sweden SW 0.76 2,242,099
Switzerland SZ 0.18 534,750
United Kingdom UK 3.33 9,791,310
United States US 82.71 243,432,870
================================================================================
100.00% $294,309,888
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
TELECOMMUNICATIONS
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $274,538,939
================================================================================
At Value(a) $294,309,888
Foreign Currency (Cost $24,360) 24,038
Receivables:
Investment Securities Sold 24,677
Fund Shares Sold 6,376,807
Dividends and Interest 34,239
Prepaid Expenses and Other Assets 16,232
================================================================================
TOTAL ASSETS 300,785,881
================================================================================
LIABILITIES
Payables:
Custodian 969
Investment Securities Purchased 6,927,043
Fund Shares Repurchased 6,663,804
Accrued Expenses and Other Payables 7,539
================================================================================
TOTAL LIABILITIES 13,599,355
================================================================================
NET ASSETS AT VALUE $287,186,526
================================================================================
NET ASSETS
Paid-in Capital(b) $274,720,205
Accumulated Undistributed Net Investment Loss (101,874)
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (7,202,428)
Net Appreciation of Investment Securities and Foreign
Currency Transactions 19,770,623
================================================================================
NET ASSETS AT VALUE $287,186,526
================================================================================
Shares Outstanding 15,754,767
NET ASSET VALUE, Offering and Redemption Price per Share $ 18.23
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $8,930,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
TELECOMMUNICATIONS
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 182,298
Dividends from Affiliated Investment Companies 114,817
Interest 598,877
Foreign Taxes Withheld (9,200)
================================================================================
TOTAL INCOME 886,792
================================================================================
EXPENSES
Investment Advisory Fees 713,709
Transfer Agent Fees 2,500
Administrative Services Fees 257,177
Custodian Fees and Expenses 26,963
Directors' Fees and Expenses 5,877
Professional Fees and Expenses 9,119
Registration Fees and Expenses 224
Reports to Shareholders 6,756
Other Expenses 1,076
================================================================================
TOTAL EXPENSES 1,023,401
Fees and Expenses Absorbed by Investment Adviser (1,364)
Fees and Expenses Paid Indirectly (25,240)
================================================================================
NET EXPENSES 996,797
================================================================================
NET INVESTMENT LOSS (110,005)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (7,626,876)
Foreign Currency Transactions (84,648)
================================================================================
Total Net Realized Loss (7,711,524)
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 7,427,975
Foreign Currency Transactions (433,060)
================================================================================
Total Net Appreciation 6,994,915
================================================================================
NET LOSS ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS (716,609)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (826,614)
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TELECOMMUNICATIONS FUND
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED (Note 1)
OPERATIONS
Net Investment Income (Loss) $ (110,005) $ 8,131
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency Transactions 7,711,524) 509,096
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions 6,994,915 12,775,708
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS (826,614) 13,292,935
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 325,635,308 70,669,026
Amounts Paid for Repurchases of Shares (105,271,950) (16,560,179)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 220,363,358 54,108,847
================================================================================
TOTAL INCREASE IN NET ASSETS 219,536,744 67,401,782
NET ASSETS
Initial Subscription (Note 1) -- 248,000
Beginning of Period 67,649,782 --
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
(Loss) of ($101,874) and $8,131, respectively) $287,186,526 $ 67,649,782
================================================================================
--------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) -- 24,800
Shares Sold 17,692,767 5,225,874
================================================================================
17,692,767 5,250,674
Shares Repurchased (6,051,118) (1,137,556)
================================================================================
NET INCREASE IN FUND SHARES 11,641,649 4,113,118
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund, Real Estate Opportunity 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.
INVESCO Variable Investment Funds, Inc. 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.
Investments in shares of investment companies are valued at the net asset value
of the respective mutual fund as calculated each day.
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. 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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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.
<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.
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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $221,736,009 and $27,683,311 respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $38,788,013 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $20,598,037 resulting in net
appreciation of $18,189,976.
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 for the six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $120. Unfunded accrued
pension costs of $0 and pension liability of $160 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 the 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 --INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999(a)
UNAUDITED
PER SHARE DATA
Net Asset Value--Beginning of Period $ 16.45 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.01) 0.00
Net Gains on Securities
(Both Realized and Unrealized) 1.79 6.45
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.78 6.45
================================================================================
Net Asset Value--End of Period $ 18.23 $ 16.45
================================================================================
TOTAL RETURN(c) 10.82%(d) 64.50%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 287,187 $ 67,650
Ratio of Expenses to Average Net Assets(e)(f) 0.53%(d) 1.27%(g)
Ratio of Net Investment Income
(Loss) to Average Net Assets(e) (0.06%)(d) 0.11%(g)
Portfolio Turnover Rate 16%(d) 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 periods shown.
(d) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000 and the period ended December 31, 1999. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 0.53% and 1.28% (annualized), respectively, and
ratio of net investment income (loss) to average net assets would have been
(0.06%) and 0.10% (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 (which
may include custodian fees).
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to state in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S739 9187 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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-TOTAL RETURN FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year (13.00%)
-------------------------------------------
5 years 9.00%
-------------------------------------------
Since inception (6/94) 9.66%
-------------------------------------------
<PAGE>
Graph: VIF-Total Return Fund
Total Return Since Inception vs S&P 500 Index and
Lehman Government/Corporate Bond 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 the value of 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 June 30, 2000.
VIF-TOTAL RETURN FUND
For the six-month period ended June 30, 2000, the value of your shares
fell 3.92%. This is comparable to the return of both the S&P 500 Index, which
fell 0.43% during the same period, and the Lehman Government/Corporate Bond
Index, which rose 4.18%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
The major stock indexes all suffered declines in the second quarter,
reflecting fears of rising interest rates. Investors rotated out of high
valuation names to revisit "Old Economy" shares trading at attractive
valuations. Interest rate fears eased in June, however, after signs of slowing
economic growth prompted the Federal Reserve to leave interest rates untouched
-- following a half percentage point increase in May. By mid-year, investors
rushed back to the high growth stocks, such as Microsoft Corp and Cisco Systems,
which had been sold off in the previous months.
Easing interest rate fears helped the Lehman Government/Corporate Index
gain ground to end the period on a positive note. While longer-term corporate
securities led the market in June, intermediate government securities produced a
higher return for the quarter overall.
The fund slightly underperformed a 60/40 benchmark consisting of the S&P
500 Index and the Lehman Government/Corporate indexes during recent weeks. Our
results reflected our overweight allocation in equities, which suffered downward
volatility during the period. Nonetheless, the fund's equity holdings
outperformed the equities in the S&P 500 Index -- largely due to our reduced
exposure to the volatile technology sector. Additionally, the fund's specific
technology holdings fared much better than those represented in the S&P 500.
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. This strategy reflects our belief that the equity markets will
offer higher risk-adjusted returns.
FUND MANAGEMENT
Effective July 1, 2000, David S. Griffin, of INVESCO Capital Management Inc,
assumed management responsibility for VIF-Total Return Fund. He was formerly the
fund's assistant portfolio manager and joined INVESCO in 1986. He earned his MBA
at William & Mary College, and his BA at Ohio Wesleyan University. David began
his investment career in 1982 and 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 RUSSELL 1000 INDEX IS AN
UNMANAGED INDEX OF LARGE-CAP COMMON STOCKS, AND THE DOW JONES INDUSTRIAL AVERAGE
IS AN UNMANAGED INDEX OF 30 LARGE-CAP STOCKS. THE LEHMAN GOVERNMENT/CORPORATE
BOND IS AN UNMANAGED INDEX INDICATIVE OF THE BROAD FIXED-INCOME MARKET. THE
NASDAQ COMPOSITE IS AN UNMANAGED INDEX OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 20000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
TOTAL RETURN FUND
64.53 COMMON STOCKS
1.57 AEROSPACE & DEFENSE
Honeywell International 2,000 $ 67,375
Raytheon Co Class B Shrs 3,000 57,750
United Technologies 3,000 176,625
================================================================================
301,750
0.38 ALUMINUM
Alcoa Inc 2,500 72,500
================================================================================
1.33 AUTO PARTS
Cooper Tire & Rubber 5,000 55,625
Genuine Parts 1,000 20,000
Johnson Controls 3,500 179,594
================================================================================
255,219
1.12 AUTOMOBILES
Ford Motor 5,000 215,000
================================================================================
5.48 BANKS
Bank of America 7,000 301,000
Chase Manhattan 2,850 131,278
FleetBoston Financial 6,500 221,000
National City 4,920 83,948
PNC Financial Services Group 3,500 164,063
Wells Fargo & Co 4,000 155,000
================================================================================
1,056,289
0.78 BEVERAGES
Anheuser-Busch Cos 2,000 149,375
================================================================================
1.29 BUILDING MATERIALS
Lowe's Cos 3,200 131,400
Sherwin-Williams Co 5,500 116,531
================================================================================
247,931
0.63 CABLE
Comcast Corp Class A Shrs(a) 3,000 121,500
================================================================================
1.12 CHEMICALS
Dow Chemical 2,400 72,450
du Pont (E I) de Nemours 1,000 43,750
Praxair Inc 2,000 74,875
Union Carbide 500 24,750
================================================================================
215,825
1.02 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
Lucent Technologies 1,000 59,250
Tellabs Inc(a) 2,000 136,875
================================================================================
196,125
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
5.88 COMPUTER RELATED
Adaptec Inc(a) 2,500 $ 56,875
Cadence Design Systems(a) 2,000 40,750
Computer Associates International 4,500 230,344
Compuware Corp(a) 8,000 83,000
Hewlett-Packard Co 1,500 187,312
International Business Machines 1,700 186,256
Microsoft Corp(a) 3,500 280,000
Unisys Corp(a) 4,700 68,444
================================================================================
1,132,981
0.20 CONGLOMERATES
National Service Industries 2,000 39,000
================================================================================
0.65 CONSUMER FINANCE
Household International 3,000 124,687
================================================================================
0.69 DISTRIBUTION
SUPERVALU Inc 7,000 133,438
================================================================================
0.95 ELECTRIC UTILITIES
DTE Energy 3,000 91,687
GPU Inc 2,500 67,656
Southern Co 1,000 23,313
================================================================================
182,656
1.93 ELECTRICAL EQUIPMENT
Emerson Electric 2,000 120,750
General Electric 4,750 251,750
================================================================================
372,500
2.08 ELECTRONICS-- SEMICONDUCTOR
Intel Corp 3,000 401,062
================================================================================
3.41 FINANCIAL
Associates First Capital Class A Shrs 3,000 66,938
Citigroup Inc 5,500 331,375
Fannie Mae 3,000 156,562
Freddie Mac 2,500 101,250
================================================================================
656,125
0.22 FOODS
Heinz (HJ) Co 950 41,562
================================================================================
7.16 HEALTH CARE DRUGS-- PHARMACEUTICALS
Abbott Laboratories 3,000 133,687
American Home Products 3,000 176,250
Bristol-Myers Squibb 4,000 233,000
Johnson & Johnson 3,000 305,625
Lilly (Eli) & Co 1,500 149,813
Merck & Co 3,000 229,875
Schering-Plough Corp 3,000 151,500
================================================================================
1,379,750
0.18 HEALTH CARE RELATED
Quintiles Transnational(a) 2,500 35,312
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.48 HOUSEHOLD FURNITURE & APPLIANCES
Whirlpool Corp 2,000 $ 93,250
================================================================================
0.59 HOUSEHOLD PRODUCTS
Procter & Gamble 2,000 114,500
================================================================================
2.04 INSURANCE
American General 2,700 164,700
MGIC Investment 5,000 227,500
================================================================================
392,200
1.19 INSURANCE BROKERS
Marsh & McLennan 2,200 229,763
================================================================================
1.41 INVESTMENT BANK/BROKER FIRM
Morgan Stanley Dean Witter & Co 3,250 270,563
================================================================================
0.34 IRON & STEEL
Nucor Corp 2,000 66,375
================================================================================
0.53 MACHINERY
Caterpillar Inc 3,000 101,625
================================================================================
2.97 MANUFACTURING
Federal Signal 2,800 46,200
Illinois Tool Works 3,000 171,000
Minnesota Mining & Manufacturing 1,000 82,500
Textron Inc 2,500 135,781
Tyco International 1,500 71,063
York International 2,500 65,313
================================================================================
571,857
0.82 OFFICE EQUIPMENT & SUPPLIES
Office Depot(a) 12,000 75,000
Xerox Corp 4,000 83,000
================================================================================
158,000
4.40 OIL & GAS RELATED
BP Amoco PLC Sponsored ADR Representing
6 Ord Shrs 2,768 156,565
Chevron Corp 2,000 169,625
Exxon Mobil 4,000 314,000
Repsol SA Sponsored ADR Representing Ord Shrs 10,432 206,684
================================================================================
846,874
0.76 PAPER & FOREST PRODUCTS
International Paper 3,000 89,437
Kimberly-Clark Corp 1,000 57,375
================================================================================
146,812
0.46 PHOTOGRAPHY & IMAGING
Eastman Kodak 1,500 89,250
================================================================================
0.31 PUBLISHING
Gannett Co 1,000 59,812
================================================================================
0.39 RAILROADS
Union Pacific 2,000 74,375
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.43 RESTAURANTS
McDonald's Corp 2,500 $ 82,344
================================================================================
0.99 RETAIL
Albertson's Inc 4,000 133,000
Target Corp 1,000 58,000
================================================================================
191,000
1.16 SERVICES
First Data 4,500 223,312
================================================================================
2.95 TELECOMMUNICATIONS-- LONG DISTANCE
AT&T Corp 9,115 288,262
Sprint Corp 5,500 280,500
================================================================================
568,762
2.87 TELEPHONE
ALLTEL Corp 1,200 74,325
GTE Corp 2,000 124,500
SBC Communications 3,000 129,750
US WEST 1,000 85,750
WorldCom Inc(a) 3,000 137,625
