<PAGE>
Variable Insurance Funds
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[Logo of HSBC Asset Management Americas Inc. Appears Here]
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HSBC Variable Growth and Income Fund
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Portfolio Review
July 18, 2000
Dear Shareholder:
The United States equity market, as measured by the Standard & Poor's 500/1/
(the "S&P 500"), declined 0.42% during the first six months of 2000. The modest
decline masked some of the most volatile trading seen in several years, as
investors became concerned about aggressive Federal Reserve (the "Fed")
tightening. The Fed did in fact raise the Federal Funds rate on three separate
occasions for a total of 100 basis points during the first half of 2000. After
trending lower for most of the first quarter, stocks turned dramatically higher
in mid-March and reached new highs before retreating. After reaching an all-
time high on March 24, the S&P 500 declined by 12% within three weeks. The
NASDAQ Composite Index/2/ (the "NASDAQ"), which declined 2.46% during the six-
month period ended June 30, 2000, is a prime example of the volatility
experienced by investors. During the first quarter, the NASDAQ suffered through
three separate corrections of 10% or more, yet registered a stunning 12.4% gain
for the quarter. The NASDAQ reached an all-time high on March 10, then
proceeded to decline by 34% in only five weeks. For the one week ended April
14, the index lost a staggering 25.3% and declined every trading day during the
week; the first time since September 1994 that the NASDAQ has declined every
day during a week. The NASDAQ rebounded in June, advancing 15%, the largest
one-month gain ever for the NASDAQ. For the first half of 2000, the S&P 500,
Dow Jones Industrial Average/3/ and the NASDAQ all registered six-month
declines for the first time since 1994. As of June 30, 57% of the New York
Stock Exchange stocks, and 76% of NASDAQ stocks, were down over 20% from their
52-week highs.
Outlook
Despite the market volatility, inflows into equity mutual funds have been
spectacular. During the first quarter, net inflows totaled $133 billion, by far
the largest inflows for a single quarter in history. For the first six months
of 2000, net inflows were approximately $215 billion, well ahead of the $90
billion during the same period in 1999.
The supply/demand scenario for equities continues to be favorable. The Initial
Public Offering (the "IPO") backlog is currently at $24.7 billion, down
considerably from $45 billion in late 1999. Weekly IPO pricing of $15 billion
occurred in March, but that figure is currently running at only $2 billion. The
second half calendar of offerings should be minimal. Merger and acquisition
activity appears to have slowed during the first half of 2000, but cash
takeovers are on the rise. Stock buybacks continue to surge, driven by strong
corporate free cash flow.
------
/1/The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market as a whole.
/2/The NASDAQ Composite Index is a market capitalization price-only index that
tracks the performance of domestic common stocks traded on the regular NASDAQ
market as well as the National Market System traded foreign common stocks and
American Depositary Receipts.
/3/The Dow Jones Industrial Average is an unmanaged index of 30 large company
stocks that are representative of the New York Stock Exchange.
Investors cannot invest directly in an index, although they can invest in the
underlying securities.
<PAGE>
Variable Insurance Funds
In the twelve months since the Fed began tightening, they have raised short-
term interest rates by 175 basis points. During the upcoming months, the
economic statistics should show whether higher borrowing rates are narrowing
the gap between consumption growth and the economy's productive capacity. We
have already seen many signs pointing towards slower economic growth ahead.
Recent market moves cause us to believe that investors are beginning to
discount another successful soft landing for the U.S. economy, similar to
1995.
Despite the anticipated slowdown in the U.S. economy, earnings estimates for
the S&P 500/1/ are estimated to grow between 14-16% in 2000, and 10-12% in
2001. The first quarter saw S&P 500 earnings rise 29.6% on a market
capitalization weighted basis. Estimates for the second quarter call for a
rise in earnings of 16-18%. The substantial increase in earnings will
meaningfully lower the P/E multiples of the major indices. Since 1995, there
have been almost 200 company changes in the S&P 500, shifting the index
towards higher growth, less economically sensitive companies. The S&P 500 now
resembles a large-cap, growth-oriented portfolio of companies. We would also
note that earnings are beginning to matter to investors again. During 1999,
NASDAQ/2/ companies with no earnings generated an average stock price gain of
115%, while those companies with profits showed an average price gain of 51%.