================================================================================
551,950
0.23 TEXTILE-- APPAREL MANUFACTURING
Liz Claiborne 1,250 44,063
================================================================================
1.10 TOBACCO
Philip Morris 8,000 212,500
================================================================================
0.04 TRUCKS & PARTS
Visteon Corp(a) 654 7,930
================================================================================
TOTAL COMMON STOCKS (Cost $11,108,897) 12,427,704
================================================================================
30.28 FIXED INCOME SECURITIES
9.97 US GOVERNMENT OBLIGATIONS
US Treasury Bonds
8.125%, 8/15/2019 $ 300,000 361,875
7.625%, 2/15/2025 $ 300,000 353,813
7.250%, 8/15/2022 $ 400,000 448,750
US Treasury Notes
7.500%, 11/15/20 01 $ 450,000 455,766
6.375%, 8/15/2002 $ 300,000 299,531
================================================================================
TOTAL US GOVERNMENT OBLIGATIONS
(Amortized Cost $1,890,127) 1,919,735
================================================================================
9.62 US GOVERNMENT AGENCY OBLIGATIONS
Fannie Mae
Benchmark Notes
6.625%, 9/15/2009 $ 350,000 337,540
5.375%, 3/15/2002 $ 300,000 292,718
5.125%, 2/13/2004 $ 108,000 101,466
Gtd Mortgage Pass-Through Certificates
8.500%, 3/1/2010 $ 40,312 41,195
7.000%, 12/1/2027 $ 127,433 123,192
6.000%, 5/1/2009 $ 81,249 78,059
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
Freddie Mac
Gold, Participation Certificates
8.000%, 10/1/2010 $ 21,868 $ 22,096
6.500%, 7/1/2001 $ 29,539 29,236
Notes
6.875%, 1/15/2005 $ 100,000 99,384
5.750%, 7/15/2003 $ 500,000 482,981
Government National Mortgage Association I
Pass-Through Certificates
7.500%, 3/15/2026 $ 38,079 37,877
7.000%, 4/15/2028 $ 212,704 206,925
================================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Amortized Cost $1,854,910) 1,852,669
================================================================================
2.02 ASSET-BACKED SECURITIES
2.02 CONSUMER FINANCE
Chase Manhattan Credit Card Master Trust,
Series 1996-3 Class A Shrs,
7.040%, 2/15/2005 $ 200,000 199,656
Discover Card Master Trust I, Series 1998-7
Class A Shrs, 5.600%, 5/16/2006 $ 200,000 189,920
================================================================================
TOTAL ASSET-BACKED SECURITIES
(Amortized Cost $407,543) 389,576
================================================================================
8.67 CORPORATE BONDS
0.49 AUTO PARTS
Dana Corp, Notes, 6.250%, 3/1/2004 $ 100,000 94,341
================================================================================
0.45 AUTOMOBILES
Ford Motor, Bonds, 6.500%, 8/1/2018 $ 100,000 86,112
================================================================================
2.97 BANKS
ABN Amro Bank NV, Sub Notes, 7.550%,
6/28/2006 $ 100,000 99,507
Bayerische Landesbank, Sub Notes, 6.375%,
10/15/2005 $ 100,000 94,813
NationsBank Corp, Sub Notes, 6.500%,
3/15/2006 $ 100,000 94,608
SunTrust Banks, Sr Notes, 6.250%, 6/1/2008 $ 100,000 90,808
Wachovia Bank, Euro Medium-Term Notes
Series 3, 7.000%, 10/17/2008 $ 100,000 95,098
Wells Fargo & Co, Sr Notes, 6.625%,
7/15/2004 $ 100,000 97,543
================================================================================
572,377
0.57 ELECTRIC UTILITIES
National Rural Utilites, Collateral Trust,
6.550%, 11/1/2018 $ 125,000 109,931
================================================================================
0.51 FINANCIAL
Associates Corp of North America,
Sr Notes, 6.375%, 10/15/2002 $ 100,000 97,918
================================================================================
0.36 HEALTH CARE RELATED
Guidant Corp, Notes, 6.150%, 2/15/2006 $ 75,000 68,664
================================================================================
0.50 HOUSEHOLD PRODUCTS
Procter & Gamble, Notes, 5.250%, 9/15/2003 $ 100,000 95,565
================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
0.46 LEISURE TIME
Carnival Corp, Notes, 6.150%, 4/15/2008 $ 100,000 $ 89,097
================================================================================
0.48 MACHINERY
Cooper Industries, Medium-Term Notes,
Series 3, 6.375%, 5/8/2008 $ 100,000 92,981
================================================================================
0.47 PERSONAL CARE
Colgate-Palmolive Co, Medium-Term Notes,
Series C, 5.580%, 11/6/2008 $ 100,000 90,235
================================================================================
0.51 RETAIL
Wal-Mart Stores, Sr Notes, 6.550%,
8/10/2004 $ 100,000 98,684
================================================================================
0.45 TELECOMMUNICATIONS--LONG DISTANCE
Sprint Capital, Gtd Sr Notes, 6.875%,
11/15/2028 $ 100,000 86,508
================================================================================
0.45 TELEPHONE
GTE Northwest, Deb, 5.550%, 10/15/2008 $ 100,000 86,876
================================================================================
TOTAL CORPORATE BONDS
(Amortized Cost $1,781,653) 1,669,289
================================================================================
TOTAL FIXED INCOME SECURITIES
(Amortized Cost $5,934,233) 5,831,269
================================================================================
5.19 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000, due 7/3/2000 at 6.400%,
repurchased at $1,000,533 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028 at 3.625%, value $1,083,115)
(Cost $1,000,000) $1,000,000 1,000,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $18,043,130)
(Cost for Income Tax Purposes $18,086,099) $19,258,973
================================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
TOTAL
RETURN
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 18,043,130
================================================================================
At Value(a) $ 19,258,973
Cash 6,530
Receivables:
Investment Securities Sold 171,299
Fund Shares Sold 83,284
Dividends and Interest 126,654
Prepaid Expenses and Other Assets 30,247
================================================================================
TOTAL ASSETS 19,676,987
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 327,771
Fund Shares Repurchased 17,033
Accrued Expenses and Other Payables 10,178
================================================================================
TOTAL LIABILITIES 354,982
================================================================================
NET ASSETS AT VALUE $ 19,322,005
================================================================================
NET ASSETS
Paid-in Capital(b) $ 16,657,342
Accumulated Undistributed Net Investment Income 354,422
Accumulated Undistributed Net Realized
Gain on Investment Securities and
Foreign Currency Transactions 1,094,398
Net Appreciation of Investment Securities
and Foreign Currency Transactions 1,215,843
================================================================================
NET ASSETS AT VALUE $ 19,322,005
================================================================================
Shares Outstanding 1,290,574
NET ASSET VALUE, Offering and Redemption Price per Share $ 14.97
================================================================================
(a) Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $1,000,000.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
TOTAL
RETURN
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 174,829
Interest 216,795
Foreign Taxes Withheld (1,077)
================================================================================
TOTAL INCOME 390,547
================================================================================
EXPENSES
Investment Advisory Fees 78,902
Transfer Agent Fees 2,500
Administrative Services Fees 31,536
Custodian Fees and Expenses 5,599
Directors' Fees and Expenses 4,940
Interest Expenses 1,243
Professional Fees and Expenses 8,741
Registration Fees and Expenses 31
Reports to Shareholders 17,973
Other Expenses 3,660
================================================================================
TOTAL EXPENSES 155,125
Fees and Expenses Absorbed by Investment Adviser (28,712)
Fees and Expenses Paid Indirectly (5,583)
================================================================================
NET EXPENSES 120,830
================================================================================
NET INVESTMENT INCOME 269,717
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on Investment Securities and
Foreign Currency Transactions (1,430,112)
Change in Net Depreciation of Investment Securities (92,044)
================================================================================
NET LOSS ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS (1,522,156)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $(1,252,439)
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 269,717 $ 697,488
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions (1,430,112) 2,529,339
Change in Net Depreciation of Investment Securities
and Foreign Currency Transactions (92,044) (3,779,125)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS (1,252,439) (552,298)
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (637,406)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (106,292)
================================================================================
TOTAL DISTRIBUTIONS 0 (743,698)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 3,079,079 10,278,231
Reinvestment of Distributions 0 743,698
================================================================================
3,079,079 11,021,929
Amounts Paid for Repurchases of Shares (10,243,482) (17,617,152)
================================================================================
NET DECREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (7,164,403) (6,595,223)
================================================================================
TOTAL DECREASE IN NET ASSETS (8,416,842) (7,891,219)
NET ASSETS
Beginning of Period 27,738,847 35,630,066
================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $354,422
and $84,705, respectively) $19,322,005 $ 27,738,847
================================================================================
---------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 206,769 616,233
Shares Issued from Reinvestment of Distributions 0 48,292
================================================================================
206,769 664,525
Shares Repurchased (696,278) (1,033,568)
================================================================================
NET DECREASE IN FUND SHARES (489,509) (369,043)
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund, Real Estate Opportunity 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 Variable Investment Funds, Inc. 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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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.
<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.
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.
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 six months ended June 30, 2000.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $6,866,454 and $14,076,962 respectively. For the year six
months ended June 30, 2000, the aggregate cost of purchases and proceeds from
sales of U.S. Government securities were $2,801,742 and $2,179,139,
respectively.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $2,411,292 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $1,238,418 resulting in net
appreciation of $1,172,874.
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 six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $235. Unfunded accrued
pension costs of $242 and pension liability of $1,839 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ending June 30, 2000, the Fund borrowed cash at a weighted
average rate ranging from 5.84%-5.94%. At June 30, 2000, there were no such
borrowings and/ or lendings outstanding.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
TOTAL RETURN FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $15.58 $16.58 $15.81 $13.21 $12.14 $10.09
=======================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.41 0.37 0.36 0.36 0.25
Net Gains or (Losses) on Securites
(Both Realized and Unrealized) (0.84) (0.98) 1.13 2.66 1.12 2.05
=======================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.61) (0.57) 1.50 3.02 1.48 2.30
=======================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.37 0.36 0.34 0.36 0.24
In Excess of Net Investment Income 0.00 0.00 0.00 0.00 0.05 0.00
Distributions from Capital Gains 0.00 0.06 0.37 0.08 0.00 0.01
=======================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.43 0.73 0.42 0.41 0.25
=======================================================================================================
Net Asset Value--End of Period $14.97 $15.58 $16.58 $15.81 $13.21 $12.14
=======================================================================================================
TOTAL RETURN(a) (3.92%)(b) (3.40%) 9.56% 22.91% 12.18% 22.79%
RATIOS
Net Assets--End of Period ($000 Omitted) $19,322 $ 27,739 $ 35,630 $ 23,268 $13,513 $ 6,553
Ratio of Expenses to Average Net Assets(c)(d) 0.60%(b) 1.17% 1.01% 0.92% 0.94% 1.01%
Ratio of Net Investment Income
to Average Net Assets(c) 1.27%(b) 2.14% 2.50% 3.07% 3.44% 3.91%
Portfolio Turnover Rate 46%(b) 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 period shown.
(b) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000 and 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 0.73%, 1.01%,
1.10%, 1.30% and 2.51%, respectively, and ratio of net investment income to
average net assets would have been 1.14%, 2.50%, 2.89%, 3.08% and 2.41%,
respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S92 9189 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graph below illustrates, for the period from inception through
6/30/00, 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
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 11.29%
--------------------------------------------
5 years 18.54%
--------------------------------------------
Since inception (1/95) 16.99%
--------------------------------------------
<PAGE>
Graph: VIF-UTILITIES FUND
TOTAL RETURN SINCE INCEPTION VS S&P 500 INDEX AND
S&P UTILITIES 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 the value of a $10,000 investment in the S&P
Utilities Index, assuming in each case reinvestment of all dividends
and capital gain distributions, for the period from inception (1/95)
through June 30, 2000.
VIF-UTILITIES FUND
For the six-month period ended June 30, 2000, the value of your shares
rose 4.29%. This is comparable to the return of both the S&P 500 Index, which
fell 0.43% during the same period, and the S&P Utilities Index, which rose
15.33%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Higher interest rates weighed on equity markets in the first two months of
the second quarter as the Federal Reserve appeared intent on raising rates as
high as necessary to slow the economy -- a resolve demonstrated by the Board's
0.50% rate increase in May. The prospect of additional rate hikes worked against
high valuation stocks, especially in the telecommunications area, but favored
more defensive plays, including traditional electric utility and natural gas
shares. In June, however, many of the higher-growth stocks within the sector
rebounded strongly as signs of moderating economic growth eased interest rate
concerns.
Our recent performance was hindered relative to other utility funds by our
exposure to telecommunications stocks. While these holdings continued to offer
strong fundamentals and healthy earnings, they fared poorly in an environment
when investors shunned anything trading at heady valuations. Among the hardest
hit were utility companies with embedded telecommunication assets, as well as
competitive local exchange carriers (CLECs) -- telephone providers that compete
with the regional bell companies. The CLEC group has been plagued by the drought
in high-yield financing, as well as by the recent bankruptcy and disposition of
GST Communications, which effectively broke an industry valuation benchmark.
Nonetheless, we felt the sharp contraction in valuations has been overstated,
and has provided us an opportunity to add to our exposure to this group.
In the electric utility industry, we emphasized high-growth utilities that
operate primarily in non-regulated businesses. One example is Duke Energy, the
second largest investor-owned utility in the country. However, utilities that
surged earlier this year on enthusiasm over their "hidden telecommunications
assets" succumbed to the same downward volatility that pressured traditional
telecom stocks.
In June, however, conditions reversed, with traditional power producers
suffering while higher-growth firms fared better. Aside from their subdued
growth characteristics, another factor leading power providers lower in June was
the recent climb in power rates, leading to increased calls from state
legislators for capping rates. An exception to the rule was once again the
diversified power producer Calpine Corp, which had another strong month as it
announced further acquisitions in pursuit of its aggressive expansion program.
With the consummation of the merger of US WEST and Qwest Communications
International in sight, both stocks moved higher as investors became more
enthusiastic about the resulting synergies. WorldCom Inc also had a strong
finish to the period as investors showed relief that its planned merger with
Sprint Corp -- and the high price WorldCom Inc would pay for it -- would
apparently not come to pass given the Justice Department's objections. A number
of CLECs in the portfolio also enjoyed strong performance during the period.
<PAGE>
While traditional power utilities can play an important defensive role in
the portfolio -- as was demonstrated in recent months -- technological patterns,
regulatory visibility, and other factors appear to favor communications firms as
we move forward.
FUND MANAGEMENT
The VIF-Utilities Fund is managed by Vice President 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, WHILE THE S&P UTILITY INDEX IS AN
UNMANAGED INDEX OF UTILITIES STOCKS. THE NASDAQ COMPOSITE IS AN UNMANAGED INDEX
OF STOCKS TRADED OVER-THE-COUNTER.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
UTILITIES FUND
89.63 COMMON STOCKS
0.50 COMMUNICATIONS-- EQUIPMENT & MANUFACTURING
Lucent Technologies 900 $ 53,325
================================================================================
14.25 TELECOMMUNICATIONS
AT&T Corp 1,300 41,112
Crown Castle International(a) 6,300 229,950
GTE Corp 2,650 164,962
Nextel Communications Class A Shrs(a) 3,800 232,513
Qwest Communications International(a) 5,130 254,897
Sprint Corp 4,100 209,100
Vodafone AirTouch PLC 46,484 187,894
VoiceStream Wireless(a) 1,800 209,334
================================================================================
1,529,762
74.88 UTILITIES
27.85 ELECTRIC
AES Corp(a) 5,800 264,625
Alliant Energy 7,870 204,620
Ameren Corp 800 27,000
Calpine Corp(a) 6,300 414,225
Consolidated Edison 3,300 97,763
Constellation Energy Group 5,800 188,862
Duke Energy 4,326 243,878
Florida Progress 1,500 70,312
FPL Group 1,900 94,050
GPU Inc 900 24,356
Montana Power 7,600 268,375
PG&E Corp 4,600 113,275
Pinnacle West Capital 2,300 77,913
Reliant Energy 4,700 138,944
SCANA Corp 7,900 190,588
ScottishPower PLC Sponsored ADR
Representing 4 Ord Shrs 5,742 191,998
TXU Corp 5,000 147,500
Unicom Corp 6,000 232,125
================================================================================
2,990,409
12.68 NATURAL GAS
Coastal Corp 5,400 328,725
Columbia Energy Group 1,700 111,562
Dynegy Inc Class A Shrs 3,500 239,094
Enron Corp 4,900 316,050
ONEOK Inc 2,250 58,359
Williams Cos 7,400 308,488
================================================================================
1,362,278
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
--------------------------------------------------------------------------------
34.35 TELEPHONE
ALLTEL Corp 3,800 $ 235,363
Amdocs Ltd(a) 5,400 414,450
AT&T Canada Class B Depository Receipts(a) 10,500 348,469
BellSouth Corp 7,040 300,080
Cable & Wireless PLC 5,200 88,091
Citizens Communications(a) 16,800 289,800
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) 2,700 366,187
Koninklijke KPN NV 800 35,928
McLeodUSA Class A Shrs(a) 15,900 328,931
SBC Communications 10,006 432,760
Telefonica SA Sponsored ADR
Representing 3 Ord Shrs(a) 1,936 124,025
Time Warner Telecom Class A Shrs(a) 3,200 206,000
US WEST 3,800 325,850
WorldCom Inc (a) 4,195 192,446
================================================================================
3,688,380
TOTAL UTILITIES 8,041,067
================================================================================
TOTAL COMMON STOCKS (Cost $6,994,876) 9,624,154
================================================================================
10.37 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $1,114,594 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028 at 3.625%, value $1,210,241)
(Cost $1,114,000) $1,114,000 1,114,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $8,108,876)(b) $10,738,154
================================================================================
(a) Security is non-income producing.
(b) Also represents cost for income tax purposes.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
UTILITIES
FUND
--------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 8,108,876
================================================================================
At Value(a) $ 10,738,154
Cash 274
Foreign Currency (Cost $113) 113
Receivables:
Investment Securities Sold 110,221
Fund Shares Sold 74,044
Dividends and Interest 15,057
Appreciation on Forward Foreign Currency Contracts 19
Prepaid Expenses and Other Assets 13,371
================================================================================
TOTAL ASSETS 10,951,253
================================================================================
LIABILITIES
Payable for Investment Securities Purchased 241,475
Accrued Expenses and Other Payables 8,111
================================================================================
TOTAL LIABILITIES 249,586
================================================================================
NET ASSETS AT VALUE $ 10,701,667
================================================================================
NET ASSETS
Paid-in Capital(b) $ 7,101,351
Accumulated Undistributed Net Investment Income 66,648
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 904,389
Net Appreciation of Investment Securities and
Foreign Currency Transactions 2,629,279
================================================================================
NET ASSETS AT VALUE $ 10,701,667
================================================================================
Shares Outstanding 489,405
NET ASSET VALUE, Offering and Redemption Price per Share $ 21.87
================================================================================
(a)Investment securities at cost and value at June 30, 2000 includes a
repurchase agreement of $1,114,000.
(b)The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
UTILITIES
FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 76,833
Interest 34,936
Foreign Taxes Withheld (414)
================================================================================
TOTAL INCOME 111,355
================================================================================
EXPENSES
Investment Advisory Fees 30,680
Transfer Agent Fees 2,500
Administrative Services Fees 13,444
Custodian Fees and Expenses 3,592
Directors' Fees and Expenses 4,655
Professional Fees and Expenses 8,063
Registration Fees and Expenses 22
Reports to Shareholders 12,119
Other Expenses 469
================================================================================
TOTAL EXPENSES 75,544
Fees and Expenses Absorbed by Investment Adviser (12,949)
Fees and Expenses Paid Indirectly (3,527)
================================================================================
NET EXPENSES 59,068
================================================================================
NET INVESTMENT INCOME 52,287
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 416,960
Foreign Currency Transactions (6,873)
================================================================================
Total Net Realized Gain 410,087
================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities (104,012)
Foreign Currency Transactions 5,521
================================================================================
Total Net Depreciation (98,491)
================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 311,596
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 363,883
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
UTILITIES FUND
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 52,287 $ 94,983
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 410,087 497,581
Change in Net Appreciation (Depreciation)
of Investment Securities and
Foreign Currency Transactions (98,491) 789,412
================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 363,883 1,381,976
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (85,148)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 2,038,368 3,712,650
Reinvestment of Distributions 0 85,148
================================================================================
2,038,368 3,797,798
Amounts Paid for Repurchases of Shares (837,766) (2,950,097)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 1,200,602 847,701
================================================================================
TOTAL INCREASE IN NET ASSETS 1,564,485 2,144,529
NET ASSETS
Beginning of Period 9,137,182 6,992,653
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
of $66,648 and $14,361, respectively) $10,701,667 $ 9,137,182
================================================================================
---------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 90,317 192,791
Shares Issued from Reinvestment of Distributions 0 4,301
================================================================================
90,317 197,092
Shares Repurchased (36,629) (154,740)
================================================================================
NET INCREASE IN FUND SHARES 53,688 42,352
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Dynamics Fund, Equity Income
Fund, Financial Services Fund, Health Sciences Fund, High Yield Fund, Market
Neutral Fund, Real Estate Opportunity 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. INVESCO Variable Investment Funds, Inc. 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 invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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.
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.
<PAGE>
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 six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year six months
ended June 30, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $2,843,211 and $2,024,843, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $2,916,936 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $287,658, resulting in net
appreciation of $2,629,278.
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 six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations were $71. Unfunded accrued
pension costs of $0 and pension liability of $309 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 the 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 -- INTERFUND BORROWING AND LENDING. The Fund is party to an interfund
lending agreement between the Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to the Fund's prospectus, the Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings.
NOTE 7 -- 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 June 30, 2000, there
were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
UTILITIES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30 YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $20.97 $17.78 $14.40 $11.95 $10.84 $10.00
===========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.22 0.25 0.31 0.13 0.07
Net Gains on Securities
(Both Realized and Unrealized) 0.80 3.17 3.41 2.48 1.26 0.84
===========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.90 3.39 3.66 2.79 1.39 0.91
===========================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.20 0.24 0.29 0.13 0.07
In Excess of Net Investment Income 0.00 0.00 0.00 0.00 0.01 0.00
Distributions from Capital Gains 0.00 0.00 0.03 0.05 0.14 0.00
In Excess of Net Realized Gains 0.00 0.00 0.01 0.00 0.00 0.00
===========================================================================================================================
TOTAL DISTRIBUTIONS 0.00 0.20 0.28 0.34 0.28 0.07
===========================================================================================================================
Net Asset Value--End of Period $21.87 $20.97 $17.78 $14.40 $11.95 $10.84
===========================================================================================================================
TOTAL RETURN(a) 4.29%(b) 19.13% 25.48% 23.41% 12.76% 9.08%
RATIOS
Net Assets-- End of Period ($000 Omitted) $10,702 $9,137 $6,993 $4,588 $2,660 $290
Ratio of Expenses to Average Net Assets(c)(d) 0.61%(b) 1.20% 1.08% 0.99% 1.16% 1.80%
Ratio of Net Investment Income to Average Net Assets(c) 0.51%(b) 1.15% 1.73% 2.92% 2.92% 2.47%
Portfolio Turnover Rate 22%(b) 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 periods shown.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000 and 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 0.74%, 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 0.38%, 0.82%, 1.21%, 1.84%, (1.28%) and
(52.86%), respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
S94 9195 8/00
<PAGE>
KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
--------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
--------------------------------------------------------------------------------
INVESCO VARIABLE INVESTMENT FUNDS
SEMIANNUAL 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
SEMI
ANNUAL
SEMIANNUAL REPORT | June 30, 2000 [INVESCO ICON] INVESCO FUNDS
<PAGE>
MARKET OVERVIEW July 2000(2)
Equity markets were extremely volatile in the second quarter as investors
weighed the threat of higher interest rates against the risks of slowing
economic growth. Early in the period, interest rate fears dominated investors'
attention amid signs that the "virtuous economy" -- neither too hot nor too cold
-- was finally starting to heat up. Labor markets remained tight, wage pressures
were simmering and consumers were studying the impressive balances on their
investment statements and spending like never before. Meanwhile, economies in
Europe and Asia continued to pick up steam, and oil prices surged to new highs.
Against this backdrop, interest rate fears led investors to question the
lofty valuations on many growth shares. The result was a sharp rotation out of
growth stocks into many defensive and value-oriented names. The
technology-driven Nasdaq Composite endured a spring sell-off of historic
proportions. Downward pressure was aggravated in mid-May by the Federal
Reserve's decision to raise interest rates by a half percentage point -- more
than expected -- in their sixth rate increase in a year. Yet, not long after the
May rate increase, investors welcomed signs that the credit tightening was
starting to cool economic growth. Job growth slowed in May, while vehicle and
home sales softened. Equity and bond markets rallied at month-end on hopes that
the economy was achieving the desired "soft landing," or gradual deceleration in
growth.
These gains extended into June, as economists began to lower their growth
estimates for the remainder of the year. Investors also took heart from June
inflation figures, which showed moderating price pressures. In a widely
anticipated move, the Fed left interest rates unchanged in June, fueling
investor speculation that its campaign of credit tightening might be nearing an
end. Growth company stocks made a comeback, as investors recognized their strong
earnings outlooks and Attractive post-correction valuations. By quarter-end, the
Nasdaq was down only marginally from its level at the start of the year.
The recent market rebound has been encouraging; however, we caution that
uncertainty over interest rates will likely persist. While the Federal Reserve
has no desire to trigger a recession, they will remain vigilant as long as
inflation remains a risk. Nonetheless, from what we know of the trends in
technology spending, we believe that productivity gains should help temper
inflation going forward. Earnings forecasts also remain robust, despite
predictions for a slowing economy. In any case, we are confident that this type
of environment will provide opportunities for investors, such as ourselves, who
rely on bottom-up research to identify solid companies that can perform well in
any kind of economy.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
The line graphs on the following pages illustrate, for the periods from
inception through 6/30/00, the value of a $10,000 investment in each fund, 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)
VIF-DYNAMICS FUND
--------------------------------------------
VIF-DYNAMICS FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 46.96%
--------------------------------------------
Since inception (8/97) 31.51%
--------------------------------------------
<PAGE>
For the six-month period ended June 30, 2000, the value of your shares
rose 13.65%. This is comparable to the return of the S&P MidCap 400 Index, which
rose 9.06% during the same period. (Of course, past performance is not a
guarantee of future results.)(1),(2)
After two months of downward pressure, the markets recovered in June,
gaining back some ground lost earlier in the quarter. Inflation concerns led to
the period's volatility, spawned by a series of higher reported inflation
figures as well as the central bank's negative statements at its May meeting,
when it raised short-term interest rates 50 basis points. The June producer and
consumer inflation figures showed moderating inflation following the earlier oil
price surge, followed by June's purchasing managers' prices paid index, which
declined for the third month in a row. As a result, equity markets recovered
somewhat, with the Nasdaq Composite up strongly after a dramatic pullback that
reached bottom in late May.
The fund's investments in three of the economy's fastest-growing segments
-- biotechnology, technology and communications -- hurt our performance in April
and May, but provided a positive tailwind as the market appeared to right itself
in June. Inflation scares, a federal ruling against Microsoft Corp, and other
factors caused investors to flee many higher-priced companies. Still, business
fundamentals remained quite strong for many of these leading firms.
The fund's investments in smaller technology stocks were hit particularly
hard in the market downdraft. Peregrine Systems, which markets infrastructure
management software, confused Wall Street by merging with Harbinger Corp, a
marketer of business-to-business e-commerce software. Redback Networks, a maker
of networking systems, and Gemstar International Group Ltd, a developer of
electronic program guides, also gave ground as investors became more focused on
current earnings rather than future growth.
GRAPH: VIF-DYNAMICS FUND
TOTAL RETURN SINCE INCEPTION 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 June 30, 2000.
But many of these same technology and biotechnology stocks proved
particularly strong in June. Two of our top-performing networking stocks
included Extreme Networks and Redback Networks. Software firms Vignette Corp and
Art Technology Group also performed well, based on evidence that large
enterprises are stepping up investment in Web-based software. These mid-cap
companies have been more aggressive than larger rivals in serving the needs of
companies adapting to the Internet. Our biotechnology holdings also gained
ground in June, with Human Genome Sciences, Celgene Corp, and Abgenix Inc all
moving higher.
On the other hand, our energy holdings, which provided some welcome
returns to the fund during the technology sector retreat, lost ground at the end
of the period. Still, we remain enthusiastic about the prospects for service
firms, in particular, which should enjoy real growth prospects as oil and gas
producers scramble to add reserves in response to tight supply and demand
conditions.
Going forward, we intend to maintain our focus on companies that should
prosper even as the economy slows, particularly on firms that are closely
involved in the digital communications "buildout." We have reduced our exposure
to the retail sector, however, with our recent sale of Circuit City
Stores-Circuit City Group.
<PAGE>
FUND MANAGEMENT
VIF-Dynamics Fund is managed by INVESCO Chief Investment Officer Timothy J.