For the S&P 500, the 11 companies with no earnings showed average price gains
of 107%, while the remaining companies with profits posted an average price
gain of 24%. This year, companies with estimated losses for 2000 are showing
average price declines of approximately 10% in both indices. For companies
with profits, the gains are modest, with average price increases of 10% and 1%
for the NASDAQ and S&P 500, respectively.
The HSBC Variable Growth and Income Fund had a total return of 0.40%* for the
period ended June 30, 2000.**
Sincerely,
/s/ Fredric P. Lutcher
Fredric P. Lutcher, III, CFA
Chief Investment Officer, U.S. Equities
--------
The performance data quoted represents past performance and is not an
indication of future results. The investment return and net asset value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
/1/The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market as a whole.
/2/The NASDAQ Composite Index is a market capitalization price-only index that
tracks the performance of domestic common stocks traded on the regular
NASDAQ market as well as the National Market System traded foreign common
stocks and American Depositary Receipts.
Investors cannot invest directly in an index, although they can invest in the
underlying securities.
* The total return set forth reflects the reduction of a portion of the Fund's
fees. Without such reduction of fees, the total return for the period would
have been lower.
** Fund commenced operations on May 25, 2000.
The views expressed in this report reflect those of the portfolio manager
through the period ended June 30, 2000. The manager's views are subject to
change at any time based on the market and other conditions.
2
<PAGE>
Variable Insurance Funds
HSBC Variable Fixed Income Fund
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Portfolio Review
Dear Shareholder:
The primary driving force during the first half of the year was the activity of
the Federal Reserve (the "Fed") Open Market Committee (the "FOMC") which on May
16 raised both the Fed Funds and Discount rates by 50 basis points. This marked
the first time that the Fed Funds rate had moved by a full 50 basis points at
one time since it began its tightening cycle in June 1999, after having moved
gradually in 25 basis point increments. The current Fed Funds rate now stands
at 6.50%, which represents 175 basis points of cumulative tightening since June
1999.
After the Fed's aggressiveness in May, the bond markets reflected on the
consequences of the June 28 Fed meeting. As such, the markets were looking for
further increases in interest rates but the widespread evidence of a slowdown
in economic activity and inflation cooled down the Fed, leaving rates
unchanged. The primary drivers behind this cooling off were a benign employment
report as well as a fairly tame Producer Price Index and Consumer Price Index
reports/1/.
The shift in market sentiment during June has been quite noticeable, as the
United States (the "U.S.") Treasury markets have rallied nicely all across the
yield curve. Additionally, mortgage rates have fallen from their recent highs
and with corporate yields falling as well, we expect to see a large calendar of
corporate issuance coming over the next several weeks. Spread product fared
well recently as spreads narrowed versus their previous high levels and U.S.
agencies, mortgages and corporate bonds all posted higher returns compared to
those of U.S. Treasuries.
The HSBC Variable Fixed Income Fund had a total return of 0.52%* for the period
ended June 30, 2000**.
Sincerely,
/s/ Edward J. Merkle
Edward J. Merkle
Managing Director, Fixed Income
-------
The performance data quoted represents past performance and is not an
indication of future results. The investment return and net asset value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
/1/The Producer Price Index and the Consumer Price Index are two measures of
the average changes in prices, over time, of two fixed market baskets of
goods.
* The total return set forth reflects the reduction of a portion of the fund's
fees. Without such a reduction of fees, the total return for the period would
have been lower.
** Fund commenced operations on May 25, 2000.
The views expressed in this report reflect those of the portfolio manager for
the period ended June 30, 2000. The manager's views are subject to change at
any time based on the market and other conditions.