Miller and Vice President 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.
Thomas R. Wald assumed responsibilities of co-manager in 1997. He received
his MBA from The Wharton School, University of Pennsylvania, and a BA from
Tulane University. Before joining INVESCO in 1997, Tom was the senior health
care analyst at Munder Capital Management.
VIF-FINANCIAL SERVICES FUND
------------------------------------
VIF-FINANCIAL SERVICES FUND
CUMULATIVE TOTAL RETURN
AS OF 6/30/00 (1)
Since inception (9/99) 10.80%
------------------------------------
For the six-month period ended June 30, 2000, the value of your shares fell
0.18%. This is comparable to the return of both the S&P 500 Index, which fell
0.43% during the same period, and the S&P Financials Index, which fell 0.50%.
(Of course, past performance is not a guarantee of future results.)(1),(2)
Financial services stocks struggled in recent months against lingering
interest rate fears and renewed credit concerns. The threat of higher interest
rates dominated investor attention in the first half of the quarter, but eased
later in the period amid signs of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged in June. By quarter-end, investor
focus shifted from interest rate risk to credit concerns, after several large
banks warned of potential problems. On a positive note, several beaten-down
financial services stocks received renewed attention from investors seeking
attractively priced stocks with solid growth potential.
The fund outperformed both the overall market and the S&P 500 Financials
Index in recent months, supported by our focus on high-growth financial services
companies. One top-performer was Bank of New York, a leading provider of
back-office processing. This business provides the bank with a promising avenue
of growth that is less vulnerable to credit and interest rate concerns. Our
results also benefited for our exposure to multi-line insurance companies, such
as American International Group (AIG), which gained support from firming prices
and easing interest rate concerns. We added to our weighting in this area.
GRAPH: VIF-FINANCIAL SERVICES FUND
TOTAL RETURN SINCE INCEPTION VS S&P 500 INDEX
AND S&P FINANCIALS 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 and the value of a $10,000
investment in the S&P Financials Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for
the period from inception (9/99) through June 30, 2000.
We also benefited from our lack of exposure to e-finance companies, which
declined in tandem with technology stocks and were the weakest performing shares
in recent months.
<PAGE>
Going forward, we caution that financial services stocks could remain
volatile as investors wait to see if the economy truly achieves the desired
"soft landing." However, our strategy in this environment remains the same. We
remain diversified across subsectors within the financial services industry,
focusing on the market leaders.
FUND MANAGEMENT
The VIF-Financial Services Fund is managed by Jeffrey G. Morris. Prior to
joining INVESCO Funds Group, 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. A Chartered Financial Analyst, Jeff began his investment
career in 1991.
VIF-HEALTH SCIENCES FUND
-------------------------------------
VIF-HEALTH SCIENCES FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 30.15%
-------------------------------------
Since inception (5/97) 24.30%
-------------------------------------
For the six-month period ended June 30, 2000, the value of your shares
rose 18.91%. This is comparable to the return of the S&P 500 Index, which fell
0.43% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
After a very strong first quarter, performance by health sciences stocks
was mixed in the second quarter. During the first half of the period, heightened
inflation and interest rate fears led investors to favor traditional
pharmaceutical companies for their predictable earnings growth and lower
valuations. Biotechnology shares, on the other hand, fell out of favor as rising
interest rates called into question their high valuations. But easing inflation
fears and new product launches sparked a renewed biotech rally in June that
gained fuel from euphoria over the mapping of the human genome -- an advance
that promises to accelerate discovery of new treatments for a variety of
diseases.
The fund handily outperformed the S&P 500 Index in the second quarter,
supported by sizable gains in many of our biotechnology shares. We took
advantage of the sell-off in high valuation shares early in the quarter to add
to our holdings in promising biotech companies. Our approach paid off, and many
of these companies surged to new highs in June. One standout was Genentech Inc.
The company's new blood thinner, TNKase, was recently approved by the U.S. Food
& Drug Administration, and promises to simplify the treatment of heart attacks.
Genentech represents what we look for in our biotech exposure -- well-managed
companies that are already profitable or have drugs in late-stage trials.
GRAPH: VIF-HEALTH SCIENCES FUND
TOTAL RETURN SINCE INCEPTION 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 June 30, 2000.
<PAGE>
While our traditional pharmaceutical exposure provided a haven from market
volatility early in the period, we took profits on a number of these positions
later in the period, scaling back our traditional drug exposure. This decision
reflects our concerns over regulatory uncertainty, a lack of new products in the
pipeline, and expiring patents on a number of blockbuster drugs. Nonetheless, a
select few pharmaceutical companies offer such strong earnings potential that
they remain cornerstones of the portfolio. For example, one of our largest
positions is Pfizer Inc, which just completed its merger with Warner-Lambert Co.
The combined company should deliver powerful synergies in research and
marketing.
Additionally, we also maintained a light weighting in the medical
equipment and health care services areas, due to our concerns over competitive
pressures and Medicare reform -- a hot issue that should receive even greater
publicity during this election year.
FUND MANAGEMENT
VIF-Health Sciences Portfolio is managed by INVESCO Funds Group Senior
Vice President and Director of Research John R. Schroer, a Chartered Financial
Analyst. He started his investment career in 1989, after earning an MBA and BA
from the University of Wisconsin.
VIF-TECHNOLOGY FUND
------------------------------------
VIF-TECHNOLOGY FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF 6/30/00 (1)
1 year 110.80%
------------------------------------
Since inception (5/97) 60.03%
-------------------------------------
For the six-month period ended June 30, 2000, the value of your shares
rose 15.65%. This is comparable to the return of the S&P 500 Index, which fell
0.43% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Technology stocks suffered a dramatic pullback earlier this year, driven
by worries over higher interest rates and other factors. We believed, however,
that the decline did not derive from a change in fundamentals, but rather was a
valuation-induced phenomenon. Many argued that this valuation adjustment has
been long overdue, given the rise in interest rates over the past year, coupled
with the lofty valuations investors bestowed on technology stocks. Indeed, the
big surprise may be that it took so long for tech stocks to fall to lower
levels.
Many leading stocks staged a dramatic rebound in June, however, after
selling off to relatively bargain levels in April and May. Investors were
cheered that the Federal Reserve remained on the sidelines and left interest
rates unchanged, as more evidence of slower economic growth became apparent.
This improved the valuation underpinning for tech stocks, although many are
still fairly expensive. Despite sharp upward moves in many tech stocks,
investors appear to be more selective in their technology holdings. We believe
that the more speculative technology and Internet stocks are unlikely to recover
to old highs as the market's willingness to extend capital to such ventures has
been reduced dramatically.
The fund picked up where it left off at the end of May and extended gains
as the market for technology stocks continued to improve. The fund rose
dramatically during June as investors returned to the market leaders first --
the lion's share of the assets in the fund. The market has more recently
broadened out, and investors have placed more confidence in the rally.
<PAGE>
We remain cautiously optimistic that the market for technology stocks has
seen the worst. While we are confident that our companies will show strong
growth in the soon-to-be-reported second quarter earnings period, the increase
in negative pre-announcements seen thus far suggests a somewhat more difficult
environment. If the economy is indeed slowing, the slowdown will be felt in
demand for some technology products, and may increase the risk of earnings
disappointments. This would suggest a narrowing of the market, and the fund
could become more concentrated as we shift more toward quality/leadership
companies. We expect that recent high levels of volatility will persist, given
the continued high valuations and psychological cross-currents in the
marketplace among technology investors.
GRAPH: VIF-TECHNOLOGY FUND
TOTAL RETURN SINCE INCEPTION 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 June 30, 2000.
FUND MANAGEMENT
Senior Vice President and Director of Sector Management William R.
Keithler, a Chartered Financial Analyst with 15 years experience in the
investment industry, is portfolio manager for VIF-Technology Fund. Bill has an
MS from the University of Wisconsin-Madison, and BS from Webster College. An
INVESCO portfolio manager from 1986 to 1993, Bill returned to INVESCO Funds
Group in 1998 after serving as vice president and portfolio manager with Berger
Associates.
VIF-TELECOMMUNICATIONS FUND
--------------------------------------
VIF-TELECOMMUNICATIONS FUND
CUMULATIVE TOTAL RETURN
AS OF 6/30/00 (1)
Since inception (9/99) 82.30%
--------------------------------------
For the six-month period ended June 30, 2000, the value of your shares
rose 10.82%. This is comparable to the return of the S&P 500 Index, which fell
0.43% during the same period. (Of course, past performance is not a guarantee of
future results.)(1),(2)
Telecommunications stocks came under heavy pressure beginning in late
March as investors re-examined valuations in light of Federal Reserve tightening
and other factors. But many of these same stocks came charging back in June as
high-growth, higher-risk issues enjoyed a broad recovery.
Among the hardest hit telecommunications stocks were competitive local
exchange carriers (CLECs), telephone service providers that compete with the
regional Bell operating companies. Not only have many of these companies found
it difficult to raise financing in a challenging high-yield market, but the
group received a psychological blow in May when GST Communications, a CLEC in
the western United States, declared bankruptcy. Equipment stocks, mainly by
virtue of their very steep valuations, also fared poorly at the beginning of the
second quarter.
<PAGE>
The fund's equipment stocks performed well in June after three difficult
months. Redback Networks was particularly strong, driven ahead in part by the
company's signing up of an important customer. Juniper Networks and Nortel
Networks also moved higher as the companies announced a partnership to sell
Juniper's Internet routers. The industry conference Supercomm early in the month
generated excitement in the sector generally, helping to lift many leading-edge
companies.
GRAPH: VIF-TELECOMMUNICATIONS FUND
TOTAL RETURN SINCE INCEPTION VS S&P 500 INDEX
AND MSCI-EAFE INDEX
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 value of 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 June 30, 2000.
For the most part, the fund's service providers also fared well in recent
weeks. With the consummation of the merger of US WEST and Qwest Communications
International in sight, both stocks moved higher as investors became more
enthusiastic about the resulting synergies. The fund's domestic wireless stocks
performed well due to indications of strong subscriber growth, and increased
takeover speculation following the collapse of the Sprint Corp/ WorldCom Inc
merger -- and speculation that WorldCom might now look elsewhere. Overall,
however, wireless stocks suffered. Investors worried that subscriber growth
appeared to be plateauing in some of the most developed markets, such as France.
Additionally, the end of the handset subsidy in Korea and the residue of costly
spectrum auctions made the future murkier for wireless firms.
With valuations throughout much of the sector still very high, we would
not be surprised to see volatility continue. Still, fundamentals remain very
positive for most companies, as do the growth opportunities posed by technology,
deregulation, and globalization. Going forward, we plan to maintain our focus on
equipment firms, with a secondary emphasis on carriers leveraging technology to
seize market share. We have recently reduced our weighting in satellite firms,
given signs that subscriber growth is slowing.
FUND MANAGEMENT
The VIF-Telecommunications Fund is managed by Vice President 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. TOTAL RETURN DOES NOT REFLECT CHARGES FOR INSURANCE OR
OTHER CHARGES IMPOSED BY INSURANCE COMPANIES.
(2) THE S&P MIDCAP 400 IS AN UNMANAGED INDEX INDICATIVE OF DOMESTIC
MID-CAPITALIZATION STOCKS. THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED
REPRESENTATIVE OF THE PERFORMANCE OF THE BROAD U.S. STOCK MARKET. THE NASDAQ
COMPOSITE IS AN UNMANAGED INDEX OF STOCKS TRADED OVER-THE-COUNTER. THE S&P
FINANCIALS INDEX IS AN UNMANAGED INDEX OF FINANCIAL SERVICES STOCKS. THE
MSCI-EAFE INDEX IS AN UNMANAGED INDEX DESIGNED TO MEASURE THE OVERALL CONDITIONS
OF OVERSEAS MARKETS.
SECTOR FUNDS MAY BE MORE VOLATILE THAN DIVERSIFIED EQUITY FUNDS, AND ARE MOST
SUITABLE FOR THE AGGRESSIVE PORTION OF YOUR PORTFOLIO.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
DYNAMICS FUND
90.53 COMMON STOCKS
0.38 BANKS
Northern Trust 8,280 $ 538,717
================================================================================
7.92 BIOTECHNOLOGY-- HEALTH CARE
Abgenix Inc(a) 11,800 1,414,341
Affymetrix Inc(a) 7,850 1,296,231
Celgene Corp(a) 26,150 1,539,581
COR Therapeutics(a) 17,400 1,484,437
ImClone Systems(a) 11,925 911,517
Medarex Inc(a) 5,600 473,200
MedImmune Inc(a) 18,100 1,339,400
Protein Design Labs(a) 9,400 1,550,559
Sepracor Inc(a) 10,100 1,218,313
================================================================================
11,227,579
3.35 BROADCASTING
AMFM Inc(a) 14,150 976,350
Citadel Communications(a) 9,550 333,653
EchoStar Communications Class A Shrs(a) 34,380 1,138,300
Entercom Communications(a) 17,000 828,750
General Motors Class H Shrs(a) 7,300 640,575
Hispanic Broadcasting(a) 12,440 412,075
Westwood One(a) 12,300 419,738
================================================================================
4,749,441
1.53 CABLE
CableVision Systems Class A Shrs(a) 13,970 948,214
NTL Inc(a) 6,987 418,347
USA Networks(a) 36,820 796,233
================================================================================
2,162,794
3.07 COMMUNICATIONS--EQUIPMENT & MANUFACTURING
CIENA Corp(a) 8,865 1,477,685
Comverse Technology(a) 12,900 1,199,700
Copper Mountain Networks(a) 5,300 467,062
E-Tek Dynamics(a) 3,800 1,002,488
Metasolv Software(a) 4,700 206,800
================================================================================
4,353,735
18.01 COMPUTER RELATED
Adobe Systems 7,700 1,001,000
Art Technology Group(a) 17,100 1,726,031
BEA Systems(a) 19,600 968,975
BroadVision Inc(a) 20,620 1,047,754
Brocade Communications Systems(a) 10,280 1,886,219
Entrust Technologies(a) 7,400 612,350
Exodus Communications(a) 28,160 1,297,120
Extreme Networks(a) 8,180 862,990
InfoSpace Inc(a) 12,600 696,150
Inktomi Corp(a) 9,350 1,105,637
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
Internap Network Services(a) 13,790 $ 572,500
Intuit Inc(a) 12,120 501,465
i2 Technologies(a) 11,745 1,224,600
Macromedia Inc(a) 6,400 618,800
Mercury Interactive(a) 14,520 1,404,810
Network Appliance(a) 15,380 1,238,090
Peregrine Systems(a) 24,800 860,250
Portal Software(a) 12,300 785,663
RealNetworks Inc(a) 11,000 556,188
Redback Networks(a) 11,460 2,039,880
Siebel Systems(a) 14,070 2,301,324
Software.com Inc(a) 900 116,888
Symantec Corp(a) 11,050 596,009
TIBCO Software(a) 3,000 321,703
Vignette Corp(a) 14,600 759,428
Vitria Technology(a) 7,100 433,988
================================================================================
25,535,812
2.72 ELECTRICAL EQUIPMENT
Flextronics International Ltd(a) 17,240 1,184,173
Jabil Circuit(a) 8,540 423,797
Molex Inc 20,037 964,281
Sanmina Corp(a) 15,060 1,287,630
================================================================================
3,859,881
11.05 ELECTRONICS--SEMICONDUCTOR
Altera Corp(a) 11,390 1,161,068
Applied Micro Circuits(a) 10,900 1,076,375
Conexant Systems(a) 8,660 421,092
Linear Technology 15,480 989,752
LSI Logic(a) 21,180 1,146,367
Maxim Integrated Products(a) 19,860 1,349,239
Microchip Technology(a) 13,570 790,665
PMC-Sierra Inc(a) 10,440 1,855,058
RF Micro Devices(a) 10,190 892,899
SDL Inc(a) 8,460 2,412,686
TranSwitch Corp(a) 15,200 1,173,250
Vitesse Semiconductor(a) 10,820 795,946
Xilinx Inc(a) 19,490 1,609,143
================================================================================
15,673,540
0.71 ENTERTAINMENT
Gemstar International Group Ltd(a) 16,440 1,010,289
================================================================================
0.90 EQUIPMENT--SEMICONDUCTOR
KLA-Tencor Corp(a) 10,230 599,094
Novellus Systems(a) 3,600 203,625
Teradyne Inc(a) 6,510 478,485
================================================================================
1,281,204
1.33 FINANCIAL
Ambac Financial Group 13,000 712,562
Edwards (AG) Inc 14,400 561,600
Providian Financial 6,800 612,000
================================================================================
1,886,162
1.66 GAMING
Harrah's Entertainment(a) 57,940 1,213,119
MGM Grand 35,420 1,137,867
================================================================================
2,350,986
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
7.57 HEALTH CARE DRUGS--PHARMACEUTICALS
Allergan Inc 18,400 $ 1,370,800
ALZA Corp(a) 25,100 1,484,037
Forest Laboratories(a) 25,950 2,620,950
Human Genome Sciences(a) 9,200 1,227,050
ICN Pharmaceuticals 16,400 456,125
Inhale Therapeutic Systems(a) 12,700 1,288,653
IVAX Corp 18,400 763,600
Millennium Pharmaceuticals(a) 13,640 1,525,975
================================================================================
10,737,190
0.50 HEALTH CARE RELATED
PE Corp-PE Biosystems Group 10,800 711,450
================================================================================
1.74 INVESTMENT BANK/BROKER FIRM
Paine Webber Group 8,900 404,950
Price (T Rowe) Associates 14,200 603,500
Waddell & Reed Financial
Class A Shrs 23,513 771,520
Class B Shrs 23,429 680,905
================================================================================
2,460,875
10.22 OIL & GAS RELATED
Anadarko Petroleum 13,120 646,980
Apache Corp 23,765 1,397,679
BJ Services(a) 19,250 1,203,125
Canadian Natural Resources(a) 9,700 281,501
Coflexip SA Sponsored ADR Representing
1/2 Ord Shr 5,700 344,850
Cooper Cameron(a) 19,575 1,291,950
Diamond Offshore Drilling 7,900 277,487
ENSCO International 13,900 497,794
EOG Resources 3,000 100,500
Global Industries Ltd(a) 12,760 240,845
Global Marine(a) 19,850 559,522
Grant Prideco(a) 22,090 552,250
Kerr-McGee Corp 5,350 315,316
Nabors Industries(a) 25,025 1,040,102
Noble Drilling(a) 28,490 1,173,432
Santa Fe International 35,880 1,253,558
Smith International(a) 19,150 1,394,359
Transocean Sedco Forex 7,700 411,469
Varco International(a) 12,286 285,650
Vastar Resources 2,650 217,631
Weatherford International(a) 25,290 1,006,858
================================================================================
14,492,858
0.21 PERSONAL CARE
Estee Lauder Class A Shrs 6,020 297,614
================================================================================
0.81 PUBLISHING
New York Times Class A Shrs 11,730 463,335
Valassis Communications(a) 17,640 672,525
================================================================================
1,135,860
0.75 RAILROADS
Kansas City Southern Industries 11,900 1,055,381
================================================================================
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
1.38 RETAIL
Best Buy(a) 6,250 $ 395,312
Kohl's Corp(a) 19,100 1,062,437
RadioShack Corp 10,390 492,226
================================================================================
1,949,975
8.96 SERVICES
Ariba Inc(a) 11,000 1,078,516
Computer Sciences(a) 3,750 280,078
CSG Systems International(a) 15,300 857,756
DoubleClick Inc(a) 12,650 482,281
Go2Net Inc(a) 9,580 481,994
Lamar Advertising Class A Shrs(a) 6,300 272,869
Omnicom Group 9,930 884,391
Palm Inc(a) 3,900 130,163
Paychex Inc 33,075 1,389,150
Proxicom Inc(a) 13,900 665,463
Robert Half International(a) 19,200 547,200
Safeguard Scientifics(a) 7,500 240,469
Sapient Corp(a) 6,580 703,649
SEI Investments 8,560 340,795
SunGard Data Systems(a) 11,300 350,300
TMP Worldwide(a) 16,700 1,232,669
VeriSign Inc(a) 9,360 1,652,040
WPP Group PLC 34,340 501,678
Young & Rubicam 10,820 618,769
================================================================================
12,710,230
1.25 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Crown Castle International(a) 15,220 555,530
VoiceStream Wireless(a) 5,610 652,425
Western Wireless Class A Shrs(a) 10,380 565,710
================================================================================
1,773,665
1.21 TELECOMMUNICATIONS--LONG DISTANCE
Allegiance Telecom(a) 12,150 777,600
ITC DeltaCom(a) 7,450 166,228
Nextel Partners Class A Shrs(a) 21,100 687,069
Viatel Inc(a) 3,100 88,544
================================================================================
1,719,441
3.30 TELEPHONE
Amdocs Ltd(a) 19,250 1,477,438
AT&T Canada Class B Depository Receipts(a) 14,430 478,896
Citizens Communications Class B Shrs(a) 24,900 429,525
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) 5,320 721,525
McLeodUSA Inc Class A Shrs(a) 40,780 843,636
RCN Corp(a) 7,100 180,163
Time Warner Telecom Class A Shrs(a) 8,600 553,625
================================================================================
4,684,808
TOTAL COMMON STOCKS (Cost $112,312,460) 128,359,487
================================================================================
9.47 SHORT-TERM INVESTMENTS
4.73 COMMERCIAL PAPER
4.73 CONSUMER FINANCE
Ford Motor Credit, 6.720%, 7/3/2000
(Cost $6,700,000) $6,700,000 6,700,000
================================================================================
<PAGE>
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4.74 REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 6/30/2000 due
7/3/2000 at 6.400%, repurchased
at $6,730,588 (Collateralized by
US Treasury Inflationary Index
Bonds, due 2/15/2026 at 6.000%,
value $6,848,542) (Cost $6,727,000) $6,727,000 $ 6,727,000
========================================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $13,427,000) 13,427,000
========================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $125,739,460)
(Cost for Income Tax Purposes $126,162,434) $141,786,487
========================================================================================
FINANCIAL SERVICES FUND
99.11 COMMON STOCKS
33.19 BANKS
Banco Bilbao Vizcaya Argentaria SA
Registered Shrs 27,700 $ 415,558
Bank of New York 68,775 3,198,037
Chase Manhattan 44,900 2,068,206
City National 15,600 553,800
Egg PLC(a) 350,000 911,368
Fifth Third Bancorp 37,950 2,400,337
Firstar Corp 70,340 1,481,536
FleetBoston Financial 56,500 1,921,000
Morgan (JP) & Co 5,200 572,650
Northern Trust 26,100 1,698,131
Royal Bank of Canada 13,100 677,106
State Street 20,700 2,195,494
Toronto-Dominion Bank 53,200 1,293,425
Wells Fargo & Co 76,350 2,958,563
========================================================================================
22,345,211
5.30 CONSUMER FINANCE
American Express 55,250 2,879,906
Countrywide Credit Industries 22,700 688,094
========================================================================================
3,568,000
19.63 FINANCIAL
Associates First Capital Class A Shrs 78,700 1,755,994
Capital One Financial 58,900 2,628,412
Citigroup Inc 51,880 3,125,770
Fannie Mae 24,600 1,283,812
Freddie Mac 51,850 2,099,925
John Nuveen Class A Shrs 5,000 209,688
NOVA Corp(a) 22,100 617,419
Providian Financial 16,640 1,497,600
========================================================================================
13,218,620
19.06 INSURANCE
ACE Ltd 35,600 996,800
AFLAC Inc 44,200 2,030,438
American International Group 15,100 1,774,250
AXA Financial 21,900 744,600
Hartford Financial Services Group 37,100 2,075,281
John Hancock Financial Services(a) 72,200 1,710,237
Nationwide Financial Services Class A Shrs 25,900 851,463
Radian Group 31,800 1,645,650
St Paul Cos 29,300 999,863
========================================================================================
12,828,582
</TABLE>
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
4.63 INSURANCE BROKERS
Marsh & McLennan 29,860 $ 3,118,504
================================================================================
11.39 INVESTMENT BANK/BROKER FIRM
Federated Investors Class B Shrs 17,600 617,100
Gallagher (Arthur J) & Co 20,000 840,000
Goldman Sachs Group 500 47,438
Lehman Brothers Holdings 2,100 198,581
Morgan Stanley Dean Witter & Co 21,000 1,748,250
Paine Webber Group 41,800 1,901,900
Price (T Rowe) Associates 5,000 212,500
Schwab (Charles) Corp 14,850 499,331
Waddell & Reed Financial
Class A Shrs 14,400 472,500
Class B Shrs 38,900 1,130,531
================================================================================
7,668,131
3.39 RAILROADS
Kansas City Southern Industries 25,700 2,279,269
================================================================================
2.52 SAVINGS & LOAN
Charter One Financial 73,800 1,697,400
================================================================================
TOTAL COMMON STOCKS (Cost $64,234,945) 66,723,717
================================================================================
0.89 SHORT-TERM INVESTMENTS--REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $602,321 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028 at 3.625%, value $655,971)
(Cost $602,000) $ 602,000 602,000
================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $64,836,945)
(Cost for Income Tax Purposes $66,401,439) $ 67,325,717
================================================================================
HEALTH SCIENCES FUND
71.00 COMMON STOCKS
1.09 BIOTECHNOLOGY
Vertex Pharmaceuticals(a) 15,100 $1,591,163
================================================================================
28.98 BIOTECHNOLOGY--HEALTH CARE
Abgenix Inc(a) 28,720 3,442,361
Affymetrix Inc(a) 5,500 908,187
Alexion Pharmaceuticals(a) 20,860 1,491,490
Amgen Inc(a) 58,000 4,074,500
Amylin Pharmaceuticals(a) 8,000 121,500
Biogen Inc(a) 34,700 2,238,150
Celgene Corp(a) 8,400 494,550
Cell Therapeutics(a) 20,200 618,625
Celltech Group PLC(a) 8,326 161,341
Collateral Therapeutics(a) 300 7,608
COR Therapeutics(a) 30,260 2,581,556
Creative BioMolecules(a) 32,640 456,960
Cubist Pharmaceuticals(a) 18,840 927,870
Genentech Inc(a) 34,710 5,970,120
Gilead Sciences(a) 15,400 1,095,325
IDEC Pharmaceuticals(a) 33,210 3,895,948
ILEX Oncology(a) 24,010 846,352
ImClone Systems(a) 29,060 2,221,274
Medarex Inc(a) 21,110 1,783,795
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
MedImmune Inc(a) 63,700 $ 4,713,800
NPS Pharmaceuticals(a) 13,300 355,775
Protein Design Labs(a) 23,020 3,797,221
================================================================================
42,204,308
2.37 ELECTRONICS--INSTRUMENTS
Waters Corp(a) 27,600 3,444,825
================================================================================
34.70 HEALTH CARE DRUGS--PHARMACEUTICALS
Alkermes Inc(a) 27,780 1,309,132
Allergan Inc 34,310 2,556,095
ALZA Corp(a) 26,130 1,544,936
American Home Products 38,385 2,255,119
AmeriSource Health Class A Shrs(a) 33,100 1,026,100
AstraZeneca Group PLC Sponsored ADR
Representing Ord Shrs 140 6,510
Bristol-Myers Squibb 70,500 4,106,625
DUSA Pharmaceuticals(a) 22,000 649,000
Forest Laboratories(a) 37,230 3,760,230
Fujisawa Pharmaceutical Ltd 49,800 2,019,205
Glaxo Wellcome PLC Sponsored ADR
Representing 2 Ord Shrs 480 27,750
Human Genome Sciences(a) 22,780 3,038,283
Inhale Therapeutic Systems(a) 13,980 1,418,533
IVAX Corp 24,700 1,025,050
Johnson & Johnson 24,605 2,506,634
Lilly (Eli) & Co 31,200 3,116,100
Merck & Co 23,800 1,823,675
Millennium Pharmaceuticals(a) 23,760 2,658,150
Pfizer Inc 113,876 5,466,048
Pharmacia Corp 24,870 1,285,468
QLT PhotoTherapeutics(a) 19,600 1,515,325