3
<PAGE>
Variable Insurance Funds
HSBC Variable Cash Management Fund
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Portfolio Review
Dear Shareholder:
The first half of the year was highlighted by the Federal Reserve Open Market
Committee's continued desire to contain inflation and cool down an overheated
economy. On May 16, they raised interest rates 50 basis points to 6.50%, the
most aggressive single tightening since 1995. Including this increase, the
Federal Reserve (the "Fed") has in the past year raised interest rates six
times for a total of 175 basis points from 4.75% to 6.50%. With this aggressive
interest rate backdrop, the market was also expecting at least another 25-50
basis point increase at the June 28 meeting but widespread economic evidence of
a slowdown in economic activity cooled down the Fed as the second quarter came
to a close.
Given our continued belief that inflation is still a threat and the economy has
only temporarily slowed down, we feel that the Fed will raise interest rates
another 50 basis points during the second half of 2000 and 75 basis points over
the next year. Additionally, the Fed is very sensitive to the fact that once
the end to the tightening cycle is perceived, the markets will rally which
could re-ignite the economy so we expect continued tough talk from Fed Chairman
Greenspan.
As in the past, our main objective is to ensure that the HSBC Variable Cash
Management Fund (the "Fund") reflects the highest standards characterized by
safety, stability, service and performance. HSBC Asset Management Americas,
Inc. values our relationship and we appreciate this chance to work on your
behalf.
The Fund had a total return of 0.50%* for the period ended June 30, 2000.**
Sincerely,
/s/ Edward J. Merkle
Edward J. Merkle
Managing Director, Fixed Income
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Past performance is not predictive of future performance as yields on money
market funds fluctuate daily. An investment in the Fund is neither guaranteed
nor insured by the FDIC or any other Government agency. Although the Fund
strives to maintain the value of your investment at $1.00 per share, it is
possible to lose money by investing in this Fund.
* The total return set forth reflects the reduction of a portion of each Fund's
fees. Without such a reduction of fees, the total return for the period would
have been lower.
** Fund commenced operations on May 25, 2000.
The views expressed in this report reflect those of the portfolio manager for
the period ended June 30, 2000. The manager's views are subject to change at
any time based on the market and other conditions.
4
<PAGE>
Variable Insurance Funds
Board of Trustees
JAMES H. WOODWARD Chancellor, University of North Carolina at Charlotte
MICHAEL VAN BUSKIRK Chief Executive Officer, Ohio Bankers Association
WALTER B. GRIMM President, Variable Insurance Funds
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Officers
WALTER B. GRIMM President
CHARLES L. BOOTH Vice President and Assistant Secretary
FRANK DEUTCHKI Vice President
GREGORY MADDOX Vice President and Assistant Secretary
GARY TENKMAN Treasurer
NIMISH BHATT Comptroller
ALAINA V. METZ Secretary
5
<PAGE>
Variable Insurance Funds
Statement of Net Assets
HSBC Variable Growth and Income Fund
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -------
<S> <C> <C>
Daily Sweep Vehicles--99.8%
Bank of New York, Cash Sweep.................................. 11,394 $11,394
-------
Total Daily Sweep Vehicles (Cost $11,394)...................... 11,394
-------
Total Investments (Cost $11,394)--99.8%........................ 11,394
Other assets in excess of liabilities--0.2%.................... 28
-------
Net Assets--100.0%............................................. $11,422
=======
Composition of Net Assets:
Capital........................................................ $11,393
Accumulated net investment income.............................. 29
-------
Net Assets..................................................... $11,422
=======
Shares outstanding............................................. 1,138
-------
Net Asset Value, Offering Price and Redemption Price per
share......................................................... $ 10.04
=======
</TABLE>
See notes to financial statements.
6
<PAGE>
Variable Insurance Funds
Statement of Net Assets
HSBC Variable Fixed Income Fund
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ ------
<S> <C> <C>
Daily Sweep Vehicles--100.1%
Bank of New York, Cash Sweep................................... 1,001 $1,001
------
Total Daily Sweep Vehicles (Cost $1,001)........................ 1,001
------
Total Investments (Cost $1,001)--100.1%......................... 1,001
Liabilities in excess of other assets--(0.1%)................... (1)
------
Net Assets--100.0%.............................................. $1,000
======
Composition of Net Assets:
Capital......................................................... $1,000
Net Assets...................................................... $1,000
======
Shares outstanding.............................................. 100
------
Net Asset Value, Offering Price and Redemption Price per share.. $10.00
======
</TABLE>
See notes to financial statements.