Schering AG 39,600 2,178,936
Schering-Plough Corp 47,000 2,373,500
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 415 27,053
Takeda Chemical Industries Ltd 11,390 749,250
Titan Pharmaceuticals(a) 29,010 1,247,430
Yamanouchi Pharmaceutical Ltd 15,330 838,908
================================================================================
50,529,045
0.77 HEALTH CARE--SERVICES
Edward Lifesciences(a) 55,800 1,032,300
First Health Group(a) 2,400 78,750
Mediconsult.com Inc(a) 12,000 18,000
================================================================================
1,129,050
3.09 MEDICAL EQUIPMENT & DEVICES
Boston Scientific(a) 15,200 333,450
Guidant Corp(a) 7,400 366,300
Medtronic Inc 26,434 1,316,744
PE Corp-PE Biosystems Group 26,620 1,753,593
Pharmacopeia Inc(a) 8,000 371,000
Targeted Genetics(a) 24,214 360,184
================================================================================
4,501,271
TOTAL COMMON STOCKS (Cost $84,481,139) 103,399,662
================================================================================
<PAGE>
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
29.00 SHORT-TERM INVESTMENTS
21.97 COMMERCIAL PAPER
8.17 CONSUMER FINANCE
American Express Credit, 6.750%, 7/5/2000 $6,900,000 $ 6,900,000
Ford Motor Credit, 6.720%, 7/3/2000 $5,000,000 5,000,000
=======================================================================================
11,900,000
9.27 FINANCIAL
General Electric Capital Services,
6.750%, 7/7/2000 $6,900,000 6,900,000
Heller Financial, 6.900%, 7/5/2000 $6,600,000 6,600,000
=======================================================================================
13,500,000
4.53 INSURANCE
Prudential Funding, 6.700%, 7/3/2000 $6,600,000 6,600,000
=======================================================================================
TOTAL COMMERCIAL PAPER (Cost $32,000,000) 32,000,000
=======================================================================================
2.45 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund 6.489% (Cost $3,569,793) 3,569,793 3,569,793
=======================================================================================
4.58 REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 6/30/2000 due 7/3/2000
at 6.400%, repurchased at $6,667,554
(Collateralized by US Treasury
Inflationary Index Bonds, due 4/15/2028,
at 3.625%, value $7,210,597)
(Cost $6,664,000) $6,664,000 6,664,000
=======================================================================================
TOTAL SHORT-TERM INVESTMENTS
(Cost $42,233,793) 42,233,793
=======================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $126,714,932)
(Cost for Income Tax Purposes $131,883,228) $ 145,633,455
=======================================================================================
TECHNOLOGY FUND
89.29 COMMON STOCKS
0.34 BROADCASTING
EchoStar Communications Class A Shrs(a) 50,200 $ 1,662,091
=======================================================================================
11.90 COMMUNICATIONS--EQUIPMENT & MANUFACTURING
ADC Telecommunications(a) 64,500 5,409,937
CIENA Corp(a) 50,800 8,467,725
E-Tek Dynamics(a) 25,100 6,621,694
JDS Uniphase(a) 39,800 4,771,025
Lucent Technologies 52,100 3,086,925
Nokia Corp Sponsored ADR
Representing Ord Shrs 146,700 7,325,831
Nortel Networks 92,500 6,313,125
Polycom Inc(a) 38,100 3,584,972
Powerwave Technologies(a) 75,300 3,313,200
Scientific-Atlanta Inc 81,700 6,086,650
Telefonakietbolaget LM Ericsson AB
Sponsored ADR Representing Series B Shrs 167,100 3,342,000
=======================================================================================
58,323,084
</TABLE>
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
19.22 COMPUTER SOFTWARE & SERVICE
Art Technology Group(a) 43,300 $ 4,370,594
BEA Systems(a) 99,700 4,928,919
BroadVision Inc(a) 78,100 3,968,456
Check Point Software Technologies Ltd(a) 17,700 3,747,975
InfoSpace Inc(a) 47,200 2,607,800
Inktomi Corp(a) 25,700 3,039,025
Internet HOLDRs Trust Depositary
Receipts(a)(b) 8,400 909,300
Intuit Inc(a) 54,400 2,250,800
i2 Technologies(a) 63,330 6,603,142
Mercury Interactive(a) 56,800 5,495,400
Micromuse Inc(a) 18,500 3,061,461
Microsoft Corp(a) 62,700 5,016,000
National Information Consortium(a) 53,800 611,975
Networks Associates(a) 123,800 2,522,425
Oracle Corp(a) 60,500 5,085,781
Peregrine Systems(a) 126,187 4,377,112
Quest Software(a) 65,100 3,604,913
Siebel Systems(a) 45,600 7,458,450
SmartForce PLC Sponsored ADR
Representing Ord Shrs(a) 101,500 4,872,000
SOFTBANK Corp(a) 7,400 1,007,136
Software.com Inc(a) 32,100 4,168,988
Symantec Corp(a) 39,000 2,103,563
TIBCO Software(a) 55,300 5,930,061
Verio Inc(a) 55,200 3,062,738
Vignette Corp(a) 48,350 2,514,955
Xcelera.com Inc(a) 25,700 873,800
================================================================================
94,192,769
3.10 COMPUTER SYSTEMS
Apple Computer(a) 60,800 3,184,400
Brocade Communications Systems(a) 36,600 6,715,528
Dell Computer(a) 107,300 5,291,231
================================================================================
15,191,159
1.08 COMPUTERS--HARDWARE
Sun Microsystems(a) 58,200 5,292,563
================================================================================
5.36 COMPUTERS--NETWORKING
Cisco Systems(a) 149,300 9,489,881
Juniper Networks(a) 32,200 4,687,112
MarchFirst Inc(a) 53,800 981,850
Network Appliance(a) 71,600 5,763,800
Redback Networks(a) 18,600 3,310,800
Sycamore Networks(a) 18,300 2,019,863
================================================================================
26,253,306
2.13 COMPUTERS--PERIPHERALS
Advanced Digital Information(a) 40,600 647,062
EMC Corp(a) 89,700 6,901,294
Entrust Technologies(a) 23,900 1,977,725
SanDisk Corp(a) 14,900 911,694
================================================================================
10,437,775
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
0.77 DISTRIBUTION
Ingram Micro(a) 94,000 $ 1,639,125
Tech Data(a) 49,300 2,147,631
================================================================================
3,786,756
5.14 ELECTRICAL EQUIPMENT
Celestica Inc(a) 88,900 4,411,663
Flextronics International Ltd(a) 70,200 4,821,863
Furukawa Electric Ltd 42,000 879,259
Jabil Circuit(a) 69,000 3,424,125
Sanmina Corp(a) 69,400 5,933,700
Solectron Corp(a) 104,200 4,363,375
Viasystems Group(a) 82,100 1,328,994
================================================================================
25,162,979
20.36 ELECTRONICS--SEMICONDUCTOR
Altera Corp(a) 67,100 6,840,006
Analog Devices(a) 60,800 4,620,800
Applied Micro Circuits(a) 41,800 4,127,750
Atmel Corp(a) 76,400 2,817,250
Broadcom Corp Class A Shrs(a) 10,700 2,342,631
Chartered Semiconductor Manufacturing
Ltd ADR Representing 10 Ord Shrs(a) 30,500 2,745,000
Conexant Systems(a) 61,500 2,990,437
Cypress Semiconductor(a) 62,100 2,623,725
Infineon Technologies AG ADR
Representing Ord Shrs(a) 48,100 3,811,925
Integrated Device Technology(a) 81,600 4,885,800
Intel Corp 41,500 5,548,031
Linear Technology 82,700 5,287,631
LSI Logic(a) 68,100 3,685,913
Maxim Integrated Products(a) 88,000 5,978,500
Microchip Technology(a) 61,400 3,577,509
National Semiconductor(a) 57,000 3,234,750
PMC-Sierra Inc(a) 38,900 6,912,044
RF Micro Devices(a) 44,500 3,899,313
SDL Inc(a) 33,000 9,411,188
Texas Instruments 63,600 4,368,525
Vitesse Semiconductor(a) 66,400 4,884,550
Xilinx Inc(a) 62,900 5,193,181
================================================================================
99,786,459
0.92 ENTERTAINMENT
Gemstar International Group Ltd(a) 73,100 4,492,223
================================================================================
5.48 EQUIPMENT--SEMICONDUCTOR
Applied Materials(a) 61,500 5,573,437
ASM Lithography Holding NV New York
Registered Shrs(a) 101,100 4,461,037
Credence Systems(a) 64,400 3,554,075
KLA-Tencor Corp(a) 46,000 2,693,875
Lam Research(a) 40,700 1,526,250
Novellus Systems(a) 68,500 3,874,531
Taiwan Semiconductor Manufacturing Ltd
Sponsored ADR Representing 5 Ord Shrs(a) 58,466 2,265,557
Teradyne Inc(a) 39,800 2,925,300
================================================================================
26,874,062
<PAGE>
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0.22 INVESTMENT BANK/BROKER FIRM
B2B Internet HOLDRs Trust(b) 26,100 $ 1,074,994
=========================================================================================
1.33 MACHINERY
Corning Inc 24,200 6,530,975
=========================================================================================
0.73 NATURAL GAS
Enron Corp 55,600 3,586,200
=========================================================================================
6.70 SERVICES
America Online(a) 43,500 2,294,625
Ariba Inc(a) 34,600 3,392,422
Fiserv Inc(a) 81,800 3,537,850
Mercator Software(a) 39,200 2,695,000
Paychex Inc 98,500 4,137,000
Safeguard Scientifics(a) 49,700 1,593,506
Sapient Corp(a) 34,700 3,710,731
VeriSign Inc(a) 34,857 6,152,261
VERITAS Software(a) 47,250 5,339,988
=========================================================================================
32,853,383
2.34 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Nextel Communications Class A Shrs(a) 64,700 3,958,831
NTT DoCoMo 40 1,085,015
Proxim Inc(a) 21,300 2,108,035
Telecom Italia Mobile SpA 57,600 590,804
VoiceStream Wireless(a) 21,800 2,535,272
Winstar Communications(a) 34,300 1,161,913
=========================================================================================
11,439,870
0.24 TELECOMMUNICATIONS--LONG DISTANCE
PSINet Inc(a) 47,000 1,180,875
=========================================================================================
1.93 TELEPHONE
Amdocs Ltd(a) 59,680 4,580,440
US WEST 57,000 4,887,750
=========================================================================================
9,468,190
TOTAL COMMON STOCKS (Cost $378,900,154) 437,589,713
=========================================================================================
10.71 SHORT-TERM INVESTMENTS
6.12 COMMERCIAL PAPER
6.12 CONSUMER FINANCE
American Express Credit
6.780%, 7/3/2000 $ 8,000,000 8,000,000
6.780%, 7/6/2000 $12,000,000 12,000,000
Ford Motor Credit, 6.710%, 7/5/2000 $10,000,000 10,000,000
=========================================================================================
TOTAL COMMERCIAL PAPER (Cost $30,000,000) 30,000,000
=========================================================================================
2.68 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund 6.489%, (Cost $13,142,068) 13,142,068 13,142,068
=========================================================================================
1.91 REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 6/30/2000 due
7/3/2000 at 6.400%, repurchased
at $9,346,982 (Collateralized by
US Treasury Inflationary Index
Bonds, due 4/15/2028 at 3.625%,
value $10,109,074) (Cost $9,342,0000) $9,342,000 9,342,000
=========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL SHORT-TERM INVESTMENTS (Cost $52,142,068) $ 52,484,068
===============================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $431,384,222)
(Cost for Income Tax Purposes $435,883,533) $ 490,073,781
===============================================================================================
TELECOMMUNICATIONS FUND
85.65 COMMON STOCKS
1.82 BROADCASTING
EchoStar Communications Class A Shrs(a) 110,020 $ 3,642,693
General Motors Class H Shrs(a) 19,500 1,711,125
===============================================================================================
5,353,818
0.41 CABLE
NTL Inc(a) 20,037 1,199,715
===============================================================================================
21.18 COMMUNICATIONS--EQUIPMENT & MANUFACTURING
ADC Telecommunications(a) 34,900 2,927,237
Carrier 1 International SA ADR
Representing 1/5 Ord Shr(a) SZ 46,000 534,750
CIENA Corp(a) 34,900 5,817,394
Comverse Technology(a) 72,100 6,705,300
Copper Mountain Networks(a) 45,300 3,992,062
E-Tek Dynamics(a) 10,800 2,849,175
JDS Uniphase(a) 49,000 5,873,875
Lucent Technologies 34,500 2,044,125
Metasolv Software(a) 15,700 690,800
Metromedia Fiber Network Class A Shrs(a) 87,080 3,455,987
Next Level Communications(a) 12,700 1,089,025
Nokia Corp Sponsored ADR
Representing Ord Shrs FI 122,620 6,123,336
Nortel Networks CA 115,840 7,906,080
QUALCOMM Inc(a) 17,840 1,070,400
Scientific-Atlanta Inc 57,460 4,280,770
Tekelec(a) 110,100 5,305,444
Telefonaktiebolaget LM Ericsson AB
Sponsored ADR Representing
Series B Shrs SW 84,400 1,688,000
===============================================================================================
62,353,760
14.26 COMPUTER RELATED
AsiaInfo Holdings(a) 24,100 1,076,969
Cisco Systems(a) 103,880 6,602,872
EMC Corp(a) 107,840 8,296,940
Equant NV New York Shrs(a) NL 8,640 371,520
Exodus Communications(a) 53,600 2,468,950
Foundry Networks(a) 7,500 828,750
Handspring Inc(a) 20,000 540,000
Inktomi Corp(a) 22,880 2,705,560
Internap Network Services(a) 60,800 2,524,150
Juniper Networks(a) 47,800 6,957,887
ONI Systems(a) 2,200 257,847
Phone.com Inc(a) 10,200 664,275
Psion PLC(a) UK 102,300 989,632
QS Communications AG(a) GM 28,100 279,603
Redback Networks(a) 26,760 4,763,280
Sycamore Networks(a) 12,700 1,401,763
Vitria Technology(a) 20,100 1,228,613
===============================================================================================
41,958,611
</TABLE>
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
--------------------------------------------------------------------------------
12.31 ELECTRONICS--SEMICONDUCTOR
Applied Micro Circuits(a) 45,280 $ 4,471,400
Broadcom Corp Class A Shrs(a) 14,420 3,157,079
Conexant Systems(a) 26,260 1,276,892
Motorola Inc 57,171 1,661,532
New Focus(a) 2,900 238,162
PMC-Sierra Inc(a) CA 43,640 7,754,283
RF Micro Devices(a) 29,190 2,557,774
SDL Inc(a) 37,460 10,683,124
Texas Instruments 21,900 1,504,256
Vitesse Semiconductor(a) 39,680 2,918,960
================================================================================
36,223,462
1.69 ENTERTAINMENT
Gemstar International Group Ltd(a) 81,020 4,978,932
================================================================================
2.12 MANUFACTURING
Corning Inc 23,100 6,234,112
================================================================================
0.35 RETAIL
RadioShack Corp 21,740 1,029,933
================================================================================
2.12 SERVICES
America Online(a) 20,460 1,079,265
CSG Systems International(a) 61,830 3,466,344
Yahoo! Inc(a) 13,700 1,697,088
================================================================================
6,242,697
8.79 TELECOMMUNICATIONS--CELLULAR & WIRELESS
Aether Systems(a) 10,500 2,152,500
China Mobile Ltd(a) HK 351,100 3,096,497
Crown Castle International(a) 69,020 2,519,230
Dobson Communications(a) 25,000 481,250
Leap Wireless International(a) 19,100 897,700
Nextel Communications Class A Shrs(a) 47,100 2,881,931
NTT DoCoMo JA 131 3,553,424
Partner Communications Ltd ADR
Representing Ord Shrs(a) IS 38,200 362,900
Telecom Italia Mobile SpA IT 183,010 1,877,137
Tritel Inc(a) 8,400 249,375
Vodafone AirTouch PLC Sponsored ADR
Representing 10 Ord Shrs UK 919,026 3,714,807