7
<PAGE>
Variable Insurance Funds
Statement of Net Assets
HSBC Variable Cash Management Fund
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -------
<S> <C> <C>
Daily Sweep Vehicles--100.1%
Bank of New York, Cash Sweep................................. 61,043 $61,043
-------
Total Daily Sweep Vehicles (Cost $61,043)..................... 61,043
-------
Total Investments (Cost $61,043)--100.1%...................... 61,043
Liabilities in excess of other assets--(0.1%)................. (65)
-------
Net Assets--100.0%............................................ $60,978
=======
Composition of Net Assets:
Capital....................................................... $60,978
-------
Net Assets.................................................... $60,978
=======
Shares outstanding............................................ 60,978
-------
Net Asset Value, Offering Price and Redemption Price per
share........................................................ $ 1.00
=======
</TABLE>
See notes to financial statements.
8
<PAGE>
Variable Insurance Funds
Statements of Operations
For the period ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
HSBC Variable HSBC Variable HSBC Variable
Growth and Income Fixed Income Cash Management
Fund* Fund** Fund*
----------------- ------------- ---------------
<S> <C> <C> <C>
Investment Income:
Interest....................... $37 $ 5 $149
--- --- ----
Total Investment Income........ 37 5 149
--- --- ----
Expenses:
Investment advisory............ 4 -- 9
Administration................. 1 -- 4
Other expenses................. 6 -- 30
--- --- ----
Total expenses before
voluntary fee reductions and
reimbursements.............. 11 -- 43
Voluntary fee reductions and
reimbursements.............. (3) -- (13)
--- --- ----
Net Expenses................. 8 -- 30
--- --- ----
Net Investment Income.......... 29 5 119
--- --- ----
Change in Net Assets Resulting
from Operations............... $29 $ 5 $119
=== === ====
</TABLE>
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* Fund commenced operations on May 25, 2000.
** Fund currently has no public shareholders and has only seed capital in its
net assets.
See notes to financial statements.
9
<PAGE>
Variable Insurance Funds
Statement of Changes in Net Assets
For the period ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
HSBC Variable HSBC Variable HSBC Variable
Growth and Fixed Income Cash Management
Income Fund* Fund** Fund*
------------- ------------- ---------------
<S> <C> <C> <C>
Investment Activities:
Operations:
Net investment income............ $ 29 $ 5 $ 119
------- ------ -------
Changes in net assets resulting
from operations.................. 29 5 119
------- ------ -------
Dividends:
Net investment income............ -- (5) (119)
------- ------ -------
Change in net assets from
shareholder dividends............ -- (5) (119)
------- ------ -------
Capital Transactions:
Proceeds from shares issued...... 11,500 1,000 61,006
Dividends reinvested............. -- -- 1
Cost of shares redeemed.......... (107) -- (29)
------- ------ -------
Changes in net assets from capital
share transactions............... 11,393 1,000 60,978
------- ------ -------
Change in net assets.............. 11,422 1,000 60,978
------- ------ -------
Net Assets:
Beginning of period.............. -- -- --
End of period.................... $11,422 $1,000 $60,978
======= ====== =======
Share Transactions:
Issued........................... 1,148 100 61,006
Reinvested....................... -- -- 1
Redeemed......................... (10) -- (29)
------- ------ -------
Net increase from share
transactions..................... 1,138 100 60,978
======= ====== =======
</TABLE>
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* Fund commended operations on May 25, 2000.
** Fund currently has no public shareholders and has only seed capital in its
net assets.
See notes to financial statements.
10
<PAGE>
Variable Insurance Funds
Notes to Financial Statements
1. Organization
The Variable Insurance Funds (the "Trust") was organized on July 20, 1994
as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as a diversified, open-end
management investment company. The Trust consists of six portfolios, three
of which are the HSBC Variable Cash Management Fund, the HSBC Variable
Growth and Income Fund, and the HSBC Variable Fixed Income Fund
(individually a "Fund" collectively the "Funds"). Shares of the Funds are
offered to a separate account of Allstate Life Insurance Company, as well
as other eligible purchasers.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies
are in conformity with generally accepted accounting principles in the
United States of America. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of income and expenses for the period. Actual
results could differ from those estimates.