VoiceStream Wireless(a) 24,900 2,895,792
Winstar Communications(a) 35,240 1,193,755
================================================================================
25,876,298
7.95 TELECOMMUNICATIONS--LONG DISTANCE
Allegiance Telecom(a) 51,615 3,303,360
AT&T Corp 31,540 997,452
Completel Europe NV(a) NL 43,100 537,104
Global TeleSystems(a) 59,660 719,649
GT Group Telecom Class B Shrs(a) CA 24,800 392,150
ITC DeltaCom(a) 2,300 51,319
KPNQwest NV Class C Shrs(a) NL 30,200 1,196,675
Nextel Partners Class A Shrs(a) 213,000 6,935,813
Nippon Telegraph & Telephone JA 107 1,425,925
PSINet Inc(a) 53,420 1,342,178
Qwest Communications International(a) 59,530 2,957,897
Sprint Corp 56,300 2,871,300
Viatel Inc(a) 23,460 670,076
================================================================================
23,400,898
<PAGE>
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12.65 TELEPHONE
Amdocs Ltd(a) 89,270 $ 6,851,473
AT&T Canada Class B Depository
Receipts(a) CA 56,020 1,859,164
BellSouth Corp 42,460 1,809,857
Cable & Wireless PLC UK 121,900 2,065,052
COLT Telecom Group PLC(a) UK 59,700 1,988,356
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) UK 7,620 1,033,463
Hanaro Telecom Sponsored ADR
Representing Ord Shrs(a) KS 78,100 551,581
Illuminet Holdings(a) 27,300 1,388,887
Koninklijke NV NL 17,800 799,405
McLeodUSA Inc Class A Shrs(a) 163,650 3,385,509
Net2000 Communications(a) 2,000 32,750
NEXTLINK Communications Class A Shrs(a) 39,400 1,494,738
RCN Corp(a) 56,460 1,432,673
SBC Communications 83,940 3,630,405
Tele1 Europe Holding AB(a) SW 45,000 554,099
Time Warner Telecom Class A Shrs(a) 72,600 4,673,625
US WEST 43,000 3,687,250
=======================================================================================
37,238,287
TOTAL COMMON STOCKS (Cost $232,274,570) 252,090,523
=======================================================================================
0.15 PREFERRED STOCKS
0.15 TELECOMMUNICATIONS--LONG DISTANCE
IXC Communications, Jr Exchangeable Pfd
Series B Shrs(c), 12.500% (Cost $498,400) 448 452,480
=======================================================================================
0.08 FIXED INCOME SECURITIES
0.08 CORPORATE BONDS
0.08 TELECOMMUNICATIONS--LONG DISTANCE
ESAT Telecom Group PLC, Sr Step-up Notes,
Zero Coupon(d) 2/1/2007 (Amortized Cost
$221,159) IE $ 235,000 222,075
=======================================================================================
14.12 SHORT-TERM INVESTMENTS
8.15 COMMERCIAL PAPER
3.40 CONSUMER FINANCE
Ford Motor Credit
6.730%, 7/3/2000 $5,000,000 5,000,000
6.710%, 7/5/2000 $5,000,000 5,000,000
=======================================================================================
10,000,000
4.75 OIL & GAS RELATED
Texaco Inc, 6.770%, 7/5/2000 $14,000,000 14,000,000
=======================================================================================
TOTAL COMMERCIAL PAPER (Cost $24,000,000) 24,000,000
=======================================================================================
2.93 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund 6.489% (Cost $8,614,810) 8,614,810 8,614,810
=======================================================================================
3.04 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 6/30/2000 due 7/3/2000 at 6.400%,
repurchased at $8,934,763 (Collateralized
by US Treasury Inflationary Index Bonds,
due 4/15/2028 at 3.625%, value $9,666,675)
(Cost $8,930,000) $8,930,000 8,930,000
=======================================================================================
<PAGE>
COUNTRY SHARES OR
CODE IF PRICIPAL
% DESCRIPTION NON US AMOUNT VALUE
---------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost $41,544,810) $ 41,544,810
=======================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $274,538,939)
(Cost for Income Tax Purposes $276,119,912) $ 294,309,888
=======================================================================================
</TABLE>
(a) Security is non-income producing.
(b) HOLDRs--Holding Company Depository Receipts.
(c) Security is a payment-in-kind (PIK) security. PIK securities may make
interest payments in additional securities.
(d) 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.
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
--------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
Canada CA 6.09% $ 17,911,677
Finland FI 2.08 6,123,336
Germany GM 0.09 279,603
Hong Kong HK 1.05 3,096,497
Ireland IE 0.08 222,075
Israel IS 0.12 362,900
Italy IT 0.64 1,877,137
Japan JA 1.69 4,979,349
Netherlands NL 0.99 2,904,704
Republic of South Korea KS 0.19 551,581
Sweden SW 0.76 2,242,099
Switzerland SZ 0.18 534,750
United Kingdom UK 3.33 9,791,310
United States US 82.71 243,432,870
================================================================================
100.00% $ 294,309,888
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO VARIABLE INVESTMENT FUNDS, INC.
JUNE 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
FINANCIAL
DYNAMICS SERVICES HEALTH SCIENCES
FUND FUND FUND
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment Securities:
At Cost(a) $125,739,460 $ 64,836,945 $ 126,714,932
===================================================================================================================
At Value(a) $141,786,487 $ 67,325,717 $ 145,633,455
Cash 200 1,197 0
Foreign Currency (Cost $0, $1,366, and $10,140, respectively) 0 1,412 10,498
Receivables:
Investment Securities Sold 335,075 220,780 78,670
Fund Shares Sold 2,173,777 493,822 7,879,414
Dividends and Interest 16,409 88,807 33,682
Appreciation on Forward Foreign Currency Contracts 983 0 0
Prepaid Expenses and Other Assets 8,292 238 8,007
===================================================================================================================
TOTAL ASSETS 144,321,223 68,131,973 153,643,726
===================================================================================================================
LIABILITIES
Payables:
Custodian 0 0 645
Investment Securities Purchased 1,164,890 860,882 5,140,091
Fund Shares Repurchased 1,603,194 369,594 3,316
Accrued Expenses and Other Payables 3,836 2,299 4,319
===================================================================================================================
TOTAL LIABILITIES 2,771,920 1,232,775 5,148,371
===================================================================================================================
NET ASSETS AT VALUE $141,549,303 $ 66,899,198 $ 148,495,355
===================================================================================================================
NET ASSETS
Paid-in Capital(b) $129,994,240 $ 66,505,038 $ 139,783,233
Accumulated Undistributed Net Investment Income (Loss) (5,942) 196,261 323,413
Accumulated Undistributed Net Realized Loss on
Investment Securities and Foreign Currency Transactions (4,486,024) (2,290,927) (10,530,052)
Net Appreciation of Investment Securities
and Foreign Currency Transactions 16,047,029 2,488,826 18,918,761
===================================================================================================================
NET ASSETS AT VALUE $141,549,303 $ 66,899,198 $ 148,495,355
===================================================================================================================
Shares Outstanding 6,590,711 6,038,732 7,794,305
NET ASSET VALUE, Offering and Redemption Price per Share $ 21.48 $ 11.08 $ 19.05
===================================================================================================================
</TABLE>
(a) Investment securities at cost and value at June 30, 2000 include repurchase
agreements of $6,727,000, $602,000 and $6,664,000 for Dynamics, Financial
Services and Health Sciences Funds, respectively.
(b) The Fund has 1.5 billion 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.
JUNE 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment Securities:
At Cost(a) $431,384,222 $274,539,939
===================================================================================================
At Value(a) $490,073,781 $294,309,888
Foreign Currency (Cost $7,626 and $24,360, respectively) 8,038 24,038
Receivables:
Investment Securities Sold 1,371,176 24,677
Fund Shares Sold 8,581,719 6,376,807
Dividends and Interest 19,865 34,239
Prepaid Expenses and Other Assets 27,062 16,232
===================================================================================================
TOTAL ASSETS 500,081,641 300,785,881
===================================================================================================
LIABILITIES
Payables:
Custodian 44,988 969
Investment Securities Purchased 0 6,927,043
Fund Shares Repurchased 4,887,471 6,663,804
Accrued Expenses and Other Payables 7,419 7,539
===================================================================================================
TOTAL LIABILITIES 4,939,878 13,599,355
===================================================================================================
NET ASSETS AT VALUE $495,141,763 $287,186,526
===================================================================================================
NET ASSETS
Paid-in Capital(b) $468,533,922 $274,720,205
Accumulated Undistributed Net Investment Loss (503,954) (101,874)
Accumulated Undistributed Net Realized Loss on
Investment Securities and Foreign Currency Transactions (31,578,167) (7,202,428)
Net Appreciation of Investment Securities
and Foreign Currency Transactions 58,689,962 19,770,623
===================================================================================================
NET ASSETS AT VALUE $495,141,763 $287,186,526
===================================================================================================
Shares Outstanding 11,529,937 15,754,767
NET ASSET VALUE, Offering and Redemption Price per Share $ 42.94 $ 18.23
===================================================================================================
</TABLE>
(a) Investment securities at cost and value at June 30, 2000 include repurchase
agreements of $9,342,000 and $8,930,000 for Technology and
Telecommunications Funds, respectively.
(b) The Fund has 1.5 billion 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.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
FINANCIAL HEALTH
DYNAMICS SERVICES SCIENCES
FUND FUND FUND
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 35,701 $ 272,951 $ 111,952
Dividends from Affiliated Investment Companies 48,731 25,246 69,793
Interest 276,337 135,394 505,101
Foreign Taxes Withheld (708) (2,161) (1,596)
===================================================================================================================
TOTAL INCOME 360,061 431,430 685,250
===================================================================================================================
EXPENSES
Investment Advisory Fees 246,350 157,790 250,672
Transfer Agent Fees 2,500 2,500 2,500
Administrative Services Fees 92,044 60,753 93,571
Custodian Fees and Expenses 17,835 7,343 14,463
Directors' Fees and Expenses 4,920 2,406 4,865
Interest Expenses 0 8,073 117
Professional Fees and Expenses 8,836 6,943 9,293
Registration Fees and Expenses 119 44 54
Reports to Shareholders 11,649 5,505 11,976
Other Expenses 493 372 517
===================================================================================================================
TOTAL EXPENSES 384,746 251,729 388,028
Fees and Expenses Absorbed by Investment Adviser (1,028) (430) (302)
Fees and Expenses Paid Indirectly (17,731) (7,284) (14,114)
===================================================================================================================
NET EXPENSES 365,987 244,015 373,612
===================================================================================================================
NET INVESTMENT INCOME (LOSS) (5,926) 187,415 311,638
===================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (4,411,487) (2,413,449) (10,649,317)
Foreign Currency Transactions 0 (12,034) (35,473)
===================================================================================================================
Total Net Realized Loss (4,411,487) (2,425,483) (10,684,790)
===================================================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 11,162,211 2,421,224 17,882,074
Foreign Currency Transactions (6,691) 21,620 127,700
===================================================================================================================
Total Net Appreciation 11,155,520 2,442,844 18,009,774
===================================================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 6,744,033 17,361 7,324,984
===================================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,738,107 $ 204,776 $ 7,636,622
===================================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
SIX MONTHS ENDED JUNE 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 87,224 $ 182,298
Dividends from Affiliated Investment Companies 188,716 114,817
Interest 775,174 598,877
Foreign Taxes Withheld (8,990) (9,200)
TOTAL INCOME 1,042,124 886,792
===================================================================================================
EXPENSES
Investment Advisory Fees 1,106,009 713,709
Transfer Agent Fees 2,500 2,500
Administrative Services Fees 399,367 257,177
Custodian Fees and Expenses 28,631 26,963
Directors' Fees and Expenses 6,535 5,877
Interest Expenses 2,878 0
Professional Fees and Expenses 12,823 9,119
Registration Fees and Expenses 298 224
Reports to Shareholders 16,229 6,756
Other Expenses 1,588 1,076
===================================================================================================
TOTAL EXPENSES 1,576,858 1,023,401
Fees and Expenses Absorbed by Investment Adviser (2,662) (1,364)
Fees and Expenses Paid Indirectly (28,192) (25,240)
===================================================================================================
NET EXPENSES 1,546,004 996,797
===================================================================================================
NET INVESTMENT LOSS (503,880) (110,005)
===================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (32,337,362) (7,626,876)
Foreign Currency Transactions 44,154 (84,648)
===================================================================================================
Total Net Realized Loss (32,293,208) (7,711,524)
===================================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 37,030,424 7,427,975
Foreign Currency Transactions (2,203) (433,060)
===================================================================================================
Total Net Appreciation 37,028,221 6,994,915
===================================================================================================
NET GAIN (LOSS) ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 4,735,013 (716,609)
===================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 4,231,133 $ (826,614)
===================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
INVESCO VARIABLE INVESTMENT FUNDS, INC.