Securities Valuation:
The value of each equity security is based either on the last sale price on
a national securities exchange, or in the absence of recorded sales, at the
closing bid prices on such exchanges, or at the quoted bid price in the
over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair market value as
determined in good faith by or at the direction of the Board of Trustees.
Bonds and other fixed-income securities (other than short-term obligations
but including listed issues) are valued on the basis of valuations
furnished by a pricing service, the use of which has been approved by the
Funds' Board of Trustees. In making such valuations, the pricing service
utilizes both dealer-supplied valuations and electronic data processing
techniques which take in account appropriate factors such as institutional-
size trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics other than market data and
without exclusive reliance upon quoted prices or exchanges or over-the-
counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. All debt securities with a
remaining maturity of 60 days or less are valued at amortized cost, which
approximates value. Under the amortized cost method, discount or premium,
if any, is accreted or amortized, respectively, on a constant (straight-
line) basis to the maturity of the security.
Security Transactions and Related Income:
Security transactions are recorded on the date the security is purchased or
sold ("trade date"). Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis and includes, where
applicable, the amortization of premium or accretion of discount.
Securities gains and losses are calculated on the identified cost basis.
Expense Allocation:
Expenses directly attributed to each Fund in the Trust are charged to that
Fund's operations; expenses which are applicable to all Funds are allocated
among them on the basis of relative net assets or another appropriate
basis.
11
<PAGE>
Variable Insurance Funds
Notes to Financial Statements (continued)
Dividends to Shareholders:
The HSBC Variable Growth and Income Fund declares and pays, as a semi-
annual dividend, substantially all net investment income. The HSBC Variable
Fixed Income and the HSBC Variable Cash Management Funds declare dividends
from net investment income daily and pay them monthly. Net realized gains
for all three Funds, if any, are distributed at least annually.
Federal Income Taxes:
Each Fund is a separate taxable entity for federal tax purposes. Each Fund
has qualified and intends to qualify each year as a "regulated investment
company" under Subchapter M of the Internal Revenue Code, as amended and to
distribute substantially all of their taxable net investment income and net
realized gains, if any, to their shareholders. Accordingly, no provision
for federal or excise tax is required.
3. Related Party Transactions:
Investment Advisor:
The Trust retains HSBC Asset Management Americas Inc. to act as Investment
Adviser (the "Investment Adviser") for the Funds. HSBC Asset Management
Americas Inc. is the North American investment management affiliate of HSBC
Holdings plc (Hong Kong and Shanghai Banking Corporation). As compensation
for its services, the Investment Adviser is entitled to receive a fee,
computed daily, and paid monthly, at the following annual rates: 0.55% for
the HSBC Variable Growth and Income Fund and the HSBC Variable Fixed Income
Fund, and 0.35% for the HSBC Variable Cash Management Fund. For period
ending June 30, 2000, the Investment Adviser voluntarily reduced its fees
for the HSBC Variable Growth and Income Fund and the HSBC Variable Cash
Management Fund by $2 and $9, respectively.
Administrator, Fund Accountant and Distributor:
BISYS Fund Services Ohio, Inc. ("BISYS"), a subsidiary of The BISYS Group,
Inc., with whom certain officers are affiliated, serves the Trust as
administrator and fund accountant. Such officers are not paid any fees
directly by the Funds for serving as officers of the Trust. In accordance
with the terms of the Management and Administration Agreement and Fund
Accounting Agreement, BISYS is entitled to receive a fee computed daily and
paid monthly, at an annual rate of 0.20% of each Fund's average daily net
assets. BISYS reduced management and administration and fund accounting
fees for the period ended June 30, 2000 of $1 and $4 for the HSBC Variable
Growth and Income Fund and the HSBC Variable Cash Management Fund,
respectively.
In addition, BISYS Fund Services Limited Partnership serves as Distributor
of the Funds.
Transfer Agent and Custodian:
BISYS provides transfer agent services for the Funds. In addition, Bank of
New York serves as custodian for the Funds. For these services to the
Funds, BISYS and Bank of New York receive an annual fee accrued daily and
paid monthly.
12
<PAGE>
Variable Insurance Funds
Notes to Financial Statements (continued)
Variable Contract Owner Servicing Plan:
The Trust has adopted a Variable Contract Owner Servicing Plan (the
"Service Plan") under which each Fund may pay a fee computed daily and paid
monthly, at an annual rate of up to 0.25% of the average daily net assets
of the Fund. A servicing agent may periodically waive all or a portion of
its servicing fees. For the period ended June 30, 2000, the Funds did not
participate in any Service Plans.
4. Capital Share Transactions:
The Funds are authorized to issue an unlimited number of shares of
beneficial interest without par value.
5. Investment Transactions:
There were no purchases and sales of long-term securities for the period
ended June 30, 2000.
13
<PAGE>
Variable Insurance Funds
Financial Highlights
Selected data for a share outstanding throughout the period indicated.
<TABLE>
<CAPTION>
HSBC Variable HSBC Variable HSBC Variable
Growth and Fixed Income Cash Management
Income Fund** Fund*** Fund**
------------- ------------- ---------------
For the period ended June 30, 2000
-------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $10.00 $10.00 $ 1.00
------ ------ -------
Investment Activities
Net investment income............. 0.04 0.05 0.005
------ ------ -------
Total from Investment Activities... 0.04 0.05 0.005
------ ------ -------
Dividends
Net investment income............. -- (0.05) (0.005)
------ ------ -------
Total Dividends.................... -- (0.05) (0.005)
------ ------ -------
Net Asset Value, End of Period..... $10.04 $10.00 $ 1.00
====== ====== =======
Total Return (a)................... 0.40% 0.52% 0.50%
Ratios/Supplemental Data:
Net Assets at end of period
(000)............................ $ 11 $ 1 $ 61
Ratio of expenses to average net
assets (b)....................... 1.13% 0.00% 1.17%
Ratio of net investment income to
average net assets (b)........... 4.11% 4.95% 4.65%
Ratio of expenses to average net
assets* (b)...................... 1.56% 0.00% 1.68%
Portfolio turnover................ (c) (c) (c)
</TABLE>
--------
(a) Not annualized.
(b) Annualized.
(c) During the period, no purchases or sales of long-term securities
occurred.
* During the period, certain fees were reduced and/or reimbursed. If such
fee reductions and/or reimbursements had not occurred, the ratios would
have been as indicated.
** Fund commenced operations on May 25, 2000.
*** Fund currently has no public shareholders and has only seed money in its
net assets.
See notes to financial statements.
14
<PAGE>
Variable Insurance Funds
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[LOGO OF HSBC ASSET MANAGEMENT
AMERICAS INC. APPEARS HERE]
--------------------------------------------------------------------------------
HSBC Variable Growth and
Income Fund
HSBC Variable Fixed Income Fund
HSBC Variable Cash
Management Fund
Variable Insurance Funds
3435 Stelzer Road
Columbus, Ohio 43219
Information:
(800) 634-2536
Investment Adviser
HSBC Asset Management Americas Inc.
140 Broadway (6th Floor)
New York, New York 10005-1180
Distributor, Administrator, Transfer Agent
and Dividend Disbursing Agent
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Independent Auditors
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, Ohio 43215
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
This report is for the information of the shareholders of Variable Insurance
Funds. Its use in connection with any offering of the Trust's shares is
authorized only in the case of a concurrent or prior delivery of the Trust's
current prospectus. Shares of the Funds are not an obligation of or guaranteed
or endorsed by HSBC Holdings plc or its affiliates. An investment in the Funds
is neither insured nor guaranteed by the FDIC or any other government agency,
and may involve investment risk, including the possible loss of principal.
8/00
Semi-Annual Report
June 30, 2000
Managed by:
HSBC Asset Management Americas Inc.
Sponsored and distributed by:
BISYS Fund Services