<TABLE>
<CAPTION>
FINANCIAL SERVICES
DYNAMICS FUND FUND
SIX MONTHS YEAR SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
UNAUDITED UNAUDITED (Note 1)
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ (5,926) $ 1,732 $ 187,415 $ 8,846
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency
Transactions (4,411,487) (66,357) (2,425,483) 134,556
Change in Net Appreciation of
Investment Securities and Foreign
Currency Transactions 11,155,520 4,831,517 2,442,844 45,982
========================================================================================================
NET INCREASE IN NET ASSETS
FROM OPERATIONS 6,738,107 4,766,892 204,776 189,384
========================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (1,730) 0 0
In Excess of Net Investment Income 0 (4,078) 0 0
========================================================================================================
TOTAL DISTRIBUTIONS 0 (5,808) 0 0
========================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 164,851,301 34,477,477 115,604,633 14,141,157
Reinvestment of Distributions 0 5,808 0 0
========================================================================================================
164,851,301 34,483,285 115,604,633 14,141,157
Amounts Paid for Repurchases of Shares (59,707,112) (9,885,578) (58,089,144) (5,399,608)
========================================================================================================
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 105,144,189 24,597,707 57,515,489 8,741,549
========================================================================================================
TOTAL INCREASE IN NET ASSETS 111,882,296 29,358,791 57,720,265 8,930,933
NET ASSETS
Initial Subscription (Note 1) -- -- -- 248,000
Beginning of Period 29,667,007 308,216 9,178,933 --
========================================================================================================
End of Period $141,549,303 $ 29,667,007 $ 66,899,198 $ 9,178,933
========================================================================================================
Accumulated Undistributed (Distributions
in Excess of) Net Investment Income
(Loss) Included in Net Assets at
End of Period $ (5,942) $ (16) $ 196,261 $ 8,846
-------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) -- -- -- 24,800
Shares Sold 7,970,318 2,115,404 10,608,778 1,317,359
Shares Issued from Reinvestment
of Distributions 0 350 0 --
========================================================================================================
7,970,318 2,115,754 10,608,778 1,342,159
Shares Repurchased (2,949,651) (571,073) (5,396,957) (515,248)
========================================================================================================
NET INCREASE IN FUND SHARES 5,020,667 1,544,681 5,211,821 826,911
========================================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
HEALTH SCIENCES FUND TECHNOLOGY FUND
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
UNAUDITED UNAUDITED
OPERATIONS
Net Investment Income (Loss) $ 311,638 $ 11,787 $ (503,880) $ (51,696)
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency
Transactions (10,684,790) 169,272 (32,293,208) 857,691
Change in Net Appreciation of
Investment Securities and Foreign
Currency Transactions 18,009,774 505,246 37,028,221 21,387,477
========================================================================================================
NET INCREASE IN NET ASSETS
FROM OPERATIONS 7,636,622 686,305 4,231,133 22,193,472
========================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (5,893) 0 0
========================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 181,790,233 19,779,104 550,794,642 103,325,672
Reinvestment of Distributions 0 5,893 0 0
========================================================================================================
181,790,233 19,784,997 550,794,642 103,325,672
Amounts Paid for Repurchases of Shares (52,583,023) (11,191,495) (153,875,569) (33,104,826)
========================================================================================================
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 129,207,210 8,593,502 396,919,073 70,220,846
========================================================================================================
TOTAL INCREASE IN NET ASSETS 136,843,832 9,273,914 401,150,206 92,414,318
NET ASSETS
Beginning of Period 11,651,523 2,377,609 93,991,557 1,577,239
========================================================================================================
End of Period $148,495,355 $ 11,651,523 $ 495,141,763 $93,991,557
========================================================================================================
Accumulated Undistributed
Net Investment Income
(Loss) Included in Net Assets at
End of Period $ 323,413 $ 11,775 $ (503,954) $ (74)
--------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 10,202,346 1,318,340 12,753,554 3,731,704
Shares Issued from Reinvestment
of Distributions 0 392 0 0
========================================================================================================
10,202,346 1,318,732 12,753,554 3,731,704
Shares Repurchased (3,135,391) (746,864) (3,755,102) (1,310,179)
========================================================================================================
NET INCREASE IN FUND SHARES 7,066,955 571,868 8,998,452 2,421,525
========================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
<TABLE>
<CAPTION>
TELECOMMUNICATIONS FUND
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
---------------------------------------------------------------------------------------
2000 1999
UNAUDITED (Note 1)
<S> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ (110,005) $ 8,131
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions (7,711,524) 509,096
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 6,994,915 12,775,708
=======================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (826,614) 13,292,935
=======================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 325,635,308 70,669,026
Amounts Paid for Repurchases of Shares (105,271,950) (16,560,179)
=======================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 220,363,358 54,108,847
=======================================================================================
TOTAL INCREASE IN NET ASSETS 219,536,744 67,401,782
NET ASSETS
Initial Subscription (Note 1) -- 248,000
Beginning of Period 67,649,782 --
=======================================================================================
End of Period $ 287,186,526 $ 67,649,782
=======================================================================================
Accumulated Undistributed Net Investment Income
(Loss) Included in Net Assets at End of Period $ (101,874) $ 8,131
------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) -- 24,800
Shares Sold 17,692,767 5,225,874
=======================================================================================
17,692,767 5,250,674
Shares Repurchased (6,051,118) (1,137,556)
=======================================================================================
NET INCREASE IN FUND SHARES 11,641,649 4,113,118
=======================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements - INVESCO Variable Investment Funds, Inc.
UNAUDITED
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, Equity
Income Fund, High Yield Fund, Market Neutral Fund, Real Estate Opportunity 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.
INVESCO Variable Investment Funds, Inc. 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.
Investments in shares of investment companies are value at the net asset value
of the respective mutual fund as calculated each day.
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.
<PAGE>
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.
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 Funds may invest in securities issued by other INVESCO Investment Companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share.
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.
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 and income are offset by capital loss carryovers and deferred post-October
31 losses, 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.
<PAGE>
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.
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.
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.
<PAGE>
IFG has voluntarily agreed to absorb certain fees and expenses incurred by each
Fund for the six months ended June 30, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
June 30, 2000, 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 $113,210,064 $17,098,067
Financial Services Fund 89,795,804 31,919,382
Health Sciences Fund 141,338,407 56,956,405
Technology Fund 438,877,696 90,620,915
Telecommunications Fund 221,736,009 27,683,311
There were no purchases and proceeds from sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 2000, 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 $18,407,815 $2,783,762 $15,624,053
Financial Services Fund 3,418,183 2,493,905 924,278
Health Sciences Fund 15,437,179 1,686,952 13,750,227
Technology Fund 70,709,015 16,518,767 54,190,248
Telecommunications Fund 38,788,013 20,598,037 18,189,976
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 for the six months ended June 30, 2000, included in Directors'
Fees and Expenses in the Statement of Operations, and unfunded accrued pension
costs and pension liability included in Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were as follows:
UNFUNDED
PENSION ACCRUED PENSION
FUND EXPENSES PENSION COSTS LIABILITY
--------------------------------------------------------------------------------
Dynamics Fund $ 25 $ 0 $ 40
Health Sciences Fund 35 0 94
Technology Fund 166 0 238
Telecommunications Fund 120 0 160
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the six months ended June 30, 2000 for Financial Services
Fund.
<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 the 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 -- INTERFUND BORROWING AND LENDING. Each Fund is party to an interfund
lending agreement between each Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending Funds. Loans totaling 10% or more of a borrowing fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to each Fund's prospectus, each Fund may borrow
up to 33 1/3% of its total assets for temporary or emergency purposes. During
the six months ended June 30, 2000, there were no such borrowings and/or
lendings for any Fund.
NOTE 7 -- 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 June
30, 2000, there were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
DYNAMICS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $ 18.90 $ 12.15 $ 10.34 $ 10.00
=============================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.00) 0.00 (0.00) 0.02
Net Gains on Securities
(Both Realized and Unrealized) 2.58 6.75 1.98 0.32
=============================================================================================
TOTAL FROM INVESTMENT OPERATIONS 2.58 6.75 1.98 0.34
=============================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income(c) 0.00 0.00 0.02 0.00
In Excess of Net Investment Income(c) 0.00 0.00 0.00 0.00
Distributions from Capital Gains 0.00 0.00 0.15 0.00
=============================================================================================
TOTAL DISTRIBUTIONS 0.00 0.00 0.17 0.00
=============================================================================================
Net Asset Value--End of Period $ 21.48 $ 18.90 $ 12.15 $ 10.34
=============================================================================================
TOTAL RETURN(d) 13.65%(e) 55.60% 19.35% 3.40%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 141,549 $ 29,667 $ 308 $ 257
Ratio of Expenses to Average Net
Assets(f)(g) 0.56%(e) 1.26% 1.45% 0.52%(h)
Ratio of Net Investment Income (Loss)
to Average Net Assets(f) (0.01%)(e) 0.04% (0.64%) 0.63%(h)
Portfolio Turnover Rate 28%(e) 70% 55% 28%(e)
</TABLE>
<PAGE>
(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 six months ended June 30, 2000 and 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 periods 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 six
months ended June 30, 2000, 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 0.58%,
2.25%, 14.76% and 34.18% (annualized), respectively, and ratio of net
investment loss to average net assets would have been (0.03%), (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 (which
may include custodian fees).
(h) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999(a)
UNAUDITED
PER SHARE DATA
Net Asset Value--Beginning of Period $ 11.10 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.04) 1.09
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.02) 1.10
================================================================================
Net Asset Value--End of Period $ 11.08 $ 11.10
================================================================================
TOTAL RETURN(b) (0.18%)(c) 11.00%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 66,899 $ 9,179
Ratio of Expenses to Average Net Assets(d)(e) 0.58%(c) 1.39%(f)
Ratio of Net Investment Income to Average
Net Assets(d) 0.44%(c) 0.67%(f)
Portfolio Turnover Rate 87%(c) 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 periods 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 six
months ended June 30, 2000 and the period ended December 31, 1999. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 0.59% and 2.48% (annualized), respectively, and
ratio of net investment income (loss) to average net assets would have been
0.43% and (0.42%)(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 (which
may include custodian fees).
(f) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $ 16.02 $ 15.29 $ 11.04 $ 10.00
=============================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income 0.03 0.02 0.05 0.10
Net Gains on Securities
(Both Realized and Unrealized) 3.00 0.72 4.66 0.94
=============================================================================================
TOTAL FROM INVESTMENT OPERATIONS 3.03 0.74 4.71 1.04
=============================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.01 0.03 0.00
Distributions from Capital Gains 0.00 0.00 0.34 0.00
In Excess of Net Realized Gains 0.00 0.00 0.09 0.00
=============================================================================================
TOTAL DISTRIBUTIONS 0.00 0.01 0.46 0.00
=============================================================================================
Net Asset Value--End of Period $ 19.05 $ 16.02 $ 15.29 $ 11.04
=============================================================================================
TOTAL RETURN(c) 18.91%(d) 4.86% 42.85% 10.40%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 148,495 $ 11,652 $ 2,378 $ 423
Ratio of Expenses to Average Net
Assets(e)(f) 0.58%(d) 1.48% 1.27% 0.60%(g)
Ratio of Net Investment Income to
Average Net Assets (e) 0.46%(d) 0.36% 0.35% 2.34%(g)
Portfolio Turnover Rate 111%(d) 173% 107% 112%(d)
</TABLE>
<PAGE>
(a) From May 22, 1997, commencement of investment operations, through December,
31 1997.
(b) The per share information was computed based on average shares for the
period ended 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 periods shown.
(d) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000, 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 0.58%,
2.85%, 4.20% and 21.45% (annualized), respectively, and ratio of net
investment income (loss) to average net assets would have been 0.46%,
(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 (which
may include custodian fees).
(g) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
---------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value--Beginning of Period $ 37.13 $ 14.34 $ 11.49 $ 10.00
=============================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.04) (0.00) (0.03) 0.05
Net Gains on Securities
(Both Realized and Unrealized) 5.85 22.79 2.96 1.44
=============================================================================================
TOTAL FROM INVESTMENT OPERATIONS 5.81 22.79 2.93 1.49
=============================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.01 0.00
In Excess of Net Investment Income 0.00 0.00 0.01 0.00
Distributions from Capital Gains 0.00 0.00 0.06 0.00
=============================================================================================
TOTAL DISTRIBUTIONS 0.00 0.00 0.08 0.00
=============================================================================================
Net Asset Value--End of Period $ 42.94 $ 37.13 $ 14.34 $ 11.49
=============================================================================================
TOTAL RETURN(c) 15.65%(d) 158.93% 25.69% 14.80%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 495,142 $ 93,992 $ 1,577 $ 414
Ratio of Expenses to Average Net
Assets(e)(f) 0.53%(d) 1.31% 1.40% 0.48%(g)
Ratio of Net Investment Income (Loss)
to Average Net Assets (e) (0.17%)(d) (0.40%) (0.14%) 0.95%(g)
Portfolio Turnover Rate 34%(d) 95% 239% 102%(d)
</TABLE>
<PAGE>
(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 periods 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 six
months ended June 30, 2000, 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 0.53%,
1.52%, 6.47% and 19.25% (annualized), respectively, and ratio of net
investment loss to average net assets would have been (0.17%), (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 (which
may include custodian fees).
(g) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS PERIOD
ENDED ENDED
JUNE 30 DECEMBER 31
--------------------------------------------------------------------------------
2000 1999(a)
UNAUDITED
PER SHARE DATA
Net Asset Value--Beginning of Period $ 16.45 $ 10.00
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.01) 0.00
Net Gains on Securities
(Both Realized and Unrealized) 1.79 6.45
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.78 6.45
================================================================================
Net Asset Value--End of Period $ 18.23 $ 16.45
================================================================================
TOTAL RETURN(c) 10.82%(d) 64.50%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 287,187 $ 67,650
Ratio of Expenses to Average Net Assets(e)(f) 0.53%(d) 1.27%(g)
Ratio of Net Investment Income (Loss) to
Average Net Assets (e) (0.06%)(d) 0.11%(g)
Portfolio Turnover Rate 16%(d) 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 periods shown.
(d) Based on operations for the periods shown and, accordingly, are not
representative of a full year.
(e) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended June 30, 2000 and the period ended December 31, 1999. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 0.53% and 1.28% (annualized), respectively, and
ratio of net investment income (loss) to average net assets would have been
(0.06%) and 0.10% (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 (which
may include custodian fees).
(g) Annualized
<PAGE>
YOU SHOULD
KNOW WHAT
INVESCO KNOWS (R)
[INVESCO ICON] INVESCO FUNDS
We're easy to stay in touch with:
1-800-6-INVESCO
On the World Wide Web: invescofunds.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.
SSKV 9182 8/00
